Virus shakes up Chandler housing market The Chandler Arizonan

Virus shakes up Chandler housing market

Virus shakes up Chandler housing market
Neighbors
0

By PAUL MARYNIAK, Arizonan Executive Editor

The abrupt economic downturn created by the COVID-19 epidemic is doing something to the Chandler housing market that hasn’t occurred for months – driving up the inventory of homes for sale.

But with unemployment rising in the wake of the coronavirus, that likely won’t be great news from anyone’s standpoint as sellers may not be finding as strong an appetite to buy a home as there had been only a matter of weeks ago.

Moreover, mortgage rates are creeping up and many lenders “will struggle over the coming weeks and home loans may become much more difficult to obtain,” according to the Cromford Report, which closely analyzes the Valley housing market.

“Housing demand is falling sharply anyway, and this has the potential to drive it even lower,” it added, noting:

“Life for lenders is very difficult right now so they are having to increase rates rather than lower them and they are still losing much more money than they planned in ways they never anticipated,” it added. “They cannot handle the quantity of refinance loan applications they are receiving, so they are raising rates in an attempt to slow down applications.”

Fears of close physical contact with strangers shared by sellers and buyers – combined with potential buyers’ concerns for their own financial health – are throwing water at least for now on what had been one of the nation’s hottest housing, experts say.

The abruptness of the reversal in the market’s fortunes has been as stunning as that of the overall economic downturn.

“The speed of change is as high as we have ever seen,” remarked the Cromford Report.

Until businesses started closing and unemployment claims began soaring, the housing market posed a steadily rosier picture for sellers and a spiraling grimmer outlook for buyers.

Home values continued to increase while available homes – particularly those around $250,000 to $300,000 – were nonexistent in some ZIP codes, including Chandler’s.

Meanwhile, buyers of more modest means found greater frustration as the month began as data for February showed closings on homes up to $250,000 were down almost 19 percent from February 2019.

Sales of homes between $250,000 and $500,000 increased last month by 26.5 percent over February 2019 while closings on homes between $500,000 and $1 million were up 26.5 percent, Cromford said.

But what a difference a pandemic makes.

Over the past month, Cromford became more pessimistic about the Phoenix metro housing market overall – even as it reported that the available housing stock suddenly began increasing.

For those who are still in the market, it said, the inventory of homes for sale was loosening – with the overall number of available houses increasing by 11 percent Valley-wide and more twice that in Chandler in a week.

“Of course,” it added, “we were starting from an excruciatingly low inventory of active listings between $150,000 and $300,000, so it is not hard to see a high percentage increase from such an abnormally low base.”

Meanwhile, Zillow said Bank of America’s downgrading of some major homebuilders is “suggesting the bank believes COVID-19 will harm consumer sentiment and slow home building.”

If that happens, it could put the brakes on a frenzy of home construction in the Valley.

Zillow Economist Jeff Tucker also expressed concern that the wave of unemployment claims foreshadows a spike in foreclosures later this year.

“The big question at the moment is to what degree measures being taken by local, state and national legislators will help limit the number of foreclosures in the months ahead,” Tucker said.

In Arizona, banks have agreed to the governor’s request that they suspend foreclosures for at least two months.

Among the factors driving the inventory increase is the virtual collapse of the tourism and hospitality industry – which has pretty much wrecked, at least for now, the vacation rental industry, Cromford said.

Homeowners who last month were enjoying the additional money they were making through Airbnb are quickly deciding it might be a better idea to put that same house up for sale before things get any worse, Cromford indicated.

Over all, it noted, “A huge amount of wealth has been destroyed on the stock market in the last month as the indexes return to 2016 levels. This leaves cash in short supply and some owners may need to turn fixed assets in liquid assets at short notice.”

Social distancing also is playing a role, the report said, explaining:

“Few normal buyers are willing to make an offer without viewing a property, though some investors may be tempted. …Buying and selling, as well as construction are likely to drop sharply, especially if a close-down is ordered by government, as it has in several states. In fact, I am surprised that showings remain as high as they do.”

Chandler’s increase in homes for sale was the third highest among 17 Valley cities, Cromford noted with 18 percent – behind Avondale (46 percent) and Gilbert (20 percent).

Cromford reported, however, that sales haven’t yet come to a grinding halt, citing “a sudden surge of low to mid-priced listings that are being snapped up quickly by eager buyers who have been starved of such supply for many months.”

Cromford stressed that homeowners for now don’t have to worry that the rapidly changing market is affecting the value of their homes – which have hit almost unprecedented levels.

“During the outbreak, there is little reason to suppose that house values will be significantly affected, up or down,” Cromford theorized.

“However, sales volumes will inevitably collapse for a while until the outbreak dies down. It will not even be possible to calculate meaningful home price numbers if there are too few closed sales to measure effectively,” it said, adding:

“These volumes will not be due to housing market issues. They are due to medical issues. People should not be worrying about the house.”

That volume of sales activity will depend on the duration of lockdowns – especially if they increase in severity.

“Real estate activity will be increasingly limited causing volumes to drop,” Cromford observed. “How far and fast they drop in Arizona will depend on decisions made at the state and county government levels.”

Lawrence Yun, chief economist for the National Association of Realtors, was more optimistic.

“I’m encouraged there will be continued home transactions though, with more virtual tours, electronic signatures, and external home appraisals,” he said, suggesting home sales could start peaking again “into late summer and autumn parts of the year.”

At the beginning of March, Cromford noted, “The supply of active listings without a contract is down 42 – making life extremely difficult for buyers.

As March ended, it said, “The housing market has reacted to what is happening” and data shows “a powerful upward trend transformed into a sharp downward trend.”

Comments are closed.