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The monthly sales rate is now just over 9,000, well below last year when it was over 10,000.
Although the monthly sales rate has only declined for the last 5 weeks, our Cromford® Demand Index has been anticipating this since the end of the first quarter. This is because the CDI uses data from listings under contract to compute demand, not just closed listings.
Currently, demand appears to be stable and still above normal, but nowhere near as impressive as it was during the second half of 2020. If demand had stayed as strong as last year, I have little doubt that supply would not be rising as it is now. Having said that, supply is only rising at a modest rate and nothing like as fast as it did back in the summer of 2005.
The summer of 2005 looked exactly like a bubble bursting with prices continuing to rise even as demand plummeted and supply soared. In those days the bubble was primed by rampant, mindless speculation and the widespread belief that prices only ever went up. In 2021 we have a very different situation with widespread caution, largely because so many people vividly remember the lessons of 2005. This caution will keep the rate of price increases lower than 2005 and we are already seeing a significant slowdown in appreciation. This is a healthy sign and a prerequisite to avoiding a painful period of declining prices. The latter still looks unlikely based on the current market readings.
The commentary was written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 Cromford Associates LLC and Tamboer Consulting LLC
Young adults may be missing some key information to move forward in the housing market. For example, two out of three young adults recently surveyed say they are waiting for lower mortgage rates to start the homebuying process, according to a survey of 1,000 non-owner millennials (between the ages of 25 to 40) conducted by Lombardo Homes. However, economists have largely predicted that mortgage rates will soon start to edge upwards in the coming weeks, moving higher from their current lows below 3%.
With mortgage rates already near historic lows, this “may speak to a lack of education and awareness among this cohort of home buyers,” the survey notes.
Also, many young adults are underestimating how much they need for homeownership, the survey finds. Millennials underestimated how much home they can afford right now, how much interest they would pay over a 30-year mortgage, and how much home values appreciate, on average, over 10 years, the survey notes.
Consumers surveyed also showed a lack of knowledge over average home prices and property taxes in their local area. Fifty-nine percent of consumers surveyed did not know that the seller tends to pay all the real estate agent fees. Respondents also showed lots of confusion over many real estate terms.
Regardless of some of the confusion, 83% of respondents say they are actively saving for a home right now. But high rents may be standing in their way from making any major progress. Seventy-one percent say their rent is so high it’s hard to accumulate savings for buying a home.
Other top reasons millennials say they haven’t bought a home yet are: “Can’t afford a down payment” (85%); “can’t afford something nice enough to compel me to buy” (67%); “want to be flexible, not tied to one area” (63%); and “not ready for the commitment” (62%).
Bottom line - It's a difficult market for first-time homebuyers right now. The market is ultra-competitive and homes are selling quickly. Let's sit down to discuss your options and plan to make homeownership a viable goal in your future.
Source: Lombardo Homes, May 13th, 2021
This week the median list price for Gilbert, AZ is $565,000 with the market action index hovering around 100. This is about the same as last month's market action index of 100. Inventory has increased to 160 from last week's 157.