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State of the Market Report | 2020 Mid Year Tucson and Southern Arizona
TRUSTED SINCE 1926
STATE OF THE MARKET REPORT | 2020 MID YEAR | NEW PENDING AND CLOSED SALES
Residential Pending Sales (listing under contract) — Tucson Metro V-Shaped Housing Recovery After a robust start to the year, pending home sales in the Tucson metro experienced a dip in new activity in March and April due to the COVID-19 pandemic. In April, new pending sales decreased 29% from April ’19. As the industry adjusted quickly to virtual showings and social distancing to safely conduct essential real estate business, new pending sales increased 19.6% in May, and June recorded the highest number of new pending sales in the last 24 months.
2,500
2,000
1,500
1,000
-3% YTD
500
11,066 11,409
0 Jan
Feb
Mar
Apr
May
Jun
Jul
2019
Aug
Sep
Oct
Nov
Dec
2020
Closed Residential Sales — Tucson Metro 2,000
1,600
1,200
800
-6.4% YTD
400
8,984 9,594
0 Jan
Feb
Mar
Apr
May
Jun
2019
Jul
Aug
Sep
Oct
Nov
Dec
Home Sales To Increase Closings on home sales typically occur 45–60 days after a listing goes under contract. Therefore, while closings are down slightly by 6.4% versus YTD 2019, we expect they will exceed 2019 levels for the first part of the third quarter, based on the increased pending activity in May and June of this year. While the full economic impact of COVID-19 is yet to be understood, low mortgage rates and high buyer demand should have a positive impact on housing in 2020.
2020
Long Realty Company Statistics based on information obtained from MLSSAZ on 07/06/2020 using Brokermetrics software. Information is believed to be reliable, but not guaranteed.
STATE OF THE MARKET REPORT | 2020 MID YEAR | MARKET CONDITIONS AND PRICING
Market Conditions by Price — Tucson Metro Seller’s Market Intensifies Due to continued low listing inventory and the robust level of buyer activity fueled by low rates, the Tucson area moves deeper into seller’s market territory. Even in the luxury $1 million and up segment, an increase in buyer activity and shortage of marketable inventory moves luxury to a more balanced supply and demand. In the under $500k market, there is less than one month of inventory, a very tight seller’s market, resulting in listings selling very quickly and in multiple offer scenarios.
0
2
4
6 Months of Inventory
8
10
12
$0– $499,999
$500,000– $999,999
$1,000,000+
SELLER
BUYER June 2019
June 2020
Listing Inventory and Median Sales Price — Tucson Metro Median Sales Price $242,000 +5.3% YTD
12,000 10,000
2007 median price peak $228,000
$300,000 $250,000 $200,000
6,000
$150,000
4,000
$100,000
2,000
$50,000
0
$0 8/2006 12/2006 4/2007 8/2007 12/2007 4/2008 8/2008 12/2008 4/2009 8/2009 12/2009 4/2010 8/2010 12/2010 4/2011 8/2011 12/2011 4/2012 8/2012 12/2012 4/2013 8/2013 12/2013 4/2014 8/2014 12/2014 4/2015 8/2015 12/2015 4/2016 8/2016 12/2016 4/2017 8/2017 12/2017 4/2018 8/2018 12/2018 4/2019 8/2019 12/2019 4/2020
8,000
Inventory Shortage / Price Gains Active listing inventory has fallen to new lows, fueled by high buyer demand and COVID-19 impacts. This limited and highly sought after supply will continue near-term to grow home price appreciation. These conditions are ripe for those considering selling a home.
Listing Inventory
Median Sales Price
Inventory 3,057 -40% YTD
Statistics based on information obtained from MLSSAZ on 07/06/2020 using Brokermetrics software. Information is believed to be reliable, but not guaranteed.
