Market Update: Rents and Sale Prices Continue Upward Trajectory July Results for Sales and Listings
Market Forecast, Market Update
November 1, 2019
V.P. Business Development & Real Estate Analyst, Grand Canyon Title Agency
September Results for Previously Owned Single Family Homes
September 2019 sales were twelve percent higher than September 2018. New monthly listings in September 2019 were two percent lower than in September 2018. The median purchase price etched out a new high. It finished at $310,000 in September surpassing the previous high of $309,900 set in July 2019. September’s median price of $310,000 was $23,000 or eight percent higher than September 2018 when it was $287,000.
The above information is for Maricopa County (Greater Phoenix). The information was compiled from ARMLS. The reason for the focus on previously owned single- family homes is because this sales category dominates the market. In 2019 there will be close to 100,000 sales for both new and used single-family homes, condos, townhouses etc. Approximately two-thirds of these sales will be previously owned single-family homes.
2019 Sets Dollar Sales Volume Record
The third quarter is over and the results are in. Dollar sales volume for the first three quarters of 2019 surpassed the previous record set in 2005. Dollar sales volume for the first three quarters of 2019 was $20.6 billion surpassing the $20.2 billion set in the pre-real estate recession year of 2005. The dollar sales volume is for previously owned single-family homes in Maricopa County (Greater Phoenix).
Chart two shows a history of dollar sales volume for the first three quarters of a year from 2000 through 2019. The chart shows a steep increase in dollar sales volume from 2003 to 2005. In these two years it almost doubled, increasing by $9.9 billion. It was $10.3 in 2003 and was $20.2 billion in 2005 making Maricopa County one of the hottest, if not the hottest residential market in the country. From 2005 to 2008 dollar sales volume rapidly decreased. By 2008 it was half of what it was in 2005. This decrease was because of job losses. Job losses led to mortgage defaults. Mortgage defaults brought foreclosures. Foreclosures brought lender owned sales and short sales. Thousands of lender-owned sales and short sales sent purchase prices spiraling downward. At the same time prices were decreasing inventory was increasing. There was less demand to purchase because lending standards tightened. Many potential buyers now had scarred credit. Investors stepped in and starting buying up cheap homes to either rent or fix and flip. Then came the slow recovery. In 2011 dollar sales volume was $10.1 billion. It took eight years for it to slightly more than double finishing at $20.6 billion in 2019. Today, once again, our residential market is one of the hottest in the country.
Since 2005 and 2019 are the record years for dollar sales volume, at least for the first three quarters of a year, let’s compare other numbers for these two years. Table Two compares Maricopa County sales, new monthly listings, median purchase price and the number of people employed. The median purchase price in 2005 was $260,000 compared to $302,500 in 2019, however, in 2005 there were 7,833 more sales than in 2019 or about 870 more sales a month. When it comes to new monthly listings in 2005 there were 18,122 more listings than in 2019 or about 2,013 more per month.
Another difference between 2005 and 2019 is the number of people employed. Today in Maricopa County there are 417,150 more people employed than at the same time in 2005.
The reason for the emphasis on the comparison between 2005 and 2019 is not only because they are the two record years for dollar sales volume but also because of rumblings that the housing market in Maricopa County (Greater Phoenix) is close to a housing bubble. Because of the great increase in the number of people of employed in 2019 compared to 2005, 417,150 more people to be exact, and the lack of new home building during the great real estate recession, it is likely home prices will keep inching up in 2020 in the most popular price ranges. Another factor likely to keep the pressure up on home prices is the exodus of Californians moving to Arizona bringing their equity and buying a home. The negative to this is that they will beat out some locals vying for limited inventory. I have spoken with recent Californians who are happy to have moved here. One of them told me he can’t believe he and his family waited this long to move here and how much they are saving in taxes! For a comparison of California’s state and corporate tax rates to Arizona’s tax rates watch the video Why People are Leaving California.
Employment at an All-Time High in Maricopa County
The number of people with a job has never been higher in Maricopa County. The number of people with a job is averaging 2,084,388 monthly so far in 2019. Table Three compares the number of people employed by category in 2005 to 2019. It shows the actual change in the number of jobs and the percentage change. The information was compiled from the Arizona Office of Economic Opportunity. The category with the greatest increase from 2005 to 2019 is Educational and Health Services. Employment in this category is up by 150,363 jobs or eighty-four percent. The category with the lowest increase is Government. Both Federal, State and Local Government jobs are up five percent or by 10,875 jobs.
2020 Predictions for Residential Real Estate in Maricopa County
In 2020 for the fourth year in a row Maricopa County will lead all counties in the nation in a numeric population increase. Maricopa County will lead all counties in the subpopulation category of net domestic migration. The city of Phoenix will lead all cities in the nation for a numeric population increase.
If there is a regional recession in another part of the country – it could slow down the number of people moving to Maricopa County because some of them will need to sell their home before moving here.
Competition amongst buyers for previously owned single-family homes in the most popular price ranges will remain intense because of job and population growth.
Competition amongst real estate agents will remain high. Real estate companies with new business models will continue to start up or increase their operations in Maricopa County because of the high dollar sales volume and the overall number of sales. Real estate agents need to distinguish themselves from the competition and give sellers and buyers reasons why they should hire them. They need to be influencers.
Employers will continue to move operations to Maricopa County to fill jobs because of the number of people moving here. People will continue to move to Maricopa County because employers are moving here.
Mortgage rates are predicted to remain historically low – which means more purchasing power for buyers. All in all, 2020 should be a good, but competitive year to be a residential real estate agent.