Unemployment rates are often called “lagging indicators” meaning that the current rates reflect hiring activity from 30-60 days in the past. Real Estate sales are also lagging indicators as the properties that are closing today reflect activity from 30-60 days in the past. So we are now 90 days into the COVID-19 quarantine and while restrictions have been eased and people are going back to work, the slowdown did have an impact on the real estate industry and that impact is now beginning to be noticed.
However, the impact strangely enough is not a lack of buyers, but rather a lack of sellers. As of this week just 87 single-family-designated homes are currently available in Maricopa and just 57 of those listings are resale homes, 30 being new-build spec homes. Compare that availability to current demand, and there is less than a 10-day supply of homes, which is an unhealthy dynamic for any market.
Consider that 285 SFD homes have gone under contract in the last 40 days and 985 homes have sold in the last six months and it’s not difficult to see that demand is currently far outpacing supply and this market may be stuck in neutral if that logjam persists.
New-build permits are leading indicators as permits issued now result in new construction weeks later. And as of today, new-build permits issued are down 28% year over year. Developers pulled back dramatically upon the initial shutdown in mid-March but now that the Arizona economy is almost back to normal and with businesses back open, I expect the issuance of new-build permits to ramp back up again by the third quarter.
Interest rates are also leading indicators and the rates now for a primary residence are under 4% and that component alone increases purchasing power and will bring new buyers into the market. In terms of Arizona real estate, consumer confidence remains high, but investor confidence still remains low as a lot of uncertainty still exists.
It’s also an election year and election years always have an impact on market certainty and consumer confidence, but I remain the eternal optimist.
America is much more resilient than people give her credit for and the people of this country have prevailed through much worse. These times too shall pass. Have another great week.