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State of the Market Report Published January 2021 TUCSON AND SOUTHERN ARIZONA
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E R
2 | STATE OF THE MARKET
Housing is Healthy in a Pandemic Impacts of COVID-19 on Real Estate The impacts of the COVID-19 pandemic on real estate were quite unknown in the first quarter of 2020. While there was an initial slowdown in sales and listing activity during the early onset of COVID-19, the market quickly rebounded with increasing sales activity. Our homes became our whole lives and the ability to work remotely untethered geographic ties. A reduction in interest rates helped enhance buyer demand, while a shortage in homes for sale drove multiple offers. Real estate professionals adapted quickly to the new world, holding virtual open houses, virtual showings with Facetime and Zoom, leveraging virtual tours and arranging for contactless closings. By the end of the year, more homes sold in 2020 than 2019, and real estate was leading the economy. The Year Ahead The strong pending sale activity in the fourth quarter of 2020 will result in first quarter 2021 closed sales outpacing last year, starting the year off with positive momentum. Mortgage interest rates are expected to remain very low, with only a modest possible increase, which extends the opportunity for home buyers. Listings will continue to be absorbed by buyers quickly, resulting in low available inventory levels and prime conditions for those homeowners considering selling. As the country and economy start to recover from the pandemic, GDP will start to grow, unemployment rates will drop and government stimulus programs will mean that, in future years, we may experience higher inflation and interest rates. 2021 represents a finite window of opportunity for buyers to hedge inflation by locking in low fixed housing payments now.
Consensus Outlook on Economy and Housing Market FORECAST
2020 A
2021 F
2022 F
GDP Growth
-2.7%
3.5%
3.0%
Unemployment Rate
6.9%
6.2%
5.0%
Inflation Rate
1.2%
1.7%
2.0
30-year Fixed Mortgage Rate
2.83%
3.0%
3.25%
Sparse inventory, multiple offers and a fast-paced market mean that both buyers and sellers should engage the assistance of a knowledgeable real estate professional. Navigating this market has its rewards for those who are prepared.
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Consensus Outlook on Economy and Housing Market source: NAR Chief Economist Lawrence Yun. Information is believed to be reliable, but not guaranteed.
STATE OF THE MARKET | 3
Tucson Residential Closed Sales Home Sales Increase
2019
Residential home sales started off 2020 outpacing the prior year, and then dipped with the initial onset of COVID-19. Falling mortgage interest rates and increased demand for homes drove a resurgence in the market, with the second half of the year outpacing 2019.
2020
2,500
2,000
1,500
1,000
In total, closed home sales increased 3.7% from 2019.
500
+3.7%
0 Jan
Feb
Mar
Apr
May
June
Jul
Aug
Sep
Oct
Nov
Dec
Tucson Residential New Pending Sales 30%
Buyer Activity Surges
23.5% 19.1% 19.2%
19.1%
20%
16.6%
12.5% 10%
9.1%
8.6% 2.6%
3.8%
0.6%
0%
-10% -15.3%
-20%
-30%
Strong new pending sales activity in the fourth quarter will lead to a high rate of closed sales in first quarter 2021.
-29.0%
-40% Jan
Feb
Mar
Apr
New pending sales are homes that have gone under contract, but the sale has not yet closed. This chart shows the number of homes going under contract each month, as a percentage comparison to same month 2019. Pending sales are an indicator of current buyer demand and predictor of home sale closings in the next 30-90 days.
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2020 Total
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Statistics based on information obtained from MLSSAZ on 01/08/21 using TrendGraphix software. Information is believed to be reliable, but not guaranteed.
4 | STATE OF THE MARKET
Tucson Residential — Closed Sales Below $800,000 2019
Increased Sales, Low Inventory
2020
2,500
Despite severe seller’s market conditions and low levels of available inventory, home sales priced under $800,000 still managed to increase 3.3% over the prior year.
2,000
1,500
This is a very competitive segment of the market and buyers need to act with urgency when finding homes for sale and making offers.
1,000
500
+3.3%
0 Jan
Feb Mar
Apr May June
Jul
Aug
Sep
Oct
Nov Dec
Tucson Residential — Closed Luxury Sales ($800,000+) 2019
Luxury Launches Upwards
2020
One of the most robust segments of the residential housing market, luxury home sales increased dramatically in 2020, up 50.2% over 2019.
60
50
Prior to 2020, the luxury market had not seen a rebound in the last decade like lower price points had. 2020 marked a breakout year, driven by the flexibility to work remotely, value of home, indoor/outdoor spaces, and movement away from areas with natural disasters or higher taxes.
40
30
20
10
0 Jan
Feb
Mar
Apr
May
June
Jul
Aug
Sep
Oct
Nov
Dec
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+50.2%
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Statistics based on information obtained from MLSSAZ on 01/08/21 using TrendGraphix software. Information is believed to be reliable, but not guaranteed.
STATE OF THE MARKET | 5
Tucson Residential Homes for Sale Inventory At Historic Lows
12,000
10,000
Dec ‘19 2,612
8,000
This does not mean that new listings are not coming on the market, however. It means that listings are selling at a rapid clip. A low listing situation can create opportunities for sellers, and a very competitive landscape for buyers.
