Metro Phoenix Economic Snapshot - 2021

MIRABEL

JANUARY | FEBRUARY 2021

Broker’s Corner

2020 Economy

The only roller coaster that stayed open

Residential Real Estate

Presented By Bob Lomax on Back Cover

2020 ECONOMY: THE ONLY ROLLER COASTER THAT STAYED OPEN Elliott D. Pollack & Co., January 2021

W

hat a strange year for the economy and more generally, one most would soon like to forget.

Beginning in March, we witnessed what happens when a pandemic leads to decisions to forcibly shut down parts of the economy and issue stay-at-home orders.

Millions went on unemployment and discretionary spending on services such as travel and entertainment plummeted overnight. GDP dropped a record 31.4% from April to June. Then, as dramatically as it dropped, GDP rocketed up by 33.4% from July to September as lockdowns eased. Even though the entire economy did not fully reopen and there are several industries still suffering, the economy came roaring back when it was allowed to.

This is because the real issue isn’t the economy. It’s COVID-19. And the recent run up in the number of cases suggests that the last shutdown has yet to take place in many areas of the country. This could cause continued volatility. Until this wave is brought under control, the risk of continued or expanded shutdowns exists. Indeed, another shutdown could reverse the expansion and the rollercoaster could continue.

We now know that this will end soon - probably by the third quarter of 2021. The efficacy rates of the vaccines that have been approved are an unbelievable 90+%.

An estimated 75 million Americans are likely to be vaccinated by the end March and by the third quarter most Americans who want the vaccine will be able to get it. Herd immunity or something similar will occur.

There are still questions. But, barring any unforeseen curve ball, the end is in sight.

For the economy, this is huge. It creates a timeline as to when the economy can start on the road back to normalcy. It also means that as tough as the next several months might be, those months will be an aberration.

So, while the fourth quarter of 2020 will be weak as measured by real GDP and while the first quarter might also be down due to the re-shutdown of the parts of the economy, things will bounce back quickly after that.

By spring, shutdowns could be a thing of the past. As the economy reopens, people will spend money because their savings rate has been so high. Most of those unemployed due to COVID-19 will be able to regain employment. The stage is set for rapid economic grow that will be very strong and will be followed by above normal growth at least through 2023.

So, ignore the news about the poor economy over the next couple of quarters. It is unavoidable but also temporary. Nationally, we have already recovered almost 55% of the jobs lost due to government mandated shutdowns. In Arizona, we have recovered almost twothirds of those jobs. And that has occurred even though hotel occupancy, air travel, trips to retail and recreation, and seated diners are all still down significantly. Virtually all of those indicators will return or exceed February 2020 levels very quickly once vaccinations are available for enough Americans.

GREATER PHOENIX ECONOMIC FORCAST POPULATION

EMPLOYMENT

1.7% INCREASE 2021 1.9% INCREASE 2022

5.1% INCREASE 2021 5.5% INCREASE 2022

RETAIL SALES

SINGLE FAMILY PERMITS

5.6% INCREASE 2021 5.2% INCREASE 2022

0.0% INCREASE 2021 5.0% INCREASE 2022

RESIDENTIAL REAL ESTATE

July 2020, Arizona ranked 3rd in population growth behind Texas and Florida. When the 2020 Census is complete, we expect California will be the #1 source of inbound migration for Greater Phoenix. This is especially true in the luxury market.

T

Luxury sales over $1M soared after the pandemic restrictions were lifted. While they were already up 7.7% over 2019 at the end of June, by the end of December the surge brought the 2020 sales count to 2,575, beating 2019 by 48.7% and securing another record for 2020. Much of the luxury migration has been attributed to the threat of possible income tax increases in California in addition to a possible wealth tax causing corporations, small business owners and wealthy individuals to consider moving. For the rest of the market, the new possibility of working remote full time has allowed some residents in high-cost areas to move to more affordable areas, keeping their incomes and jobs without the worry of a commute.

• The annual average price per square foot rose 12.5% from $172.37 to $193.94 • The annual average sales price increased 14.6% from $344,195 to $394,340 • The annual median sales price gained 13.7% from $277,000 to $315,000

Outside of the MLS, new home developers have been scrambling to meet demand as well. As of the end of November, despite lumber shortages due to massive wildfires and bark beetle infestations, labor shortages due to the COVID-19 pandemic, and disruptions in the supply lines for appliances and imported materials, builders still managed to sell 14% more new homes and obtain 28,204 more single family permits for future supply, up 24% over 2019. Multi-family permits which mostly represent apartment complexes, are up 21.6% over 2019 through November and represent another 12,224 doors. The median price of a new single family home rose 6% from $333K to $353K.

Tina Tamboer,The Cromford Report

he Greater Phoenix market came roaring out of 2020 breaking records left and right. Not even the COVID-19 pandemic and economic shutdowns could close the gap between supply and demand enough to bring the market into balance last year. The result of stay-at-home orders was a “pause” in housing demand followed by a surge that continued through the end of the year. The surge was massive in the luxury price ranges, which contributed to the following year-over-year price trends through the Arizona Regional MLS (ARMLS):

2020 saw demand soar from a normal level to 35% above normal just between July and December. There were 111,036 new listings added to ARMLS supply last year, only 38 more than the previous year. That was barely enough to satisfy the 105,271 sales closed, which surpassed the previous ARMLS sales record of 104,071 achieved in 2005.

