Where is the 2021 Housing Market Headed?

May 2021 stats arrived mid-June. Pending home sales, a measure of signed contracts on existing homes, jumped an unexpectedly high 8% in May compared with April, according to the National Association of Realtors. Analysts expected a 1% drop. This is the highest level of sales activity for May since 2005.

 

"The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings" said Lawrence Yun, the National Association of Realtor (NAR)'s chief economist. Yun indicated that although the housing market has had to overcome obstacles, there appears to be positive market conditions on the horizon through the end of 2021. 

"While these hurdles have contributed to pricing out some would-be buyers, the record-high aggregate wealth in the country from the elevated stock market and rising home prices are evidently providing funds for home purchases,” Yun said. 

"More market listings will appear in the second half of 2021, in part from the winding down of the federal mortgage forbearance program and from more home building. Home price growth will steadily moderate with increased supply, but a broad and prolonged decline in prices is unlikely," Yun continued. "However, if a reduction occurs in some markets, homebuyers will view the lower home price as a second-chance opportunity to get into the market after being outbid in previous multiple-bid market conditions."   (more)

 

1031 Exchanges Threatened?

According to the Phoenix Business Journal on July 2, President Biden’s American Families Plan will eliminate or cap the 1031 exchange process and may cripple the already deeply hurt commercial real estate sector.

 

The article presents a study which demonstrates that Section 1031 drives the Arizona real estate economy, involving 15 to 20% of all commercial transactions. And as most replacement properties acquired in a 1031 exchange are ultimately disposed of through a taxable sale, the argument that it provides a loophole to avoid paying taxes is defeated.  Further, a Ernst & Young study concluded that if section 1031 were limited or repealed, it would shrink GDP by $9.3 billion per year.  Full Article If you do not subscribe to the Business Journal, contact me for more information.

 

THIS MONTH'S MARKET UPDATE Video Link:  

Phoenix ranks 6 of the ten largest cities in the nation for housing affordability. Home prices are up 49% from just 3 years ago, but the monthly payment has increased just 25%. So why is it so hard to find a home? Because while the Phoenix population continued to grow despite the recession of 2008, new construction just did not keep pace.  Click link to see my most recent Monthly statistics charts & this month's Housing Market Report.

 

CROMFORD'S MONTHLY VIEW

 

There’s a misconception that waiting for a Buyer Market to buy a home is a good idea.

Comments For Buyers:

There’s a lot of conflicting advice for buyers online these days, and there’s no shortage of headlines advising them to wait. Many authors cite the unpleasantness of multiple competing offers and rising prices as the reason to wait out the market. This is despite their acknowledgment that home values are not expected to stop rising in the near future and that interest rates are expected to eventually rise.

It’s undeniably more pleasant to purchase a home when there’s a plethora to choose from and you’re the only game in town, however there’s a reason you may be the only buyer in that scenario. That’s the end of a Seller Market, and signifies the top of price.
The top of price is either the beginning of a Balanced Market or a Buyer Market, which either way means the end of exciting annual appreciation rates. There’s a misconception that waiting for a Buyer Market to buy a home is a good idea. This is not true. Home values decline in Buyer Markets because, by definition, there are more homes than buyers to buy them. While that sounds like a magical dream land these days, the reality is that no one likes to purchase a home and watch its value decline or go flat. Ironically, if you want your home to appreciate right after you buy it, then you want to buy in a Seller Market. Perhaps we should rename Seller Markets “Winner Markets”, because both buyers and sellers win in a sense.

Admittedly, the extreme Seller Market Greater Phoenix is experiencing doesn’t feel like “winning”, but there is some relief on the horizon. The market has been losing strength since mid-March, but it’s not plummeting. At it’s current rate of decline, the Greater Phoenix market is still projected to remain in a Seller Market for 16 months. That’s a target of October 2022 before prices stop rising. As the Seller Market weakens, appreciation rates will still be positive moving forward but there will be a little more supply to accommodate demand. My advice to buyers frustrated with the market, don’t wait for the market to balance out. Take a breath, take a vacation, but don’t give up. Change is subtle.

Comments For Sellers:

Typically this time of year we start talking about the imminent “Summer Slowdown” in contract activity as kids are out of school and people take vacations to escape the heat. Last year, the Greater Phoenix market didn’t experience this typical seasonal trend. As trips were cancelled and people stayed home, there was a large surge in purchase contract activity that continued through the end of the year. This year, as people are getting back to some form of normalcy, it looks like we will see a seasonal slowdown in buyer activity once again. If the trend continues and the market follows previous years, we should expect contract activity to slowly decline through the end of the year.The seasonal slowdown is typically nothing to be concerned about, mainly because there tends to be a dip in new listings as well. However this year there’s an event coming up that could alter that scenario, that is the end of forbearance for many homeowners. While the vast majority of forbearances have ended with homeowners staying in their home, anywhere from 16%-20% have resorted to selling their home one way or another according to the Mortgage Bankers Association. This could result in an increase in supply over the next few months, adding extra days of marketing time to your listing and possibly a few price reductions. Stay tuned.