Dec ‘20 1,351
6,000
4,000
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
-50.2%
2008
0
2007
2,000
2006
The number of available homes for sale continued to slide in 2020, ending the year with only 1,351 active listings. This represents a 50.2% decrease from end of year 2019.
Tucson Residential — New Pending Sales vs New Listings New Pending Sales
Listings Absorbed Instantly
New Listings
In 2020, the pent-up demand from buyers and low available inventory meant that as soon as listings hit the market, they went under contract.
2,500
2,000
22,581 new listings 20,500 new pending sales Only a 9% difference
1,500
New Listings Happening
1,000
Despite a pandemic and stayat-home order, new listings were only 2.2% lower in 2020 as compared to 2019.
500
0
Jan
Feb
Mar
Apr
May
June
Jul
Aug
Sep
Oct
Nov
Dec
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Statistics based on information obtained from MLSSAZ on 01/08/21 using TrendGraphix software. Information is believed to be reliable, but not guaranteed.
6 | STATE OF THE MARKET
Tucson Residential Market Conditions — Months of Inventory It’s a Seller’s Market
Dec 2019
When you have high buyer demand and low listing inventory, it results in a seller’s market — reflected by the lower months of inventory number.
0
2
4
Dec 2020 6
8
10
12
$0–$499,999
In 2020, the market shifted even deeper into a seller’s market, including all price points. A seller’s market presents a unique opportunity for potential sellers to list and maximize their home value with less time on market. At the same time, buyers can benefit from historically low interest rates.
$500,000–$999,999
$1,000,000+
Seller’s Market
Buyer’s Market
Tucson Residential Median Sales Price $300,000
Home Prices Rise
Dec ‘20 $276,874
When you have high demand and low supply, you can expect prices to increase.
$250,000
$200,000
$150,000
Dec ‘19 $239,911
$100,000
$50,000
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0
In 2020 the median residential sales price increased 15.4% to $276,874 from end of 2019 levels. Higher prices have been mainly offset for buyers with historically low interest rates. At the same time, this increases market value and equity positions for many homeowners.
+15.4%
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Statistics based on information obtained from MLSSAZ on 01/08/21 using TrendGraphix software. Information is believed to be reliable, but not guaranteed.
STATE OF THE MARKET | 7
Mortgage Rates Mortgage Rates Hit Historic Lows Mortgage interest rates continued their steady trend downwards in 2020, hitting new historic lows with 30-year fixed rates under 3%. Low rates resulted in a boom in refinances and new home purchases - helping to offset increases in home prices for buyers by keeping monthly mortgage payments in check. This helped with increasing the affordability for buyers.
Tucson Residential Monthly Payment Monthly Payments Steady
$1,400 Dec ‘19 $1,067.19
Dec ‘20 $1,064.07
$1,200
$,,000
$800
$600
Despite increasing home sale prices, historically low mortgage rates have enabled buyers on average to buy homes at higher prices while keeping their monthly principal and interest payment the same – helping with affordability. The monthly mortgage payment on a median priced house is virtually unchanged from December 2019.
$400
$200
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Dec 2020
Mar 2020
Jun 2019
Sep 2018
Dec 2017
Mar 2017
Jun 2016
Sep 2015
Dec 2014
Mar 2014
Jun 2013
Sep 2012
Dec 2011
Mar 2011
Jun 2010
Sep 2009
Mar 2008
Mar 2008
0
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Mortgage Rates source: Freddie Mac as of 01/14/21. Statistics based on information obtained from MLSSAZ on 01/08/21 using TrendGraphix software. Information is believed to be reliable, but not guaranteed.
8 | STATE OF THE MARKET
Tucson Residential Days on Market Homes Selling Faster
50
The average days on market for listings, meaning the number of days from being new-to-market to going under contract, is getting lower. As of December 2020, the average days on market was only 23, down 36% from 36 days in December 2019. This trend means buyers need to be ready to act quickly when making offers, and work with a real estate professional to be aware of all available inventory, including new construction and coming soon listings.
45 44 40
36
35 30
23
25 20 15 10 5
Dec 2020
Nov 2020
Oct 2020
Sep 2020
Aug 2020
Jul 2020
May 2020
June 2020
Apr 2020
Feb 2020
Mar 2020
Jan 2020
Dec 2019
Nov 2019
Oct 2019
Sep 2019
Aug 2019
Jul 2019
June 2019
May 2019
Apr 2019
Mar 2019
Feb 2019
Jan 2019
0
Tucson Residential — Sold Price to Original List Price % Difference 99%
100% 99% 98%
Homes Selling At or Close to List Price With higher demand and low available supply, listings are selling faster and closer to list price.
96%
97% 96%
In December 2020, listings sold for 99% of the original list price, on average. This percentage was 96% at the end of 2019.
