Report: Havasu housing values most at risk

CoreLogic recently released its monthly report using data through May. The company reported a 0.7% increase nationally in home prices in May compared to April, and a total of a 4.8% rise year over year.

But looking forward CoreLogic forecasts a drop in home values of 6.6% nationally over the next 12 months, starting with a 0.1% drop in June. If true, that would represent the largest drop in home values since 2010, as the market was rebounding from the 2008 recession.

The report goes on to identify the Prescott metro area and the Lake Havasu City-Kingman metro area respectively as the number one and two communities in the nation who are most at risk of home price declines, both with a confidence score of more than 75%. The Lake Havasu City-Kingman metro area comprises all of Mohave County. Following the two Western Arizona communities on the top 5 list are three metro areas in Florida.

“States like Arizona and Florida faced the perfect storm of elevated covid-19 cases and the subsequent collapse of the spring and summer tourism market, which curtailed home-purchase demand enough to keep a lid on home price gains over the coming year,” the report says. “While harder-hit areas may also experience a slower rebound, the preservation of factors like low mortgage interest rates and a shortage of for-sale supply have already supported prices in some metros and may also encourage home price stabilization nationwide.”

Chad Nelson, Team Leader of A Team Coldwell Banker Realty, said he doesn’t know about Mohave County as a whole but said he is skeptical of forecasts of declining home values in Havasu at least. Nelson said Lake Havasu City has seen a shortage of existing single family homes on the market for sale – just 167 as of Thursday compared to about 400 to 500 homes usually on the local market. But he said the shortage of inventory hasn’t stabilized home prices but actually pushed them significantly higher.

Nelson said the median sales price for homes sold in Havasu so far this year is $320,000 which is up 12.7% from last year. Nelson said the national average in recent years has been a 2% increase annually and Lake Havasu City has been more than twice that rate at around 5% in the last couple years. He said the average list price in Lake Havasu City is also up 6.3% so far this year at $340,000.

CoreLogic reports price growth is expected to stall out in June with a drop of 0.1 percent and remain slow throughout the summer. But the Havasu real estate market actually had a particularly productive June.

Nelson said 229 homes were sold during the month of June, which is more than any other month this year and exactly 60 more homes than were sold locally in June 2019.

“I attribute that to all of the people who have been quarantining here from California,” Nelson said. “They tell their friends how much of a good time they are having, and inviting them out to visit. I mean, try to find a vacation rental or an Airbnb in Havasu right now – It is very difficult.”

Nelson said that has resulted in even more people looking to buy homes than usual, and fighting over a limited inventory.

“The pent up demand is crazy, especially for new construction homes and pool homes right now,” he said. “The demand is higher than I have ever seen it before. My team alone closed 44 transactions last month, and our typical sales are in the 30s. So demand is way up. We need more houses to sell.”

While the report from CoreLogic admits activity until this point suggests the market will bounce back, it said its forecasted decrease in home prices is largely due to elevated unemployment. Mohave County has been particularly hard hit by unemployment since the start of the pandemic, with the second highest unemployment rate of any county in Arizona at 13.8%.

Nelson said unemployment may well have a negative effect on the community, particularly if unemployed residents end up having to sell their homes. But with the current demand, he said several hundred homes would have to hit the market in a short timeframe in order to bring about a market correction.

“It’s unfortunate that if unemployment causes a house to fail we are going to lose that person who lives here and that home will most likely be a second home or a vacation home,” he said. “That is good for business, but it is not that great for our community – I don’t think.”