14
STATE OF THE MARKET REPORT | 2020 MID YEAR | AFFORDABILITY AND MORTGAGE RATES
Interest Rates Over Time
70s
90s
80S
10s
00s
TODAY
8.86% 12.7% 8.12% 6.29% 4.07% Historically Low Mortgage Interest Rates Buyers are currently benefiting from historically low mortgage interest rates. These low rates are driving both home purchases and a boom in refinances, lowering homeowners’ monthly housing payment expense. The low rates and pent-up demand are fueling a rapid recovery for housing during the COVID-19 pandemic. While we expect rates to remain low in the short term, economists predict they will rise at some future point, so buyers should take advantage now.
3.07% Source: Freddie Mac
Monthly Payment on a Median Priced Home — Tucson Metro $1,400
Lower Monthly Home Payments Despite upwards pressure on home sale prices, historically low mortgage rates have actually improved affordability and lowered the monthly payment on a median-priced home in Tucson.
Median Sales Price $242,000 +5.3% YTD
$1,200
Monthly Payment $989.22 -5.1% YTD
$1,000 $800 $600 $400 $200
3/2020
7/2019
11/2019
3/2019
7/2018
11/2018
3/2018
7/2017
11/2017
3/2017
7/2016
11/2016
3/2016
7/2015
11/2015
3/2015
7/2014
11/2014
3/2014
7/2013
11/2013
3/2013
7/2012
11/2012
3/2012
7/2011
11/2011
3/2011
7/2010
11/2010
3/2010
7/2009
11/2009
3/2009
7/2008
11/2008
3/2008
$0
Statistics based on information obtained from MLSSAZ on 07/06/2020 using Biometrics software. Information is believed to be reliable, but not guaranteed.
STATE OF THE MARKET REPORT | 2020 MID YEAR | LUXURY AND SOUTHERN ARIZONA
Luxury Residential New Pending Sales — Tucson Metro Robust Luxury Sales The $800,000 and up housing market has experienced a robust increase in sales activity in 2020. Despite the COVID-19 pandemic, reduction in travel and an at times volatile stock market, affluent buyers have stepped up interest, and bounced back in earnest in May and June.
70 60 50 40 30 20
+32.8% YTD
10
247 186
0 Jan
Feb
Mar
Apr
May
Jun
2019
Jul
Aug
Sep
Oct
Nov
2020
Sierra Vista and Green Valley/Sahuarita Closed Sales Southern Arizona Markets Follow Tucson While the Green Valley, Sahuarita and Sierra Vista markets saw dips in sales activity in March and April due to the COVID-19 pandemic crisis, they have rebounded quickly in May and June and made up -8.5% YTD much of the earlier losses in buyer activity.
-7.2% YTD
Sierra Vista
Green Valley/ Sahuarita 0
200
400
600
800
YTD 2019
1,000
1,200
1,400
1,600
YTD 2020
Statistics based on information obtained from MLSSAZ and ARMLS on 07/06/2020 using Brokermetrics software. Information is believed to be reliable, but not guaranteed.
Dec
STATE OF THE MARKET REPORT | 2020 MID YEAR | ECONOMIC FORECAST
In these uncertain times, the future of our economy, housing and what additional impact COVID-19 may have is not entirely clear. That being said, many economists predict that the economy, while negatively impacted this year, will start to recover in the second half of 2020 and continue into 2021.
Annual Forecast Home Sales Forecast To Rise COVID-19 certainly will have an impact on the economy this year. Dr. Lawrence Yun, Chief Economist for the National Association of REALTORS, believes that nationally home sales will be impacted downward this year but recover even stronger in 2021, partly fueled by the expectation of continuing low rates, economic expansion and job growth. Locally, we are seeing trends that our home sales rebound is happening faster.
