Homebuyers hit the wall in East Valley The Mesa Tribune | The Hometown Newspaper for the city of Mesa, AZ

Homebuyers hit the wall in East Valley

January 26th, 2021 Mesa Tribune Staff
Homebuyers hit the wall in East Valley

Tribune Executive Editor

The top analyst of housing market trends in the Phoenix Metro Market has sounded the alarms for homebuyers in 2021 that can be boiled down to one word: desperation.

The Cromford Report said that while January is normally the best month for new listings to come on line, the shriveling inventory of both resale and new homes is reaching historic lows.

“Since the turn of the year we have been closely watching to see if the arrival rate of new listings would improve and make the supply situation somewhat easier,” it said.

Instead, new listings have “arrived at a feeble rate, lower than lower than the January of the last three years and well below what we had been expecting based on December’s patterns,” it said, concluding:

“As a result, the overall supply situation has gotten worse, not better.”

Nine municipalities reported fewer than 100 listings, ranging from 67 to 98. They included: Maricopa, 67; Fountain Hills, 70; Tempe, 73; Goodyear, 75; Chandler, 86; Cave Creek, 87; Buckeye, 90; Gilbert, 95; and Glendale with 98.

“I have been an agent since 2003 and in those 18 years I have not seen inventory this low and I haven’t heard any of my more seasoned agents reminiscing about a market like this,” Realtor Christie Ellis said. “Almost everyone says they can’t believe it.”

“In all fairness this is an unprecedented time: pandemic – people afraid to list and let others go through their house – low interest rates, lack of keeping up with the rate of building needed to support the natural growth.

She also said a dwindling labor pool in the home-building business has combined with a high demand for contractors among people who are taking advantage of a significant increase in their home equity to undertake major renovation projects.

Ellis also said inventory has been eaten up as a result of “the influx of neighbors to the West who are looking for more affordable house and different way of life.”

Cromford backs that up.

Cromford’s analysis of closings for December showed 20 percent of home purchases were by out-of-state buyers.

And there could be more than that.

Many out-of-state buyers are using LLCs to purchase homes, Cromford said, explaining, that is “making closings more difficult to track and identify. That suggests the public percentages of out-of-state purchases “are probably lower than in real life.”

As for the data on homes still out there, Cromford didn’t mince words.

“These numbers are pathetic, just a fraction of what we would normally see,” Cromford said, warning that “the situation for buyers is getting even more desperate” and that “for new listings, the outlook for 2021 is already dire from a buyer’s point of view.

“Buyers are likely to outnumber sellers by at least 5 to 1 for the foreseeable future. This is the most extreme example of a seller’s market we have ever witnessed,” it added.

It also said the alarmingly low inventory is driving up prices faster than they were rising in the last six months, and that only 1,943 homes were available for under $500,000 in the Phoenix Metro market compared with 10,253 in December 2018.

It added, “1,943 is a crazy number for a metropolitan area of nearly five million people.”

“Prices are likely to increase massively over the next six months in these current circumstances,” it predicted. “This applies even if demand cools considerably.”

Cromford noted that indexes reflecting inventory and pricing “are shooting upwards from the already stratospheric heights.”

“Has the first week of 2021 given us any signals that the supply situation is about to improve? That’s easy to answer – no. New listings are weak and inventory levels are lower now than on December 31,” it said, adding that the market is “moving ever deeper into uncharted territory.”

Even without the influx of out-of-state buyers, most of the nation is in the same dire straights as Phoenix.

“The shortage of homes for sale nationwide has made it much more difficult to find a home to purchase, meaning that buyers are struggling to take advantage of the record-low mortgage rates on offer,” Realtor.com reported last week.

However, Fannie Mae reported people are exhibiting a “substantially more pessimistic view of homebuying and home-selling conditions.”

Its Home Purchase Sentiment Index, based on a survey containing 100 questions, fell nearly 18 percent year over year in 2020, Fannie Mae said.

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