Real Estate Market Update March 14, 2020
During times like this, Sarah and I are here to help in whatever way we can...help bring food to someone, medication, etc...please PM us if there is someone who is in need of help! We all need to take our part in this world to help each other during times of crisis! Our prayers go out to the immune compromised, nurses and doctors on the front lines and our prayers that this will pass and be contained quickly. 🙏
We have been getting a lot of comments from our clients and friends on the real estate market and wanted to share some insight from the Cromford Report on the current Phoenix Real Estate Market Outlook:
We have all learned a lot about the novel corona virus since my last observation on that subject dated February 29. There is now little doubt that it will spread to every corner of the globe and will have a huge effect on the world, both in human and economic terms. It will therefore have an effect on the Phoenix housing market but these changes will be minor compared with the effect on families who lose loved ones and the businesses directly affected, included:
Hotels & vacation rentals
Transportation - especially airlines
All tourism-related jobs
There will be an increase in demand for healthcare workers, but the USA already had a shortfall of over 1 million healthcare professionals.
We anticipate a recession during 2Q and 3Q 2020 both globally and in the USA. This will impact employment levels and disposable income. Whether the recession lasts longer than that is impossible to say at the moment.
Here are the types of effects we can anticipate for the housing market, though nothing is certain in these very uncertain times:
investors will probably lose some enthusiasm for additional purchases
other buyers may defer or cancel buying decisions due to fear of losing their jobs
extremely low mortgage rates may compensate somewhat for the slowdown in demand
sellers may be less willing to allow strangers to view their home for fear they may be carrying the virus
new home builders may experience shortages of supplies and build times may extend, reducing total supply
people who are self-isolating, in quarantine or simply sent home by their employer are far less likely to go house hunting, or to list their home for sale
We therefore expect a fall in demand for homes. The foot fall at new home subdivisions is already dropping substantially as if to confirm this.
We expect a slight reduction in supply too, thus balancing some of the drop in demand.
Overall we anticipate volumes declining for several months but it will probably remain a seller's market
In the medium term, we may see homes coming onto the market that were previously Airbnb / VRBO properties. We may see a long hiatus in tourist visits and the owners may tire of the high vacancies if they are highly leveraged.
Lower sales volumes may mean we need fewer agents, fewer title and escrow staff and fewer lending professionals. This will add to the recessionary trend.
In the long term we are likely to see a temporary fall in population due to the increased mortality rates. In the UK the government has advised us to expect 60% of the population to contract the virus and to expect some 500,000 additional fatalities, mostly among the aged (like me). This represents some 0.8% of the total population. The government in the USA has made no similar projection but if it were to reflect the UK numbers, then the population of Central Arizona would decline by about 35,000. This is about half the usual number of net migration arrivals each year, so would probably not have a lasting effect on housing demand. However it does disproportionately affect the older age groups, so we would expect more noticeable demand drops in locations with unusually high median ages. These include Sun City, Sun City West, Sun Lakes, Carefree, Rio Verde, Wickenburg, Tonopah and Desert Hills.
Black Canyon City, Eloy, Rio Verde, Congress).
Trying to buy when supply is so low can be a frustrating affair. I am even receiving calls in the UK from Phoenix buyers trying to make an all-cash unsolicited offer on my home. However when I tell them I live in a rented house in Leicestershire, they wish me a nice day and hang up.