Why are we having a housing shortage? After all, we have experienced a pandemic. Shouldn't people have been waiting around with inventory rising, making it a lot easier?
One aspect of housing inventory is age groups. Millennials (aged 25 - 40 years) are now the largest population segment of buyers in today's market. On the other hand, baby boomers are aging in place, not selling their homes, further contributing to fewer homes for sale. Baby boomers may have excellent interest rates so why pay to sell and move when they've achieved low mortgages, if they have them.
Looking at our leading chart above, it's easy to see that housing starts have not kept up with population. Folks didn't stop having babies just because we endured a housing crisis!
What about new homes? How about unemployment? What about foreclosures? How about forbearance? All of these are factors in supply and demand. Then why do we have a shortage?
For starters, let's look historically at active listings in general. This chart reflects Active plus homes Under Contract Accepting Back up Offers AND Contingent Contracts taking Back Up Offers. Those last 2 statuses currently include over 40% of the total number of 9700 listing total below. The chart below is dated 4/15/21, so numbers below are more current than the last update for this chart.
This chart reflects a clear historical flow of Active, UCB & CCBS listings.
So today (5/14/21) for instance there are 5081 Active listings in all of Maricopa County, AND there are 4681 UCB & CCBS listings, an extra high number in this sellers market. Normaly that number might be 20-30% on top of the Active listing count. I'd LOVE to share a chart without those numbers as dollars to donuts those will close and if they fall out, they'll be right back under contract with the curent demand.
Reports are provided courtesy of subscription to the Cromford Report DO NOT COPY.
Home affordability is an issue as the rising demand and cost to build increase home prices for existing and new construction. Note that this chart is using a 1500 - 2000 square foot home in the Greater Phoenix area.
Since the Pandemic, those working from home has risen dramatically. A lot of home buyers are now seeking an extra bedroom or office since they won't be going back to work.
There has been a lot of press over rising construction costs. Lumber has not kept up with demand thanks to the pandemic when mills stopped production, which has raised prices exponentially. Check out this article from the National Association of Home Builders for clear reporting.
The Cromford Market Index is a market indicator forecasting market predictions while comparable sales for instance reflect historical sales. A balanced market is shown as 100 so anything under 100 is a buyers' market while numbers over 100 reflect a sellers market. As you can see the number for March, 2011 is over 500!
Cromford Supply vs. Demand index reflects all sales derived from the Arizona Regional MLS. The Cromford Supply Index reflects a short term value. Values over 100 reflect higher supply than normal.
The Demand index reflects pending and closed sales during a 4 year period. Values over a 100 index reflect more demand than usual. The wide gap reflected here both in 2005 and 2021 show the demand difference. Prices will continue to rise even if the Cromford Index declines as demand has dropped.
Notices of Trustees sale are issued when a homeowner misses 3 mortgage payments in Arizona. The notice basically says that the homeowner has 90 additional days to pay up or go to foreclosure. With this non-judicial process of 6 months of missed mortgage payments, Arizona rebounds quickly like other Western states so that inventory does not languish. Compared to March, 2009 when 10,558 homes had received a notice of default, the current 75 homeowners is a fraction of a percent as compared to the previous real estate market. *
Would inventory increase if those in forbearance walked away from their homes? A lot of sources nationally are reporting on this but in Phoenix those numbers would be absorbed quickly if you look at demand above. Arizona is NOT listed as one of the top states for those in forbearance.
The breakdown in numbers from the Mortgage Bankers Association reflects how homeowners are exiting forbearance as reported below May 4, 2021. The average number of homes in trouble averages 7,128 homes per state. Every state has a different number of homeowners in trouble, obviously, but even the numbers are lower than most think.
ARIZONA IS ONE OF THE FASTEST ECONOMIES IN THE US. There are many contributing factors, but for certain the Greater Phoenix Economic Council has been a driving force for jobs and companies moving to Arizona.
Phoenix has received the most net gain of homeowners moving to any one state according to this article in AZ Big Media. Sources confirm that all sectors of real estate, except office condos, are seeing growth.
The increasing industrial market and semi-conductor sector have risen dramatically according to this article originally reported by the Phoenix Business Journal.
So the answer is no! We aren't going to see a bubble or a repeat performance of 2008-2011!
If you're looking to buy or sell a home in the Phoenix area, use a knowledgable agent who understand market conditions.