Almost from the time that the pandemic started making an impact on America, the Cromford Report periodically switched from its normal daily analyses of the Valley’s housing market to report with increasing alarm the statistics showing the insidiousness of COVID-19.
This month, the Valley’s acute shortage of resale homes rang those alarm bells.
Taking note that “all cities are running with the bulls,” Cromford on July 9 said the combination of downward trending inventory and rising prices was getting “rather scary.”
“This is not the behavior of a normal well-behaved market and it feels to me a little bit like the upward climb of an even bigger roller coaster than the one we rode in March and April,” the report said. “I could be wrong. Nobody knows even vaguely where this is headed, but I do know for sure than markets that go to these extremes do not stay there forever.
“There will be a down phase and I wonder when it will start and whether it will be sweet and gentle or severe. We need to hang on tight and stay calm.”
Scottsdale Realtor Becca Linnig last week gave her own take on what she sees on the ground as the result of what Cromford also called a “feeding frenzy” over the homes that are on the market – a scene that will only get wilder now that mortgage rates fell to a 50-year low last week.
“Over the last two weeks I have submitted a half dozen offers for the same client – only to be told we are one of 21 offers and the ‘winning’ buyer pays more than the asking price, waives inspection, appraisal and gives up earnest money immediately,” said Linnig.
“Currently, when homes hit the market, they will allow a one-hour open house for any potential buyer to get in and decide if it is worth giving up basic buyer rights to ‘win’ the home,” added Linning, who has the endorsement of the Scottsdale Area Association of Realtors in her campaign for Scottsdale City Council.
A Realtor the last 14 years with REMAX Excalibur, Linnig noted that the housing market has been tight for the last few years “but with the low cost of money, it is even worse.”
Other Realtors have echoed her observations, saying the housing market in Scottsdale and most of eastern Maricopa County in particular seems impervious to high unemployment, business shutdowns and other economic effects of the pandemic.
“New Zealand and Australia’s housing markets are so robust they have 30- minute open houses,” Linnig said. “I thought that was crazy but that is similar to what is happening here now.”
Given the strong demand, prices have risen as well.
Earlier this month, Cromford reported that the median sales price in June was $305,000 – up 9.3 percent from the same time last year and up 4.1 percent from May.
Inventory of re-sale homes fell by 26.5 percent Valley-wide from May to June and Cromford noted:
“The lack of supply is driving many buyers towards new homes instead of re-sales. New homes are selling faster than last year and faster than they can be built, so supply will shortly become a major problem for the developers too.”
How long the buyer frenzy and slim inventory will last have been topics of conversation for experts across the country.
“It is quite possible that the market will continue to move in the same direction – in favor of sellers – for a very long time yet,” Cromford said earlier this month. “But no market does that forever. Rising prices will eventually suppress demand and bring new sellers into play.”
Cromford reported that an unexpected 2,103 new listings were added to the ARMLS database in seven days – up over 19 percent compared with the same period in 2019.
But some Realtors told the Progress that infusion has made barely a dent in current inventory and that those homes will be the subject of the same kind of bidding wars Linnig spoke about last week.
Cromford also noted a somewhat similar surge of new listings occurred in March when the pandemic began establishing a foothold in the country and said the “the underlying reason for the current surge in new listings is not entirely clear, just yet."
Though the latest spurt could be tied to the spike in COVID-19 cases in Arizona, Realtors said that as long as interest rates remain low, sellers will continue to reign and buyers continue to be frustrated.
With the state order halting evictions about to expire this week, Cromford suggested, some investors may be deciding to shed rental homes while the market is still tilted toward sellers.
Other experts also have cautioned that while the market is nearly “euphoric” for sellers, the ride won’t last forever.
CoreLogic, a housing data provider, said the market would hit an extended price slump within a year and its Home Price Index and HPI Forecast report predicted a year-over-year home price decrease of 6.6 percent by next May.
Frank Martell, president and CEO of CoreLogic, said in a press release, “With elevated unemployment, purchase activity and home prices could fall off after summer.”
Though CoreLogic said Arizona and Florida “faced the perfect storm of elevated COVID-19 cases and the subsequent collapse of the spring and summer tourism market,” it also conceded that sellers are in the driver’s seat – especially in Phoenix. It noted:
“Phoenix leads the way with a 7.8 percent year-over-year projected growth in July” – not much off the “pre-COVID 8.2 percent year-over-year growth in March.”
Asked how she counsels her clients out of their frustration, Linning replied: “Don’t give up anything you will regret just to get the contract accepted. It is a highly emotional transaction when everything goes smooth, so it’s imperative that you have a professional team – Realtor, lender, title, inspector, appraiser – to help navigate.
“Be patient and flexible,” she added. “When my client doesn’t end up with the house, we end up finding a more suitable one. It’s just hard to see that in the moment – especially if it takes a while.”