Even though the economy is starting to reopen, it’s a new world out there, and we’re traversing it with gloves and hand sanitizer galore. I think many of us are looking at the housing market and the economic situation at large and scratching our heads, truthfully unsure of what’s really happening—or what may happen soon.
Across the three markets that our team serves (Southern Arizona, San Diego, and Austin), we’re observing some pretty drastic differences, which can likely be attributed to the way those markets handled the coronavirus outbreak.
“The Tucson, San Diego, and Austin markets all had fewer than three months’ worth of active inventory.”
One thing that’s apparent in all three markets is a huge dropoff in the number of listings coming to the market, or, in other words, a decrease of people putting their homes up for sale. This presents a real problem for buyers, one that’s compounded by the fact that we had a severe inventory issue well before the pandemic even started.
The Tucson, San Diego, and Austin markets all had fewer than three months’ worth of active inventory, meaning that if no one listed a new home there, it would take only three months to completely run out of homes for sale. That low supply is already considered an extreme seller’s market. Now, factor in a pandemic that made many would-be sellers second guess everything, and we’re looking at what can only be described as a hyper-extreme seller’s market. Active listings dropped 23.9% year over year in Austin; 33.2% in Tucson; and 35.6% in San Diego.
If you’re a buyer, be prepared to compete for the best properties. You’ll likely pay above asking price (unless, of course, the house has been wildly overpriced by some eager seller). In Tucson and Austin, the number of new listings is creeping back up, but in San Diego, it’s still lagging. That’s probably because Texas and Arizona are reopening, but it’s also not mere coincidence that Texas and Arizona are now leading in new COVID-19 cases. We’ll just have to wait and see what happens in those markets regarding public policy.
In San Diego, where the economy is reopening but at a much slower pace, buyer demand hasn’t quite made its way back up (pendings are down 7.7% year over year). That being said, it’s wild to think that, despite a nearly 40% drop in supply, demand (as expressed via pendings) is only down a mere 7%. Demand is furiously outpacing supply right now.
If you think that’s crazy, check out Tucson and Austin: Pendings are up 10.6% and 13.6% respectively, meaning that we’re selling more homes during the pandemic than we did in the same month last year! With massive demand across all three markets, it’s clear that this inventory issue is only going to get deeper, which in turn will serve to push prices up.
Closings always lag pendings by roughly 30 days, so we can expect this enormous pent-up demand to push through and make itself known in the closing numbers within the next month or two.
Overall, the future looks bright for all three of these markets as we carry on through summer. For sellers, now is a phenomenal time to get your home on the market. If you’re a buyer, don’t lose sight of the fact that interest rates are historically low—in some cases as low as the high 2s and the low 3s. There are still plenty of opportunities to get into a new home that meets your needs.
Will prices fall in the coming months? Who knows. Will the economy fall in the coming months? Who knows. What we do know right now is that the prices sellers can fetch in the market today are fantastic. We also know that, despite higher prices, affordability for buyers is better than it was just a year ago thanks to the drop in interest rates.
Call us today at the Taylor Team; we’re happy to assist you with your needs in any of the three markets we serve. Until next time, stay safe, healthy, and positive!