It’s been a wild past couple of weeks, for many reasons! Today I wanted to share what we’ve seen in the Real Estate world, specifically here in the Metro Phoenix Market.
First of all, this is a fluid situation and long-term effects won’t be known for quite some time. Anything is possible, but some predictions are included below.
Mortgage Interest Rates / Financing
Volatility was the key word last week… but let’s move back further. In early March, we saw rates drop, which sparked a refi craze; some even able to secure long-term rates below 3%. The incredible demand overwhelmed lenders quickly so they began pushing rates up artificially to fend off newcomers. They needed a reprieve to catch up on the new orders. Then COVID-19 really landed and we saw lots of further movement. Many think when the fed lowers their interest rate that in turn mortgage interest rates follow suit. However, that’s not the case. There are many factors involved in where interest rates land. The treasury/bond rate is more closely a match, but still not direct correlation. Last Wednesday & Thursday we saw rates really spike and by Thursday afternoon, many lenders were quoting mid 5’s for 30-year conventional money. A big contrast from over 2% lower just two weeks prior. Then on Friday we saw some relaxation. Still not back to where they were, but over time, as fears & uncertainty calms, we anticipate interest rates getting back to a good place for a while.
The increased demand from refinances turned already lengthy wait times even longer. We are seeing many appraisals take a couple weeks when they used to be 5-days or so for turnaround. This impacts closing timeframes and when you have a chain of contingency sales in motion, things can get hairy. Also, as we’ve seen prices rise to begin 2020, some rapidly, that has meant a lot of low appraisal results. Why does this happen? Well, appraisers need to look at Closed Sales. Due to tight inventory and lots of demand, bidding wars will drive prices up; however, if the sold data doesn’t support, then it is a more gradual process to get prices up overall. Sometimes all involved inside the transaction need to get creative and find ways to make it happen. There are always four options: 1) the seller can reduce, 2) the buyer can come up and pay the difference in cash, 3) buyer and seller meet somewhere in between or 4) the sale cancels and everyone begins anew.
With all the shut downs and people working mainly from home, that impacts productivity & efficiency. That combined with longer appraisal turn times and overwhelmed lenders means longer escrows. What we normally saw in 30-days, we now need 45 in many instances. This shouldn’t be long-term, but for the near future at least. If certain government entities shut down completely such as the IRS or VA office, then that could spell more significant delays since certain transcripts and documents needed during the process wouldn’t be churning. For now, most county recorder’s offices are still transacting and here in Maricopa County, they use an electronic recording desk so should stay business as usual in that regard. However, many title companies have put in place provisions should that change to enable closings still to occur.
We are of course seeing limited human contact (social distancing) so signings aren’t occurring in the escrow office, but rather mobile versions. This isn’t new for many, but will likely only increase the mobile aspect going forward, even after everything settles down. Online notary services are also gaining momentum and could become mainstream at some point not too far off. Home inspectors, contractors and other professionals that touch a real estate transaction are working a little differently than normal too. This usually just leads to a more lengthy timeframe overall, as mentioned above.
Showings & Marketing
Some colleagues have basically stopped their business and won’t show any property, nor hold open houses during this time. Personally, I am still out showing property, but with more precautions in place. I do not hold a ton of open houses so that’s a non-issue for us. The 3D Matterport Virtual Tour we have used for several years now sure comes in handy during times like these! Not as many buyers are out viewing and some sellers are holding off so it has caused some pause in the marketplace, although not a ton as of now. A new listing of ours this morning has received 6 showing requests already today.
Several of the large “iBuyers” like Opendoor, Redfin, Zillow Instant Offers, etc have halted their buying. While I do not believe this will last forever, it could change their strategy and numbers some going forward. Realistically, in almost all cases, their purchases means less $$$ in the pocket of real people so I am all for this to stop as much as possible.
I would hope/like to believe this will largely blow over in a few weeks and we get back to “normal”, but it’s hard to tell the long-term impact just yet. Depending upon how long shut downs of various businesses take place, the potential layoffs and income loss could lead to fewer able to buy as planned. This will also impact renters, not just buyers. The stock market decline of course affects retirement and funding that also helps with home purchases from time to time so that plays a role as well. Our inventory has been low for quite some time and recently highlighted as lowest ever… well, these happenings could cause some of the investors to sell off and not retain property longer. That would free up space for more owner-occupants, which in my eyes would be a good thing. In the last 10-days we have seen about a 15% increase in Active Homes on the market in Maricopa County. That is good news for buyers! Our local economy has been very strong and the real estate market no exception. If we can get a little more inventory for buyers, that won’t hurt… rates should relax and fears subside. The stimulus package will fit in here somewhere, but nothing is free so repayment could be surprising to some. If a full on lockdown occurs and suspension of real estate activity for even a few week period, that will certainly have an impact with lots of transactions faltering along the way.
As is always the case, if you’re contemplating a move, let’s chat and see if now is the right time for you or not. We will always provide you relevant and accurate information so you can then make the right informed decisions for yourself and your family.