An updated report on the pandemic’s impact on Scottsdale real estate has been published and can be viewed here.
First, we hope that you and all the members of your family are safe during this Covid-19 event. This post is longer than usual, but we want to share what we have learned and observed and provide an update on the current Scottsdale real estate market. We also know top agents in virtually every state. If you would like a perspective on another market, let us know and we can connect you.
COVID-19 is impacting just about every aspect of our lives, and real estate is no exception. We have prepared some research to understand the impact this is having on Scottsdale market activity. As a starting point, we looked at current showing activity. We use a tool called Showing Time, that most agents use to schedule property showings. This allows us to look at the number of showings on different dates and across different areas.
SHOWING ACTIVITY – ENTIRE SCOTTSDALE REAL ESTATE MARKET
Showing activity has definitely dropped since COVID-19 hit. We first looked at the first quarter for the entire market covered by the Arizona Regional Multiple Listing Service (ARMLS). The year started strong with showing activity up 62 percent from the month of December, which is typically a slower month for the Scottsdale real estate market. Year-over-year activity was up dramatically in January and February, as you can see from the chart below. As we all know, about halfway through the month the world changed dramatically, and so did the number of showings. In the second half of February, we started to notice a slowing, and in March, showings dropped significantly.
We also looked at showings in the Scottsdale real estate market on a more micro level. The chart below shows what has changed, and it is dramatic. The blue bars are the actual number of showings each day and the red line is a ten day moving average. The data is for all homes in Scottsdale priced above $250,000.
SHOWING ACTIVITY – SCOTTSDALE HOMES ABOVE $1MM
For listed homes priced above $1 Million, the showing drop has been even greater sincethe Covid-19 spread. In February and early March they were averaging around 100 showings on a typical day. On March 31st, the day that the stay at home order went into effect, they dropped to 11 showings. I have had conversations with other agents about this, and we have currently recommended that our clients put their homes temporarily off the market, which stops days from accumulating on the market. The chart below shows this data for this group of homes:
HOMES UNDER CONTRACT IN THE SCOTTSDALE REAL ESTATE MARKET
It makes sense that when showings decrease, homes going under contract also decrease. The data on this graph shows homes that went under contract by week, comparing this year with last. In speaking with several title company executives, one claimed that new escrow openings in one of their California branches was down 90 percent. Arizona has not been hit that hard yet, but one major title company here in the valley has seen the number drop perhaps about 15 percent. What has changed dramatically is the number of refinance escrows. A month ago they were at about 20 percent, and today they are at 45 percent. Indicating a significant decline in new home financing.
TEMPORARILY OFF THE MARKET
Another data point we can look at is homes that are taken off the market temporarily. There may be sellers, that at least for now, do not want others in their home until there is a bit more clarity about the spread of the virus in our area. Typically there are a few listings that are put in this status for a variety of reasons; remodeling, guest visits and, holidays. Since March 1st, 991 homes have been moved to this status. It comes as no surprise that 75 percent of those homes are occupied.
FINANCING ACTIVITY IN THE SCOTTSDALE REAL ESTATE MARKET
The impact of COVID-19 on financing is another element that is changing dramatically. We have had conversations with several lenders and mortgage companies this week that have provided great insight. First of all, interest rates are at historic lows, and were already quite low before the COVID-19 crisis. There was a tremendous amount of refinancing going on which already had these companies busy. The mortgage market changed significantly this past week.
One of our lenders reported that conventional mortgages, which someone could have qualified for with a credit score of 580, now requires a score of at least 640. They said that this is the first time in history that lenders are not just looking at income, but are looking at the type of job the person has. He said right now anyone in the hospitality industry is going to find it difficult, if not impossible to have a loan funded.
Jumbo loans have become very hard to come by with many lenders. Because of the way that market is structured, many of the traditional investors have put the brakes on, as have the companies that service those loans. Some of the bigger banks still offer Jumbo loans, but their underwriting is bound to be more stringent. Interest only products like a ten year ARM are also more difficult to come by, and one major bank has lowered their Maximum loan to value from 80 percent to 65 percent.
One change several of the agents we spoke with have noticed is that people are getting creative to make deals happen. Seller financing was a part of deals three of us have been involved in the past two weeks.
WHATS NEXT FOR THE SCOTTSDALE REAL ESTATE MARKET
With where we find ourselves these days, no one can predict changes from hour to hour, and trying to gain a perspective on the future is impossible. The housing market is resilient and according to one industry analyst, housing issues not caused by a recession have a way of coming back quickly.
For now, real estate has been classified as an essential business, but we can’t say it is business as usual. Homes continue to sell, at perhaps a slower pace, however, last week there were 172 closings in Scottsdale across all price ranges which is not significantly below earlier months this year, but most of those deals were already in the pipeline. We are seeing an increase in deals falling through, and those homes going back on the market. Agents are doing showings using Facetime and holding virtual open houses on Facebook. We have purchased a special camera that enables us to show homes virtually. You can see an example here.
We currently have plenty of time on our hands to answer any Scottsdale real estate market questions you may have, so please don’t hesitate to call, email or set up a time for us to join you on a Zoom call. If you would like to receive updates on the current Scottsdale real estate market, please sign up for our weekly newsletter.
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