The coronavirus pandemic is not slowing down home sales in the Valley.
The Phoenix metro area in the first quarter of 2020 saw more sales than during any first quarter since 2006, according to the latest data available from Belfiore Real Estate Consulting’s July housing report.
A total of 31,368 closings took place, 15% more than in the first quarter of 2019, per CoreLogic data. Last year, 5% more closings took place than in 2018 — more than during any year since 2006.
Looking deeper into 2020, 122,501 closings are now projected, according to the report.
In Peoria, closings are up about 17.5% from the first quarter of 2019 to first quarter of 2020.
The housing industry has pulled off the fastest positive turnaround in decades following the COVID-19 shutdown debacle just four months ago, President Jim Belfiore said in the report.
Demand has shot upward — in the last 30 days, there has been 28% more new home sales. Normally, 2% fewer sales would occur from June to July, but seasonal logic is not 2020 logic, he said.
“Buyers are signing contracts faster than builders can build, with historically low mortgage interest rates pushing demand so high that resale supply is now at 15-year lows, ready-to-deliver speculative new supply is at 78-month lows, and pricing pressure is on,” he said. “Home shoppers that want a house are now being pushed to hurry up and wait, as construction backlogs are growing.”
Closing activity, down in all four metro Phoenix area regions in the first quarter of last year, charged upward the rest of the year and was up by double-digits in all four regions in the fourth quarter, according to the report.
In the first quarter of this year compared with the first quarter of 2019, demand went up 16.7% in the West Valley, 15.5% in the East Valley, 13.6% in the Central and South, and 13.1% in the North and Northeast.
The largest year-over-year jumps in closings took place in West Phoenix at 61%, Gold Canyon at 57%, and New River at 55%.
The demand jumps primarily are predicated on jumps in demand for new homes versus resale homes.
New home sales demand, peak-to-trough, only fell 30%, and as the last three months of data now reveal, total demand fell only about 16% during the pandemic.
In an amazing turnaround, builders sold 28% more homes over the last 30 days than the prior 30-days, and while sales were 7% lower recently than during the same period a year ago, buyer demand is surging and the deficit will be gone in August, according to the report.
Similarly, resale demand has shot up as well.
Cromford® Report data suggest the number of existing homes that have closed escrow over the last 30 days was 29% higher than the number in the prior 30 days. Demand compared to a year ago was also up by 8%.
Twenty-one percent more pending listings exist than one year ago, meaning sales will continue to rise in the coming 30 days, according to the report.
What is driving the new demand?
“Low mortgage rates, optimism despite rising COVID-19 infections, and apparently, people with more disposable income. Builders are offering sub-3% mortgage interest rates, the lowest rates offered on record. Lower rates mean lower payments. With word spreading about the rates, lenders are lending at capacity, and they are making more money than they were making during the booming first quarter,” the report stated.
Additionally, resale supply fell dramatically— to the lowest levels on record since 2005 — from mid-June to mid-July, as sales surged.
The MLS listed 14,118 resale homes in mid-July, according to Cromford® Report.
Current supply is 16% lower than it was a month ago and an astounding 29% lower than it was a year ago, according to the Belfiore report.
“Resale supply is so low now in many areas that parties wanting to buy a home are likely being forced to consider a new home even if they desire a resale,” the Belfiore report stated.
The latest metro-wide data suggests new home prices rose 0.3% in the month of May, and such was the case in Peoria. Prices for new home builds increased 5.6% and 2.4% year-over-year in north Peoria and south Peoria, respectively.
Supply has plummeted and is expected to continue to go down, and as a result, home prices are expected to rise.
Mr. Belfiore expects pricing pressure, normally most significant in the spring of each year, to be extraordinary in the second half of 2020.
Foreclosure levels remain at historical lows, but these are likely to increase, albeit minimally, late this and into next year. During the first quarter of the year, South Peoria had 25 pre-foreclosures and 12 foreclosures; North Peoria had 24 pre-foreclosures and six foreclosures, according to the report.
“Ultimately, the increasing figures are not expected to negatively affect the housing market; pre-foreclosure and foreclosure rates will become increasingly important figures to watch, particularly the longer the disease impacts Americans’ psyche and employment, but given the high levels of equity reportedly held by homeowners taking advantage of the CARES Act forbearance law, foreclosures are not expected to increase significantly,” the report said.
Philip Haldiman can be reached at 623-876-3697, firstname.lastname@example.org, or on Twitter @philiphaldiman.