2019
2020 Forecast
2021 Forecast
GDP Growth
2.3%
-4.5%
+3%
Job Gains
2.2 million
-4 million
+2 million
Home Prices
4.8%
0% to 2 %
1% to 3%
Home Sales
0%
-10% to -15%
+13% to +18%
Source: National Association of REALTORS, Dr. Lawrence Yun
2025 to 2030: Delayed Inflation Future Possibilities Inflation Rate
4% to 7%
Mortgage Rate
6% to 9%
Home Sales
Negative
Homeownership Rate
62%
Home Price Appreciation
5% to 10%
College Tuition, Medical Expenses
Rising
Income, Rent, Food
Rising
Mortgage Payment for those who bought in 2020–2021
Not Rising Source: National Association of REALTORS, Dr. Lawrence Yun
Hedging Possible Future Inflation Now With A Lower Housing Payment Dr. Yun also forecasts that the government economic stimulus and economic policies related to the pandemic crisis may lead to future increases in inflation, affecting household goods, education costs, rent, home prices, food and other goods and services. One way to offset future inflation is by locking in a home purchase or refinance now at these historic low rates, to have a fixed monthly house payment, sheltered from future inflation.
STATE OF THE MARKET REPORT | 2020 MID YEAR | HOME PRICING FORECAST
Home Prices Forecast to Rise Economists Bullish on Home Prices These economists are forecasting home prices to rise moderately this year, and increase at a higher rate in 2021 and into 2022. This is driven by economic and employment expansion, an expectation of continued low mortgage rates and on the supply side a continuation of limited availability related to home inventory for sale, including resale and new construction. Forecasters are not predicting a drop in prices.
Source
2020
2021
2022
Mortgage Bankers Association
+4.3
+3.2
+2.4
Zelman & Assoc
+3.0
+4.2
+4.6
Fannie Mae
+0.4
+2.1
N/A
National Association of Realtors
+3.8
+2.1
N/A
Freddie Mac
+0.4
+0.7
N/A
Source: Keeping Current Matters
Within the Next 3 Months Y/Y Percent Change by State WASHINGTON
MAINE MONTANA
NORTH DAKOTA
MINNESOTA VERMONT NEW HAMPSHIRE
OREGON
WISCONSIN
NEW YORK
SOUTH DAKOTA
IDAHO
MICHIGAN
WYOMING
PENNSYLVANIA
IOWA NEBRASKA NEVADA
ILLINOIS
INDIANA
MARYLAND WEST VIRGINIA
COLORADO
KANSAS
MISSOURI
KENTUCKY
CALIFORNIA
OKLAHOMA NEW MEXICO
VIRGINIA NORTH CAROLINA
TENNESSEE
ARIZONA
SOUTH CAROLINA
ARKANSAS
MISSISSIPPI
ALABAMA
Median Expected Price Change in the Next 3 Months Among REALTOR® Respondents (Y/Y Percent Change)
GEORGIA
TEXAS LOUISIANA
4+% to 8%% FLORIDA
ALASKA HAWAII
NEW JERSEY DELAWARE DC
OHIO
UTAH
MASSACHUSETTS RHODE ISLAND MASSACHUSETTS
REALTORS Anticipate Prices to Rise Like economists, REALTORS “on the street” across the country are anticipating prices to be stable or in some cases rise moderately this year. In Arizona, REALTORS are expecting prices to rise in the 2%–3% range (from prior year). This bodes well for buyers who may see short term price and equity gains on purchases, and sellers who are looking to optimize the pricing on their home sale now.
3+% to 4% 2+% to 3%
Source: National Association of REALTORS
0+% to 2% Less than 0%
In Closing… 2020 has proven to be a challenging year, with many unknowns. One thing we do know though, is the underlying resiliency and strength in our local housing markets. If you are considering buying, the very attractive mortgage rates could benefit you. Just be prepared to act quickly and aggressively when making offers. For those considering selling, the conditions are ideal to do so. With safety guidelines and practices in place, and virtual marketing and showings, you can have a successful sale with everyone involved in your transaction maintaining proper safety measures. It is also a good time to have an updated analysis completed on your home’s current value. Contact me for a complimentary home value analysis, or any other real estate needs.