The Cromford Report is based on the campus of Arizona State University. Provided as a proud subscriber. ©2021 Cromford Associates LLC and Tamboer Consulting LLC

LUXURY HOME MARKET INSTITUTE

Link to this month's printable report follows.

Supply isn’t just being reduced by the affluent buying additional properties, it was also highly impacted by the seniors, baby boomers, and empty nesters who decided to stay in place.

Each spring we typically see a vast number of listings entering the market from this demographic as they chose to downsize or relocate. It is predicted that the 2020 and early 2021 “stay in place trend” will start to change and homes will slowly trickle back on to the market, especially if the pandemic continues to remain manageable.”

 Full Report from the Luxury Home Marketing Institute just released June 25, 2021 both National and specific to Paradise Valley Arizona. Other market report locations are available, contact me.

_{Denise van den Bossche (www.DeniseVDB.com) has been a career Real Estate professional in the Scottsdale Valley since 1985, participating in the Phoenix Valley’s growth from a population of 1.5M to the current 4.5 million. She can be reached at 602-980-0737.}

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Adding Aging-in-Place features into the design of your remodel or the updating of your home can pay you big dividends! 

The movement to Age-in-Place has grown exponentially due to: High replacement costs during a Seller's Market; Unexpected global economic events; Job transfers; An Accident with home rehabilitation, Extended family - both health and financial issues.

Adding just a few modifications to your "updating" plans can provide you with the option to live in your home longer. And, whether you stay in the home, or "right-size" somewhere else, adding Boomer-Design features will increase your buyer-pool and home value!  (downloadable full article)

^{NAR's Senior Real Estate Specialist are trained professionals who are experts in Aging-in-Place and other topics important to the Baby Boomer demographic. More information can be found at www.SRES-AZ.com.} 

Realtor.com May 3, 2021 by Clare Trapasso.

With home prices at a new record high and homes flying off the market in hours in some cases, it’s no wonder that Google searches for “when is the housing market going to crash” have spiked dramatically in recent weeks. After all, the mania seems reminiscent of the run-up to the housing bubble in the mid-2000s—and we’ve all been told that what goes up must eventually come down.

In this market, it’s possible that you answered a knock at your door to an Agent "representing a buyer" wanting your home. Or you received a no-questions “cash offer” in the mail. Booming housing markets always see an increase in new Real Estate Licensees. In addition, with the COVID Pandemic eliminating millions of service sector jobs, real estate becomes an option with no diploma or degree required, and training as easy as a two-week test preparation course, in most states.

 However, while the barriers of entry are low, the barriers of success are high, especially for a new Agent. Expertise is gained in-the-field. But in the 2021 market, there are simply no houses to sell. And if you do find a client, buying a home is difficult when you are competing with a network of seasoned agents. In recent years in Phoenix Metro, there are 64% less homes for sale, year over year, and a historically high buyer demand. So you should not be surprised at unsolicited offers for your home. Quite frankly, there is very little else for new agents to do.

One thing remains constant and is even more true than ever: Your Home Equity is a significant asset in your portfolio and you deserve expert guidance.  

About the Author:

^{Denise van den Bossche (www.DeniseVDB.com) Is Now a Good Time to Buy or Sell a Home? Call Denise 602-980-0737, celebrating 35 years Arizona Real Estate. For the Latest Housing Market Trends, Updated Monthly, go to:  www.HotFromPhoenix.com}

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^{#RealtyExecutivesInternational #HousingMarket #Phoenix #HotFromPhoenix #DeniseVDB #BestArizonaRealtors #LuxuryHomes #Scottsdale #ParadiseValley}

The Arizona economy has completely transformed into a mecca for Technology and Innovation over the last decade, increasing the Quality of Life from Excellent to Exceptional. 

Job Growth Projections on Steroids

According to a new report from the Arizona Commerce Authority, Arizona is projected to add 22,753 more technology jobs by 2030, a 20% growth rate, one of the fastest in the nation. These jobs will focus on Semiconductors, electric vehicles, artificial intelligence, automated vehicles, quantum computing, cybersecurity, aerospace and defense, photonics, biopharma and other advanced industries. And Metro-Phoenix & Scottsdale is at Ground Zero.

