Today's real estate market bears a very strong resemblance to the Cabbage Patch Kids riots from Christmas 1983 (Did I just date myself?!). The Cabbage Patch Kids demand, just like the demand for housing in the Greater Phoenix area, has become somewhat savage and cruel to many Buyers.
And for those naysayers, the U.S. home ownership rate surged to 67.9%, its highest point since the Great Recession. The rate increased 3.8% over last year and 2.6% over the last quarter...and that's WITH COVID.
Still questioning if this is a bubble? Today, more than 91% of the resale purchases and 96% of the new construction are being lived in by the Buyer. These are people buying homes for themselves. Past bubble times, investors were over one-third of the re-sale Buyers at that time. Today it's less than 9%. Even fewer for new builds at only 4%. This girl remembers when some communities were selling well over 60% to investors in 2004-2006.
One of the other wonderful things the builders have done for our communities is that they have built in a certain level of upgrades in to their base prices so that the communities have consistent desirability and quality even many years down the road.
Boy did we get our butts handed to us in 2007 until the bottom of the market in 2011. Prior to the market 'crash' that so many people still have PTSD from (yes, that is a real thing), the Greater Phoenix area saw a growth average of 4%-5% growth in new construction. In 2007 was the first slight year of decline (before anyone really knew what was happening), we did see a slight decline to only 3.1% new units that year.
Despite the trajectory downward in demand, 2008 still pushed out another 1.7% of new units. Remember those smoking deals? Used to be $400,000 and now it was on sale for the low low price of $310,000! By 2009, we saw less than 1% every year until it started to inch up by 2016. And what do you think was going on with the population at this same time? Up up up...while the construction was almost nil. And as of today, our population growth has outpaced the new units exponentially.
If you are thinking of moving up, down or buying your first home, now is the time to revisit that conversation and to refocus on the key factors that really matter: demographics and mortgage rates. As the national progress to conquer this horrific virus, the economy reopens and people start working again, we will see an even bigger surge of Buyers in our market. Notice I say OUR market. Once the US is completely open again (whenever that may be), even more people will be migrating to the Greater Phoenix area. Reference: It’s official: The U.S. won’t see a housing bubble crash anytime soon After holding out for July 15 housing data, HousingWire's housing data analyst is making the call
An index value of 100 is an equally balanced market.
This meter shows us a slightly elevated demand (15.6% higher than normal for this time of year) with a shortage of 62% of our normal inventory showing the Greater Phoenix Market Index currently at 303.9. What does this mean?
The black line shows the Market Index at that time, now notice how the property value about 4-6 weeks later adjusts. Based on this trajectory, what will our values do next month?
Our country will undoubtedly see more changes due to the unemployment but let's take a closer look at just Arizona.
Not only does Arizona have a lower unemployment than what the media is reporting nationally but the majority of the people on unemployment were employees in the hospitality sector which most did not own homes. With more than 91% of the homes in Greater Phoenix owner-occupied, not only are there quite a few assistance programs to help these homeowners stay in their home but if worse comes to worse, they can sell their home at market value to cash out their equity. With instant cash Buyers coming out the wood-work, no one would ever be in a predicament that they'd be pushed out of their home.
Anyone that has owned their home since 2010 has doubled their value.
Even homeowners that bought just 12 months have equity already.
And for all of you that think the political situation will have a bearing on the market, let's look at EVERY November.
Not only is November the beginning of the holiday season, it is also the shortest month of the year second to February (fewer days to close business). We should see numbers decline just as we do every year. What do you think will happen based on this chart below?
As it relates to real estate it doesn't matter who wins the election, everyone still needs a place to live. In both stock (equity) and bond markets, looking back over 90 years actually it showed more muted performance in the year leading up to a presidential election than they did at other times. USBank
Hopefully I have sparked a little of your attention now. This is not a fad that will pass. This is not a phase that will go away. Don't be caught left behind renting like many of the lifer-renters in areas like San Francisco, Seattle, Los Angeles in the 90's. With the average monthly rental wavering near $1,700/month, you can expect your rent to go up every single year. Or for $1,700/month, you could own a home and be building a strong financial future for you and your family.
Call me today for a virtual Buyer consultation and/or specific data for more specific areas of the market.
THIS GIRL KNOWS REAL ESTATE
Sheryl (Shey) Willis, CNE
GOARIZONA REAL ESTATE
Maricopa County Real Estate Special Commissioner
Zillow Premier Agent
Redfin Partner Agent
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Sheryl Willis, Go Chandler and eXp Realty does not engage in or condone activities which illegally discriminate on the basis of race, color, religion, sex, age, national origin, disability, familial status or any other protected classification under federal or state law.