The COVID-19 pandemic came in like a wrecking ball in March 2020, did that change the Metro Phoenix housing market?
The Pandemic and Metro Phoenix Housing: Good News for Buyers
Dennis Kolodin, CCIM Designated Broker
The Pandemic and the Metro Phoenix Real Estate Market- The kickoff of 2020 was developing into a nightmare for normal buyers who just wanted to find a place to live. This has changed with the appearance of COVID-19.
Extreme competition for homes between wholesalers, cash buyers, vacation rental investors, and traditional buyers depleted supply and created an environment consisting of multiple offers, appraisal waivers and an increasing number of sales over asking price.
Buyers: Is the Greater Phoenix Housing Market Experiencing a Price Slow Down?
The Greater Phoenix housing market was on the precipice of seeing price appreciation accelerate at an alarming rate. Analysts wondered what could possibly slow it down. Well, they have their answer; an act of nature.
The COVID-19 pandemic came in like a wrecking ball in March. It shut down tourism and crashed the stock market single-handedly over the course of a few weeks. Hedge funds and iBuyers (funded by Wall Street) bowed out of purchases. Vacation rental buyers put their plans on hold.
This is providing much-needed relief to normal homebuyers, if only they could leave their house. Stay-at-home orders have “pinched the hose” on what is arguably one of the hottest housing markets in the country.
This is causing a build-up of pent up demand This demand will undoubtedly return with some gusto when travel restrictions are lifted and a level of stability returns. Don’t expect prices in Greater Phoenix to drop as they did in 2008, however.
Investors are Pulling Out of the Marketplace
Back then when investors pulled out of the market, prices were so high that families making the median income could only afford 27% of what was selling. This time around as investors once again pull out of the marketplace, families making the median income can afford 68% of what’s selling with today’s incomes and interest rates.
This is well within normal range and puts regular homebuyers in a better position to pick up the pieces left by Wall Street and vacation rental investors.
The Pandemic and the Market: Sellers: Prices are Good for Buyers, But They’re Not Looking at Properties
Lock downs and travel restrictions across the country are causing buyers who need to relocate to Arizona, either for a job or to retire, to put those plans on hold for now.
The effects of COVID-19 span the job market, stock market, corporate profits, and exchange rates. This has had the highest impact on high-end luxury market buyers.
Not only are these buyers restricted from leaving their home cities at the moment, but they also have instability in their portfolios as well.
Under these circumstances, it should not come as a surprise to see that weekly contract activity over $500K has slowed down by 64% since their peak on February 24th while price points under $500K have only seen a 30-40% slow down.
Sales Prices are Not Declining (At the Moment)
However, Sale prices are not declining at the moment, but seller expectations are adjusting. Upticks in weekly price reductions tell us that sellers are beginning to ease up on pushing market value. Sellers are also beginning to realize that it will take longer to sell their homes under these conditions.
Weeks ago, some listings were receiving multiple offers within a matter of hours, but that’s not a reasonable expectation now. As a result, active listings that would’ve flown off the market 4 weeks ago could be on the market for weeks, maybe even months at this rate. Information, communication, and strategy will be important during the course of the pandemic response.
It is interesting to note, its situations like these where professional Realtors show the value of their experience and service.