Much of the shift from Housing and Construction to Technology and Innovation has occurred over the last decade. This shift has brought with it youth and vitality, fueled by a high growth of skilled workers, higher wages, and income.  Arizona has three state universities and the nation’s largest community college system, not to mention private schools including Grand Canyon University. And our graduates are staying here. Our culture is incredibly diverse, both from other cultures and from folks who have relocated here from other parts of the country. That gives us a “friendly” welcoming attitude towards newcomers.

Arizona is Outperforming the Nation

In terms of pandemic recovery, Arizona is outperforming the country when it comes to workforce, employment, manufacturing jobs, population growth, and wage growth. We are a top 10 state for economic momentum, tech jobs added last year, and jobs recovered during the pandemic. Additional Arizona factoids mentioned by the ACA in its May 27, 2021 report:

• In 2020, Arizona attracted a record $13.7 billion in foreign direct investment (FDI), more than any other state in the nation.
• Arizona’s workforce now exceeds pre-pandemic levels. The Office of Economic Opportunity says that it will add nearly 550,000 jobs by 2030 for an annualized growth rate of 1.6%, four times the estimated U.S. growth rate.
• In 2020 Arizona led the nation in personal income growth: net earnings rose by 3.5 percent, above the national average of 0.3 percent.

Arizona Ranks High in its Infrastructure and Low in Natural Disasters

There are many reasons Arizona is attractive for both corporations and families. Weather and shutdowns caused by natural disasters and/or aging infrastructure are a few. When buying a home in Scottsdale, deferred maintenance is the first thing you would look for. You would typically not be thinking about power outages, clean water or hurricane evacuations. Arizona places a priority on natural gas, electricity, drinking water and waste removal. Additionally, the state has low history of natural disasters. These major business disruptions rank high on any short-list when it comes to corporate relocation and expansion. And with these companies come job opportunities.

Arizona was recently ranked as having the second most reliable energy grid in the country. When you pair that with our abundant renewable energy and modern highways, airports, rail, ports of entry and public transportation, Arizona stands out as an ideal location for doing business in the global economy. -Sandra Watson, President and CEO Arizona Commerce Authority

Global Recognition

Phoenix has now gained global recognition with the announcement that Taiwan Semiconductor Manufacturing Company (TSMC) has selected Phoenix for its onshoring operations. TSMC will build a $12 billion facility in north Phoenix which will be the newest and most modern semiconductor facility in the world. That’s a very huge deal in putting Arizona on the map globally.

The New Leader in Semiconductor Technology

Arizona is well on its way to meeting and exceeding skilled job projections with recent announcements from industry giants Intel and TSMC, among others. It is no wonder Forbes recently named Arizona “U.S. Semiconductor Central.” 

Intel’s east valley expansion will lead to the direct creation of 3,000 new high-tech, high-wage jobs and 3,000 construction jobs, while supporting an estimated 15,000 additional indirect jobs. The TSMC project will create more than 1,600 direct jobs and generate thousands more.

 Leisure, Sports and Recreation

When I left the Midwest for Arizona State University’s Graduate School in 1982, the Phoenix Valley was a
ll about Snowbirds, Resorts & Golf. As I became involved in the various Economic Development Committees and State Politics in the 1990s and 2000s, Arizona was as busy working to attract businesses as its universities were to attract students.

All of that work has paid off. The leisure industries were not replaced, they have been greatly enhanced. The youth and vitality we gained from a younger, skilled and higher-paid work force has added more focus on health, education and the arts. The restaurants and night life are plentiful and world-class. Whereas the summers used to mean no reservations were needed at restaurants, golf was cheap and traffic was very light. Not so anymore. The people are still friendly, the sun still shines 300 days a year, and the traffic has been well managed.  I still feel like every day is a vacation almost 40 years later.

_{This information was obtained from the Arizona Commerce Authority (ACA) in a special report published in the Phoenix Business Journal 5/27/2021.}

About the Author:

^{One thing remains constant and is even more true than ever: Your Home Equity is a significant asset in your portfolio and you deserve expert guidance.  Is Now a Good Time to Buy or Sell a Home? Call Denise 602-980-0737, celebrating 35 years Arizona Real Estate. For the Latest Housing Market Trends, Updated Monthly, go to:  www.HotFromPhoenix.com}

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^{#RealtyExecutivesInternational #HousingMarket #Phoenix #HotFromPhoenix #DeniseVDB #BestArizonaRealtors #LuxuryHomes #Scottsdale}