For sellers, the 2014 Phoenix Metro real estate market was a tough year. Not terrible or disastrous, but still not the greatest. It is however, in our opinion, a turning point.
For buyers, 2014 was (and still remains) a great year. Home values and mortgage rates stayed down, when most analysts expected both to rise, especially rates. Currently, mortgage rates are at an 18 month low!
For reasons we’ll explore, we’re expecting significant change ahead in 2015.
The greatest issue faced by sellers is the (still current) overarching lack of demand. There simply isn’t as many buyers looking for homes as experts had been anticipating. Why is this? There have been a number of reasons given and we aren’t at all sure which reasons bear the most weight, but here are the most common ones:
- Overly tight lending restrictions
- Generational differences in lifestyles (many more adults are living with roommates or family today than in the past)
- Large student loans keeping many from buying their first home
- Previous short sale or foreclosure defaults keeping buyers as renters (we call this the “penalty box”)
Fortunately, this lack of demand has not been totally disastrous. For one it has shown us that our market is healthy enough to remain balanced instead of tanking. Even after 12 months of relatively low sales valley-wide, prices have leveled, without much movement up or down. This is a huge plus for prospective buyers. Once demand begins to increase again, which we believe will happen by the 2nd quarter of 2015, prices will again rise.
As we have said before our current market is actually looking more traditional in a lot of senses. Foreclosures and short sales are back down to very low historical levels, the majority of current buyers are seeking owner occupied homes rather than investments, and national polls are showing that most people DO want to buy a home, but they are not yet ready.
On top of that we have good reasons to be positive going into 2015. Among them:
- There has been traction within the federal government to loosen their restrictions in light of the national lack of demand. For instance, Fannie Mae just recently have come up with a 3% cash down conventional loan for first time homebuyers. Not having this available really hurt the high 200K to mid 300k range this year.
- 2015 will be the first year where a large portion of folks who lost their homes to short sale or foreclosures in 2008 will be able to start buying again. There is great optimism that as these folks come out of the “penalty box” they will start to buy again.
- Interest rates may still remain very low thanks to reduced inflation, and thanks to cheap oil.
Though it has been a discouraging year for many sellers (especially in the 300-400k range), many of whom have had their homes on the market for much longer than we as Realtors generally anticipate, all in all I don’t think the Real Estate market is doing badly.
We also can’t be overly positive, as many from our cloth tend to be. To sell your home in the market still means being willing to be aggressive with your presentation (clean home, staged if possible, great photos), exposure (have the home advertised well on the MLS and other home finder websites), and pricing. If you are not willing to be competitive with your pricing then there is not much hope.