Coronavirus Ends an Amazingly Strong Decade-Long Housing Market Boom
COVID-19 has temporarily halted a robust housing market and an entire sector of the economy that depends on it. Nationally, first quarter indicators show the real estate market has slowed, with experts predicting a 30-35% drop in inventory for April as compared to a year earlier, according to the Luxury Market Report (full report links at end of this blog).
The luxury market was at a record pace according to Realtor.com’s Chief Economist Danielle Hale this month,
“A low interest rate environment combined with flourishing economy and record setting stock markets pushed luxury sales into the double digits for the first time as 2019 came to an end.”
Arizona’s most popular tourist season and the highest buyer activity occurs each March and April. This season was lost in 2020 as out-of-state buyers who had been house hunting for weeks, months, and often times, years, postponed their trips.
Initial Urgency and Panic
Real Estate transactions under contract when the World Health Organization announced the global pandemic on March 11th had legitimate concerns. Reactions ranged from newly unemployed buyers with loans in jeopardy, to those panicked by the uncertainty and willing to cancel and walk away from earnest deposits. Agents scrambled to negotiate extensions and/or postpone closings, some faced by the domino effect of homes under contract contingent upon the sale of another transaction.
Advances in Technology Allows Business as Usual
Current technology is allowing transactions to move forward. Many areas, including the greater Phoenix Valley, allows digital mortgage approvals, remote signings, and digital closings. Additional technology tools available, but little known before, are now being implemented for virtual appraisals, inspections, showings and more. Ten years ago, this situation would have had a much greater impact on transactions moving forward. One new change in most states is a new “COVID-19” Addendum, being required by most brokerages that allows parties to automatically extend dates or cancel the contract without penalty in the case of coronavirus impacts.
Real Estate Marketing’s “New Normal”
Real estate agents are attending webinars at record numbers to learn new techniques and invest in new technology. Listing Agents are implementing virtual tools such as Matterport, Videography, and live open houses on social media outlets. Buying Agents are conducting virtual home tours balancing gloves, masks, and other precautions and hygiene recommendations from both the Center of Disease Control and their respective brokerages. The average work day of most agents has increased, and in addition, many are balancing the addition of home bound children due to the quarantine.
When the 2008 Great Recession officially ended in June 2009, it is estimated that over 25% of licensed agents left the industry. New, part-time and tenured agents alike, most working on 100% commission, will spend 2020 analyzing the costs of doing business. We have already seen numerous “i-buyers” close their doors. After an amazing decade in the housing market, the National Association of Realtors announced in January that they had reached a membership of 1.4 million in 2019, an all-time high. NAR totals do not include the active licensees technically “inactive,” holding licenses to speculate as principals or negotiate for family members without being held to the NAR Code of Ethics.
Locally, Property Taxes are still due
Locally, Maricopa County Treasurer sent out notice this week that there would be no extension for May 1 property tax payments, however, there is no interest incurred if paid by May 29, the last business day of the month. Arizona had the 5th lowest property taxes of 2019.
How This Compares to the 2008-2009 Recession?
Arizona’s most respected source of residential real estate data demonstrates a clear comparison of today’s market with that of the Great Recession. As shown in the Supply and Demand Index, demand in 2008 was nearly 50% below normal, with supply 200% above normal as early as two years earlier. We are nowhere near those levels. Those buyers were also investors, what we call “false” demand, unlike today’s owner-occupant buyers. In addition, additional graphs show affordability was artificially high then, which is not the case today. While we expect a recession, we are not anywhere near the crash experienced over a decade ago.
How is Arizona’s Market Today vs 2 Weeks Ago?
The market is fluctuating significantly every week, as is the Government’s involvement adjusts and the pandemic matures. To make any solid predictions would be unreasonable based on this uncertainty. The graph on Weekly Contracts shows the downturn in housing purchases as a result of the stock decline beginning February 19, and Arizona’s initial business shut down on February 23. At this writing we have no vaccine and no real knowledge of this virus. According to Cromford, the market today is “less bad.” We are still in a Seller’s market, and pent up demand is increasing. We still have buyers needing to buy, and Maricopa is still the top relocation county in the nation. Interest rates are at historic lows, but unemployment is over 18%. Jumbo loans have evaporated. As with every other downturn, cash is king.
If you would like a print version of any of my reports, or if I can help you buy or sell anywhere in North America, please let me know denise@AZMultipleListingService.com or text 602-980-0737
About the Author: Denise van den Bossche has been a licensed Agent and homeowner for over 35 years in the Metro-Phoenix Scottsdale Valley of the Sun. A Legacy LEED® AP, designated SRES, DMX, ePro, EcoBroker and co-founder of Seniors Advisors Advising Seniors®, a consortium of experts to surround and support families facing aging or chronic illness. To request a no-obligation market report, home evaluation, or consumer guide on your specific needs, contact Denise at 602.980.0737 or email Denise@AZMultipleListingService.com. Denise’s husband Patrick is President of Realty Executives International, with 500 offices throughout North America.
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