Homes for sale nationally are down 52% over the same time last year and in Arizona there was a 64% decrease in inventory over last year. Demand is up as potential buyers re-evaluate their priorities in homes and lifestyle during and after the pandemic. There are 4 offers for every listing and intense competition has led to double digit price growth according to the National Association of Realtors. Absorption rate measures how fast we would sell out of the current homes on the market if no new listings were added and we are under 1 month in Prescott and the Quad Cities. The list price has become the starting price as buyers bid over market and financed offers struggle to compete with all cash offers. Speculation abounds about another bubble to burst so let’s look at the fundamentals of this market.
Migration to Arizona has been strong and it lands in the top 5 on UHAUL’s migration growth list. Buyers in our area have been able to sell homes in more expensive areas and can afford to pay cash about 50% of the time. Baby Boomers are very attracted to the Quad City Area while the Millennials are edging them out to be the largest home buying demographic in our state and nationwide.
Nationally there has been 13 straight years of below average building of new homes. We have not made up for or matched the pace of building during the last boom. We do need to build more homes to increase the supply, but it won’t be done fast enough to be the complete solution. Shortages in skilled labor, increases in the costs of building supplies and the length of the entitlement process contribute to how quickly developers can add supply to the market. The National Association of Realtors posits that to get back to a 6 month healthy supply of inventory an additional 2.7 million homes should be on the market for sale.
There is a foreclosure moratorium in place until June 30th and whether that will be extended is a subject of much discussion. There are about 4 million borrowers behind on their mortgage payments but banks are working with many to add overdue payments to the end of their loan. Borrowers that can’t qualify for this type of loan restructure will likely be able to sell their homes at a profit as equity has climbed in the past few years. As more of these homes come on the market and as vaccines ease seller’s hesitancy to have buyers visit their home we do expect a balancing of supply and demand to occur.
How does a buyer succeed in this market? One way is to have a strong local agent on your side as sales do occur prior to hitting the general market. Know what you are looking for and be prepared to look at a home and quickly and decide whether to place an offer. Buyers in a competitive market need to go in strong and fast to not miss an opportunity. Get counsel on the risks in waiving home inspections and appraisals as a way to sweeten the deal. Too much sweet can promote different aches and pains in the process and a skilled agent can help you cap your risk.
If you are a seller the highest offer is not always the best offer. An experienced agent can be your best asset in negotiation during a market that moves fast. They can help you weigh which offer is most likely to get to closing date and this can be absolutely critical if your next home purchase relies on the sale of your current home.
The number one tool on your side is knowledge and the more prepared you are before placing your home on the market or placing your first offer, the more likely you are to get your desired outcome.