Arizona’s Real Estate Market Is Heating up Despite the Pandemic
There’s no question that the economic impact COVID-19 has had globally, has been profound, and as economies slowly re-open, the U.S. has been struggling to catch back up. Between losing employment and the need to relocate due to assisting family members and staying safe, many residents have either chosen to move or been forced to, stirring up a myriad of issues within the housing market. One primary example has occurred in Arizona, where the pandemic initially diminished the metro Phoenix’s housing market in April. But since May, the market has started to recover, putting homebuyers back on the hunt for their dream home in time for summer.
For a metropolis such as Phoenix – with a “very hot” seller’s market – it’s hard to imagine the real estate market plummeting at all. Especially when just months before lockdowns were set in place, home sales hit a record high according to Arizona Regional Multiple Listing Service (ARMLS). Despite the densely populated city, they were still affected. The housing market certainly took a hit – with residential foreclosures falling to 18%, even lower than during the housing market fall of 2005 – but the city saw pending sales begin to climb again in May. Tom Ruff of ARMLS Information Market group, a Phoenix housing expert, shares a unique perspective: “If there’s a silver lining to the COVID-19 punch, it’s the unsustainable runaway appreciation we’d been seeing has moderated. In the long run, this is a good thing and something I’d been hoping for, just not the way it happened.”
While home prices did slip in April, they didn’t show any signs of crashing in the long term. The median home price in metro Phoenix in April was $300,000, while in March the median was only a bit more at $302,500. Housing analysts even began comparing home sales by week, rather than by month, due to the rapid and unexpected changes in the market. The number of homes for sale in April was down 12% compared to April of 2019 – a small but mighty percentage. As Ruff simply put, “Both buyers and sellers have taken a step back.”
The April dip in home prices is predominantly due to more low-priced homes being listed for sale. This is likely due to homeowners trying to sell their home as fast as possible after the coronavirus shook the economy and caused residents to fear not being able to pay their existing mortgage. Many of those listings may also be highly leveraged short-term rentals that owners need to sell quickly. Transactions for homes that were priced over $1 million had increased in February by 56% compared to February of 2019, although that trend has slowed down. During the height of the pandemic, The Cromford Report stated, “With the recent negative developments in the markets for stocks and commodities, we would anticipate the demand for homes over $1,000,000 to be less impressive when we look at numbers for the next few months.” This forecast was rather spot on.
Christa Lawcock, an agent at Realty Executives, spoke on the topic confidently when many were worried about the future of the market in April. “The sky is not falling on the real estate market. Homes priced right are still getting multiple offers, but it’s not as competitive as it was.”
Now, fast forward to May and Phoenix began to see the housing market quickly pick back up where it left off. A senior housing analyst with Cromford, Tina Tamboer, promisingly described, “It looks like five or six weeks ago was the bottom for Covid’s impact on our housing market.” Considering home sales take time to close and any pre-existing pending sales are factored into later months, we won’t see a booming real estate market today, but it is on the rise. Based on pending sales as of late May, Ruff predicted Phoenix’s median home price would decrease to $290,000 which she directly blames that on less expensive homes on the market, Considering the luxury housing market is always expected to slow as the stock market drops, overall homebuyers shouldn’t count on hefty price drops this summer. Ruff continues, “Consumers looking at the May closing numbers and betting on prices to follow the same trend in June will most likely be greatly disappointed. Housing supply remains at historically low levels. While price growth has slowed, I can’t see how it can go negative.”
While larger properties are playing a huge part in the housing market data for the months surrounding the pandemic, real estate sales in Arizona are, in fact, starting to rise. A recent report by Long Realty, the largest brokerage company in Southern Arizona, showed that new pending real estate sales in the Tucson Metro Area were up 9.3% in just one week in May. Compared to before the COVID-19 related lockdowns, sales are still down about 13.5 percent but the weekly growth is incredibly reassuring. It’s been nearly impossible to keep up with the everchanging housing market and data as real estate professionals navigate the “after COVID-19 era.” But Kevin Kaplan, VP of Marketing & Technology at Long Realty, says the market has started to become a bit more consistent.
With such great momentum in the region’s housing market at the beginning of the year, and even a few months following, “sales activity was up, inventory was down, rates were good.” Kaplan claims that these directions are remaining true, “Despite recent surges in unemployment, markets throughout Arizona have an increased level of new pending sales from previous weeks. The Green Valley and Sahuarita area’s new pending sales are up 7.1 percent and the Greater Phoenix Area’s new pending sales are up 18.9 percent.”
When comparing Arizona’s housing market during this challenging economic time to other states and cities not adjusting as well, there is an important distinguishing factor: Governor Doug Ducey designated real estate as an essential business. This allowed real estate agents to continue going into the office and managing properties during stay-at-home orders.
Long Realty believes another element that kept the market going strong is the real estate industry’s ability to adjust to a virtual business. While the industry was deemed essential in Arizona, they were still taking safety precautions when showing homes such as alternative video showings, eliminating open houses, and extensive sanitizing between physical showings.
Not only is Arizona’s housing market picking back up, but The Arizona Republic explains that increases in home contracts during May showcase that home sales could nearly bounce back to the pace in February during pre-COVID days.
As Kaplan says, “Given that we’re in the middle of a pandemic, and a stay-at-home-order and an economic crisis, I’d say the market is performing pretty well. I don’t think we were surprised, per se, but encouraged from the continued activity. And it is down, and understandably so, but I wouldn’t consider 85 percent of the pre-COVID sales rate a pause in the market.”
Based on Arizona’s perseverance through the COVID-19 generated housing market struggle, other states in the U.S. should have the capability to come out on top as well. The Grand Canyon State’s strong real estate market is a great indicator of a national recovery that may be well on its way.