As we all know, 2020 has been wildly unexpected with the COVID-19 pandemic paving the way into the unknown. With record-breaking unemployment rates and a crashing economy, it is quite surprising to see the real estate market in such a great state. The real estate market in Greater Phoenix continues to thrive month-over-month. While supply for homes on the market is at a record low, the demand for homes is at an all-time high, which means sellers are getting top dollar for their homes. COVID-19 has caused our nation great pain over the last 8 months but one industry that has not been negatively affected by the pandemic as of late is the real estate market. This article will discuss both the positive and negative affects COVID-19 has had on the Phoenix real estate market and any changes we may expect to see in the coming months.
The Federal Reserve cut mortgage rates to a record-breaking low in an effort to boost economic growth. This has proven to entice potential buyers to take the plunge and begin the search for a new home. Buyers are getting approved for under 3% on a 30-year mortgage which means the potential for savings over those 30 years is exponential if we compare it to mortgage rates from 13 years ago when the average was over 6% on a 30-year loan.
Not only do low interest rates entice new buyers but they also encourage current homeowners to refinance their homes in order to lock in these low rates as well. In fact, so many homeowners applied to refinance their homes over the last few months that many title companies started turning re-fi applicants away because they just couldn’t take on any more refinances. Nationally, re-fi’s are up 60% year-over-year and mortgage applications are up 40% year-over-year. These stats are incredible considering the current state of our economy. It is hard to know how these low interest rates will impact the economy in years to come but for now, it has proven to keep Phoenix real estate in high-demand.
COVID-19 has most definitely instilled fear into our nation and one repercussion of this fear has unintentionally caused a shortage in homes listed on the market over the last 8 months. With so much unknown, people are fearful of listing their homes which has caused a shortage of total listings compared to years past. Uncertainty with the economy has pushed more people towards refinancing vs trying to sell their current property and risk not finding another home to purchase. While summer usually offers more than enough listings for buyers to have plenty of options to choose from, this year was much different. In Phoenix alone, we saw new-builds hit the highest demand since before the 2009 recession merely due to the fact that there was such a low supply of homes on the market, many buyers were forced to turn to new-builds if they wanted to secure a purchase. The low supply of houses on the market has also impacted investors who are sitting in limbo not knowing whether to sell their properties for top-dollar with the risk of not being able to invest their earnings elsewhere or keep holding on to their investments and risk having tenants who are unable to pay rent due to job loss. COVID-19 has proven to affect our nation in more ways than one and the more we dive into the real estate industry we learn that is has had both positive and negative effects thus far.
What is a seller’s market? A seller’s market in regards to the real estate industry means that when it comes to buying or selling a home, the market is in favor of the seller. This means that the seller has a better chance of selling their property for top dollar. Currently, with such a low supply of actual homes on the market, the competition for buyers is fierce. Homes are being listed much higher and often, buyers are being forced to offer above asking price if they want a chance at actually winning the contract. This means a few things for buyers:
In a seller’s market, sellers have the upper hand. This means that they likely can hold out for better offers and find buyers with cash in hand, which is ideal for any seller. While the market is in favor of sellers, you have to also remember that most sellers will also need to purchase another home of their own, so the shortage in overall real estate only does them good when it comes to selling, not purchasing.
Some investors are hurting right now when it comes to collecting rent from tenants. Due to COVID-19, different initiatives have passed in order to help keep people in their homes, and while these initiatives help those who are currently renting, they are not necessarily in favor of the property owners. The pandemic has caused stress and financial loss for many people, investors included, and while no one wants to evict a tenant during these times of hardship, we have to look at it from all angles. If tenants are not paying rent, that means the property owner must pay the mortgage out of pocket (if the home is not paid off). Imagine being an investor with multiple properties where not a single tenant is paying rent for months on end? Many investors use investment properties as a form of income or even as a retirement plan, the pandemic has caused a serious detriment to those who have invested life savings into additional properties in hopes to create a more stable financial future.
This is the question so many of us are asking. As leading real estate professionals in Greater Phoenix, we are watching the market closely and advising our clients the best we can. Because the pandemic has been so unpredictable, it is hard to know what the next few months will bring. We have seen a steady rise in the market over the last 6 months, with record lows in terms of listed homes on the market, yet record highs with mortgage applications, and overall sales in the valley far surpassing all of our expectations. Refinancing your home is a great option if you can find a title company that can take you on as a client, as rates are still below 3%. If you are considering selling one of your investment properties, now is a great time so long as you have a plan to put your investment earnings elsewhere.
For more information on the current market or to learn your home buying, selling, or leasing options, contact the Capstone Team today!
If you are looking for weekly updates on the Greater Phoenix real estate market, check out our weekly market updates page where we post videos from our YouTube channel every Monday. These videos cover current trends in the real estate market in Greater Phoenix and nationwide. We cover buying, selling, leasing, and property management in each week’s updates. These videos are quick 5-10 minute snapshots of what we have seen in the market that week to better help our clients make the best financial decisions when it comes to real estate.
While COVID-19 has been devastating for many reasons, we have to admit that the housing market has not been this good in over a decade. With interest rates at record-breaking lows, homebuyers are locking in great rates while many homeowners have been able to refinance their homes, also locking in these extremely low rates. Sellers have found the market to be in their favor, selling their homes for top dollar. New-builds continue to be in high demand in the Valley with builds scheduled well into summer of 2021. Investors, while finding it to be an optimal time to sell, are struggling with whether or not to keep their investment properties or sell them, as the future of the real estate market is unknown and ever-changing.
Overall, we have seen both positives and negatives in the real estate industry through the entire COVID-19 pandemic. As industry leaders, we hope to provide quality feedback and expertise to each of our clients as we continue to navigate these unknown times. If you are looking to buy, sell, or lease your property in Greater Phoenix, call our office today and one of the Capstone team members would be happy to help you begin the process!