95% 94% 93% 92% 91%
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Dec 2020
Nov 2020
Oct 2020
Sep 2020
Aug 2020
Jul 2020
June 2020
May 2020
Apr 2020
Mar 2020
Feb 2020
Jan 2020
Dec 2019
Oct 2019
Nov 2019
Sep 2019
Jul 2019
Aug 2019
May 2019
June 2019
Apr 2019
Mar 2019
Jan 2019
Feb 2019
90%
A Long Realty Market Pulse Study revealed that 79% of Long Realty listings received multiple offers. Another great reason to have a knowledgeable real estate agent help you navigate this fast-paced market.
Long Realty Company
Statistics based on information obtained from MLSSAZ on 01/08/21 using TrendGraphix software. Long Realty Market Pulse Study conducted Fall of 2020 among Long Realty agents. Information is believed to be reliable, but not guaranteed.
STATE OF THE MARKET | 9
Southern Arizona — Residential Closed Sales 2020 vs 2019 Home Sales Up Across Southern Arizona
14%
Even with a tight listing inventory environment, home sales increased across Southern Arizona in 2020, with Sierra Vista seeing the largest increase of 13%.
13%
12% 10% 8%
Low interest rates and the attractive qualities of a Southern Arizona lifestyle drew more buyers in, and we expect to continue to see strong real estate sales across the region in 2021.
6% 4%
4%
3%
2%
1%
0 Tucson 19,686
2020 Closed Sales
Green Valley 2,238
Sahuarita 817
Sierra Vista 1,994
Southern Arizona — Residential Median Sales Price 2020 vs 2019 Home Sales Prices Rise Across the Region
40% 36%
35%
Across Southern Arizona, the high buyer demand and low supply of available listings resulted in an increase in median sales prices.
30% 25%
Sahuarita saw the highest increase percentage in home sales price.
20% 15%
15%
16%
10%
7%
5% 0% Median Price Dec 2020
Tucson $276,874
Green Valley $257,566
Sahuarita $263,000
Sierra Vista $198,500
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With current treads in market conditions, one could expect a continued increase in sales price. Real estate is local, so trends and prices may vary for your specific situation.
Long Realty Company
Statistics based on information obtained from MLSSAZ and ARMLS on 01/08/21 using TrendGraphix software. Information is believed to be reliable, but not guaranteed.
10 | STATE OF THE MARKET
Tucson — New Home Permits New Home Permits Grow As buyers considered all their home purchase options, the pace of new construction permits increased in 2020, after an initial COVID-19 related dip. The increase in permits and construction activity, however, are not large enough to fill the listing shortages seen in the resale market. Increases in labor and supply costs, and buyer demand, have increased new construction pricing as well. 2019
2020
2020 Six-Month Average
500 400
352
399
225
272
300 200 100 0 Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jobs Projected to Grow Arizona Non-Farm Jobs Forecast
Jobs Projected to Increase Thousands 3,400 Optimistic 3,200 3,000 Pessimistic
2,800 2,600
As the US and state fight the COVID-19 pandemic, economists are projecting that job growth will return in 2021, though the rate depends on several factors including the pandemic status and economic recovery track. As employment grows, the economy will grow and provide continued support for housing.
2,400 2008
2010
2012
2014
2016
2018
2020
2022
2,200
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Tucson New Home Permits source: RLBrownReports/Bright Future Real Estate Research, Volume 434. Arizona Non-Farm Jobs Forecast source: Economic and Business Research Center, The University of Arizona. Information is believed to be reliable, but not guaranteed.
STATE OF THE MARKET | 11
2021 Real Estate Forecasts Home Prices Projected to Rise
6%
Leading economists are forecasting that home prices will rise in 2021, given the continued high demand and low inventory housing environment.
6%
5.7%
2021 Home Price Appreciation Forecasts
3.9% average of all forecasts
The average of these six forecasts is 3.9%, and Realtor.com is forecasting a 4.5% home price increase in Tucson for 2021.
2.6%
A continued rise in home prices will help increase homeowner wealth.
NAR
Zelman
REALTOR.com
Freddie Mac
2.5%
CoreLogic
2.1%
Fannie Mae
2%
MBA
Slight Increases in Mortgage Rates Possible
Mortgage Rate Projections Quarter
Freddie Mac
Fannie Mae
MBA
NAR
Average
Q4 2020
3.0
2.9
3.0
2.9
2.95%
Q1 2021
3.0
2.8
3.1
3.1
3.00%
Q2 2021
3.0
2.8
3.1
3.1
3.00%
Q3 20210
3.0
2.8
3.2
3.2
3.05%
Mortgage interest rates are projected by economists to potentially increase just slightly in 2021. Eventually, as the general economy recovers and starts to grow, inflationary pressures may push rates higher. In the short term, however, it seems the opportunity to finance at a very low rate will continue.
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for you
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This is a fast-paced, changing real estate market. Navigating through it can be difficult, which is why I am here as a resource for whatever questions or assistance you may need. 2021 presents opportunities for both sellers and buyers, and a knowledgeable professional can help you make well educated decisions.
Long Realty Company
Information source: Keeping Current Matters and Realtor.com, January 2021. Information is believed to be reliable, but not guaranteed.
EVERYTHING REAL ESTATE.
for you
TRUSTED SINCE 1926
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EVERYTHING REAL ESTATE.
for you
TRUSTED SINCE 1926
EVERYTH REAL ES
for y
TRUSTED