Pandemic has slowed, not stopped, home price rise SanTan Sun News

Pandemic has slowed, not stopped, home price rise

April 27th, 2020 STSN Staff
Pandemic has slowed, not stopped, home price rise
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By PAUL MARYNIAK
Executive Editor

The lingering scarcity of homes for sale in Chandler and across the Valley continues to bedevil homebuyers, keeping home values where they’ve been before the pandemic-fueled economic meltdown, experts say.

Worse for buyers, prices continue to creep upward, according to the Cromford Report, the leading authority on the Phoenix metro housing market.

“As long as supply remains lower than demand,” it said last week, “there will be no downward pressure on prices and home values will therefore be sustained.”

In its latest analysis of listings in 17 Maricopa County municipalities, Cromford said Phoenix and the East Valley showed “the biggest rises in supply” in April from last month – adding, “but even here supply remains lower than in April 2019.”

A case in point is Chandler, where in the three northernmost ZIP codes, there were 144 homes listed for sale last week as opposed to 177 a year ago. In ZIP code 85249, the 114 homes listed last week pales in comparison to the 190 listed in April 2019. In ZIP 85286, 86 homes were listed, down from 120 a year ago.

Valleywide, Cromford said, “New listing counts are still declining by larger percentages each day – last week they were down 29 percent from the same week in 2019. If this trend continues, then it becomes more likely that supply will remain tight and stay below the diminished level of demand.”

Meanwhile, prices continue to inch up – a trend that is largely driven by the big imbalance between supply and demand.

Cromford last week said sales throughout the Valley were down 20 percent for the first two weeks of April compared with the same time last year.

“The really interesting thing is that the fall in closings is not affecting all price ranges equally,” Cromford said. “The range between $250K and $1 million is almost unchanged from last year – down less than 2 percent.

If anything, the pandemic may have dampened demand and is keeping prices from shooting up faster, Cromford said.

Cromford noted that the success rate for listings – the measure for how quickly homes sell – fell from 89 percent to 82 percent after March 21, when many businesses closed.

But, it added, “89 percent is abnormally high and 82 percent is still a long way above average.

“We have never seen prices decline when listing success rates are above 65 percent,” it said. “In fact, apart from a few isolated instances, price declines tend to follow listing success rates below 50 percent.”

On April 13, the report also said, “Not until supply and demand meet will we see prices stabilize and not until supply is higher than demand will we see prices decline. A lot can happen in the next 4 weeks, however. It’s still too early to be making apocalyptic projections for the Greater Phoenix housing market.”

But Cromford and other real estate experts say too much uncertainty even over the immediate future makes it impossible to say where the housing market is heading.

That was apparent in various mixed messages by different economists for Realtor.com, the website sponsored by the National Association of Realtors.

Realtor.com reported that nationwide, “the number of homes for sale fell by nearly half as sellers are pulling them off the market or holding off on listing their abodes.

And as nonessential businesses remain shuttered and unemployment soars, reaching 22 million jobless claims in just four weeks, home price growth is also beginning to slow.

Moreover, Realtor.com senior economist George Ratiu noted, “Sellers are recognizing the economic downturn is already a lot deeper than expected.”

Still, while the economy has slowed home price increases dramatically, they’re not falling.

Ratiu said, ““Demand is already evaporating and, with that, prices will absolutely decline.”

But Danielle Hale, Realtor.com’s chief economist, offered a completely different take.

“I don’t expect the slowdown to be like the last recession where prices fell,” she said. “There are more than enough buyers out there to keep home sales from slowing in any major way.”

For now, however, there’s no reason for homebuyers to feel any more optimistic than they were before the economy shutdown in the pandemic’s wake.

“Even the most motivated buyers aren’t likely to find a home easily,” Realtor.com said, citing the drop in listings as a major factor.

“Many sellers are taking their homes off the market or delaying listing them as they don’t want to lose out on fetching top-dollar for their properties or move during a worldwide pandemic,” the website said.

Added Hale: “It will be different than the Great Recession. Things unraveled pretty quickly, and then the recovery was pretty slow. I would expect this to be milder. There’s no dysfunction in the banking system, we don’t have [many] households who are overleveraged [with their mortgage payments] and are potentially in trouble.”

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