Already 56% below normal in July, supply fell to 64% below normal by December and prices increased at an accelerated rate under the pressure of multiple offers. As of January 2nd, 2021, there were only 6,326 active listings without a contract and 13% of them were outside the Greater Phoenix Metro boundary. This is the lowest active listing count recorded in at least 20 years.

Where did the extra demand come from? Aside from the lowest mortgage rates we have ever seen, Arizona and Greater Phoenix continue to top the list of growing areas in the country. According to the most recent US Census report released December 22nd, 2020 covering July 2019 –

110K 100K 90K

Median ARMLS rental rates rose 12.9% from $1,550 to $1,750/month in 2020, which closely resembles the percentage growth in median home prices. The sharp increase in the cost of housing has caused much speculation regarding a possible “bubble” and imminent crash. It is important to recognize that today’s housing shortage has been caused by a severe lack of building over the last decade in relation to population growth.

From 2010 to 2019, the Greater Phoenix population grew by 18%, but the number of single family and multi-family units combined only grew by 9%.

As the population continues to grow, the housing gap is becoming harder to close. This took years to develop and will take longer than a year to correct. Home prices are projected to continue rising throughout 2021; however, as affordability is expected to drop below normal, it is reasonable to expect some demand to drop with it. When that happens, prices will still rise but at a slower pace.

ANNUAL SALES RATE

12 MONTH AVERAGE SALES PRICE PER SQFT

GREATER PHOENIX - ARMLS RESIDENTIAL MEASURED MONTHLY January 3, 2021

GREATER PHOENIX - ARMLS RESIDENTIAL - MEASURED MONTHLY January 5, 2021

2005

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$200 $180 $160

80K 70K

$140

60K

$120

50K

DEC 2020

SEPT 2020

DEC 2019

JULY 2020

SEPT 2019

JUNE 2020

JULY 2019

DEC 2018

SEPT 2018

MAR 2019

JUNE 2019

JULY 2018

DEC 2017

JUNE 2018

SEPT 2017

MAR 2012

JULY 2017

DEC 2016

JUNE 2017

SEPT 2016

MAR 2017

JULY 2016

DEC 2015

JUNE 2016

SEPT 2015

MAR 2016

JULY 2015

DEC 2014

JUNE 2015

SEPT 2014

MAR 2015

JULY 2014

DEC 2013

JUNE 2014

SEPT 2013

MAR 2014

JULY 2013

DEC 2012

JUNE 2013

SEPT 2012

MAR 2013

JULY 2012

DEC 2011

JUNE 2012

$00 SEPT 2011

20K

JULY 2011

30K

$100

MAR 2012

40K

MIRAB

Broker’s Corner: 2020 Year End Recap WOW. 2020 was quite a journey. The highs and lows were like nothing I have experienced in my young 59 years on this planet. The human tragedy was obviously profound. But as with most things, there were bright spots too. Liz decided to make the most out of the Covid lockdown by spending time to improve her golf game to make it more enjoyable for her and now she is hooked. I am so thankful for that as we will enjoy playing golf together now for the rest of our days.

And what can I say about the real estate market.

2020 shattered all expectations and by all accounts was one of the strongest markets in our lifetime. In 2020, 56 properties in Mirabel either closed or went under contract totaling almost $78 million in sales.

Mirabel Properties is proud to have represented the sellers on 36 of those sales (62.5%) and almost $40 million in listing sales volume. Nine other agents accounted for the remaining 37.5% of the business.

Compare this to 2019 where there were just 22 sales in all of Mirabel totaling just under $28 million.

Of the 56 sales in 2020, 30 were home sales totaling just under $67 million and 26 were lot sales totaling nearly $11 million. Mirabel Properties is proud to have represented nearly 75% of the sellers on the homesite sales in 2020.

My hat is off to the Mirabel Club for making the most of what they could for the members in 2020.

Marcie and her team did an amazing job and are to be commended and thanked for their efforts. The clubhouse remodel couldn’t have been timed any better as we would have had to have been closed a good portion of the time anyway. And it was worth the wait as the almost finished product exceeds even my highest expectations. Great job to all involved. And Nissa tells me she has sold 16 golf memberships since October 1, 2020. Another WOW. So far, 2021 shows no signs of slowing down as Mirabel Properties put over $4 million under contract in the first 10 days of January. But only 5 completed houses are on the market as of the date of this writing so a lack of inventory will be our biggest challenge. Thank you so much to all of you who trusted Mirabel Properties with your real estate needs in 2020. It is much appreciated and will not be forgotten. As always, if you want to discuss anything related to real estate in Mirabel, or just want to say hi, give me a call. Or better yet, stop by the gatehouse and say hello.

Until next time ………………………………………

Bob & Liz Lomax Owners/Designated Broker, MBA | Mirabel Properties

For a list of available custom homes and homesites, contact Bob and Liz Lomax at 480.595.2545

BOB LOMAX

O WN ER/ DESI G N ATED B RO K ER MI RAB EL PRO PERTI ES

4 8 0 .5 9 5 .2 5 4 5 OF F IC E 4 8 0 .5 9 5 .9 5 0 3 FA X 6 0 2 .9 2 0 .7 1 9 2 MOB IL E All information is deemed reliable but not guaranteed.

www.Mirabel.com If your home is currently listed, this is not a solicitation for that listing.

Produced by Prime Source & DLP • 480.921.0511 • PrimeSourceAZ.com