Think you’ve seen a crazy real estate market before? So has Phoenix, yet here we are again. What’s the difference this time around? Interest rates are at historical lows and more homeowners are refinancing to stay in their homes, leaving even fewer homes hitting the resale market.
The greater Phoenix area has a population of approximately 4.8 million people and 1.4 million single family homes, condos and townhomes in total inventory. As of July 25th, only 8,553 of these units were available for sale through the Arizona Regional MLS. If that number doesn’t cause you to gasp, then this might: only 1,384 are single family homes under $300,000 and that number is diminishing every day.
The last month has seen a surge of buyer activity, but it was not met with an equivalent surge of new listings. New listings overall compared to last year were down 7.8% while contracts in escrow soared 24% higher. For buyers under $300K however, new listings were down 22% in June compared to last year and are down 38% so far in July. This is causing an extreme amount of buyer competition in this price range.
When buyers expand to over $300K, then new home construction starts supplementing inventory and providing some much needed alternatives. The top 3 cities for single family home permits are Phoenix, Mesa and Buckeye with notable spikes in building permits issued in Surprise, Maricopa and Queen Creek. Most new homes are selling between $300K-$500K, but buyers looking for a brand new single family home under $300K still have some options. Their best bet is in Pinal County or Buckeye with average sizes between 1,800- 2,000 square feet for their budget.
Conversely, new listings over $500K saw a spike last month, up 20% over last year. 1,596 new listing came on the market and 2,046 contracts were accepted in this price range in June.
What does this mean for sellers? Brace yourselves. Half of the sellers who accepted contracts under $400K in the first week of July were on the market for just 8 days or less with their agent prior to contract acceptance. Sellers who took contracts between $400K-$600K had a median of 14 days on the market with their agent and those who landed con- tracts between $600K-$1M had a median of 41 days. It’s a good time to be a seller.
While 28% of all sales in July so far have closed over asking price, that percentage peaks at 41% for those be- tween $200K-$300K. Top cities for closings over asking price are Tolleson, Avondale, Glendale, Gilbert and Youngtown. Gilbert is the only city in that list with a median sale price over $300K.
Seller-assisted closing costs remain popular and were involved in 23% of all sales in the first week of July. That percentage increases to 33% on transactions closed between $150K-$300K. Top areas where 50%-60% of sales involved seller accepted closing cost assistance were Youngtown, West Phoenix, Aguila, Glendale, and Tolleson.
This supports the theory that sellers receiving offers over asking price in the West Valley and other affordable areas are still open to accepting closing cost assistance if a contract meets their most important needs.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report ©2020 Cromford Associates LLC and Tamboer Consulting LLC