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A seller’s market The recent spike in prices is the result of a seller’s market fueled by a lack of housing supply.
prices “into the atmosphere,” she said. The issue now is from a lack of supply. “We had 57,000 listings in the [Mul- tiple Listing Service then],” she said. “Where are we going to get 50,000 list- ings today?” Tamboer pointed to the National Association of Home Builders’ Home Opportunity Index, which showed the median income family then could only aord 27% of what was selling before the recession, as opposed to 63% in rst quarter 2021. “You had nobody there [to buy], you know?” she said. “So [prices] had to come down. There’s no way around it. But this time around, over the last 10, now 11 years, we have been under- building for our population, and we slowly turned that into a shortage.” Stapp said the recession did aect the situation today. “What we are living with now is a result of and reaction to the Great Recession,” he said. “The reason we have prices escalated as high and as quickly as we do is a lack of inventory. The Valley continued to grow during and after the Great Recession, but the entire homebuilding marketplace stalled and under-built from 2008 to 2015. We set ourselves up for this problem.” LaRoque Wolfe said she has heard concerns that when forbearance—a temporary pause or reduction in mort- gage payments—comes to an end, the result will be a ood of homes on the market. That will not happen, either, she said. “We have approximately 707,000 homes in forbearance in Arizona,” she said. “But most of those are going to renance. … Probably about 15% will come to the market. Once those come to the market, they’re going to be gone in probably a day.” Lookingahead Tamboer stressed that no one can predict the market. She said she only projects where the market is headed based on the data trajectory from the moment, which now shows the seller’s market weakening. The Cromford Report uses a pro- prietary formula to come up with a market index number showing if it is a buyer’s or seller’s market or if it is in balance. In balance, the index is 100. Anything above 110, she said, is con- sidered a seller’s market. Early in the spring, the index was over 700. On July 1, it stood at 397.7.
“A lot of agents would put the house on the market on a Friday,” she said. “They would say, ‘OK, we’re going to have an open house on Saturday. We’re going to review oers on Sunday and we’re going to make the decision on Monday. And it went that fast.” Mark Stapp, the director of the mas- ter’s in real estate development pro- gram at Arizona State University, said the pandemic further exacerbated the problem for working-poor buyers, a category he said can include residents from teachers to phlebotomists. “In places like the southeast Valley, the greatest share on a percentage basis of new home building growth is built for higher median incomes,” Stapp said. “People are getting pushed out of the market to places like Flor- ence or Coolidge where the price of land is cheaper.” Most new home construction in Gilbert is in the town’s southern ZIP codes of 85297 and 85298, where the median home prices for June rose to about $600,000, according to data from the West and SouthEast Realtors of the Valley. In contrast, the median prices in Florence were $315,000 and in Coolidge $243,500. Dierent fromtheGreat Recession Real estate professionals said they are frequently asked when the market will crash. “When you say ‘crash’ to somebody like me or a real estate agent who lived through 2008, they think of a drop in value by 50%,” Tamboer said. “So that’s why you’re going to be like, ‘Nope, not going to happen.’” The dierence, Tamboer said, lies in what was happening before the Great Recession and what is happening now. Then, overbuilding led to a glut in housing, and investors had pushed
The median price for a home in Gilbert has grown consistently in the past few years with 2020 being the highest increase since 2013.
+4.3% +4.1% +3.6%
SOURCE: MARICOPA ASSOCIATION OF GOVERNMENTSCOMMUNITY IMPACT NEWSPAPER
the process will look more like tra- ditional home selling from the past couple of decades with fewer bids and buyer concessions. “If you’re in a weak seller’s market, [prices] won’t rise as fast as right now,” said Tina Tamboer, senior data ana- lyst for The Cromford Report, which provides detailed information on the Greater Phoenix residential resale market. “You might see it like 1% [per month], and that’s a 12% gain a year. That’s pretty amazing.” A ‘critical’ shortageof homes LaRoque Wolfe called the situation a “serious, critical shortage of homes,”
and she said the eects of it have man- ifested in several ways. “Sellers were not even looking at typical oers anymore,” she said. “They had 30, 40 oers on a house, and they were going straight to the cream of the crop.” Sellers are asking buyers to waive the appraisal contingency or forego inspections, she said. Buyers some- times were paying $100,000 over mar- ket value, and buyers trying to use Federal Housing Administration loans or putting down 20% as down pay- ments could not compete. Homes are moving quickly, too, LaRoque Wolfe said.
A housing shortage
The Great Recession
The Metro Phoenix residential real estate market’s spiking prices this spring comes from a problem with housing unit supply against population growth. That contrasts with the housing unit glut that preceded the Great Recession.
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SOURCE: U.S. CENSUS BUREAUCOMMUNITY IMPACT NEWSPAPER
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