Wednesday, March 11, 2020 / by Sharyn Younger
Unfortunately, I can shed no more light on the subject than anyone's guess. But I CAN talk about the effects of COVID-19 on the Phoenix real estate market. The best way to describe the effect, is to think of it as a seesaw with a positive effect on one side, and a negative effect on the other. And depending upon the trajectory of this thing, one side may be left hanging up in the air!
On a positive note, my phone has been ringing off the hook from buyers who had been kicking the tires on the idea of buying a home and are now wanting desperately to find something to buy. They have seen interest rates fall to their lowest in years, and want to be able to buy while money is cheap. Talk to any lender and they will tell you that they are buried under refinances and purchase loan applications. And if you don't think money is cheap, understand that over the last 50 years, average mortgage interest rates hover around 8%. We are currently hovering around 3%.
On the negative side of the seesaw, is the fear that is spreading as quickly, or more quickly than the virus itself. It's not uncommon to hear both "experts" and regular folk wondering aloud about the long term impact of the corona virus (and its associated anxiety) on the economy. We've all seen photos of airplanes flying international flights with 5 people on board. The hospitality industry is creaking under the weight of canceled cruise passengers, empty hotel rooms, and smaller restaurant crowds as people worry about others handling their food. The stock market is most definitely feeling the pain, and most people I know don't even want to look at their investment accounts.
We do know that one of the worst thing for real estate and the economy in general, is fear. While interest rates appear attractive, fears of a looming recession have made some eager home buyers pull back and take a "wait and see" approach.
What is keeping the Phoenix real estate market alive and thriving in the midst of fears of an economic downturn, is the fact that we continue to be challenged with inventory lower than buyer demand. We are down AGAIN from a year ago in the number of active listings. Buyers excited about lower interest rates meaning more home for their money, are challenged in finding a home that meets their wants and needs. Competition remains fierce in all markets except for the luxury market and 55+ communities.
Long term predictions are difficult to ascertain. Over the last several years when someone would ask about what the market will do in the future, I would give my opinion with a caveat: "unless we have a significant upset to the economy". We may well be heading for that significant upset and without a clear understanding of this virus and concrete measures to take, it's nearly impossible to tell what the future holds.
I had someone recently say to me "have faith, not fear". All I want is accurate information! Hopefully it's forthcoming.