by MICHAEL BODEEN | Jul 25, 2016 | Bodeen Team Blog, Buying a Home, Real Estate News
According to Michael Orr of the Cromford Report, the average closed lease rate for all Phoenix Metro areas and home types within the Arizona Regional MLS (ARMLS) is 85.1 cents per sq. ft. per month. This is great news for landlords, but not so much for valley renters. Last year it was 81.0 cents which means an annual increase of 5.1%. Two years ago the number was 75.0 cents and in July 2013 it was 69.6 cents. This shows a rise in rents of 22.3% in the last 3 years! This is dramatically faster than the increase in average wages. Consequently, the typical tenant has a lot less to spend on things other than housing.
This situation is very good for landlords and should create motivation for tenants to become home owners. High rents, however (per Orr), reduce disposable income and so impairs the ability to exercise that motivation to buy. It also reduces the demand for other goods and services. Tenants tend to feel less wealthy than they did 3 years ago unless they have improved their earnings through promotion or job switching. This goes some way to explain why a significant number of people think the economy is doing poorly when almost all the actual numbers are quite positive. Wealth is draining away from tenants but expanding for real estate property owners. With that background it is counter-intuitive that renting has become more popular even for people who can afford to own.
There were 2,998 active rental listings as of Saturday, down from 3,291 on July 23, 2015 and 4,474 on July 23, 2014. In 2008 at this point there were 8,525. Supply appears to be very tight and failing to improve.
Wealth is draining away from tenants but expanding for real estate property owners. With that background it is counter-intuitive that renting has become more popular even for people who can afford to own.
– Michael Orr
by MICHAEL BODEEN | Jul 18, 2016 | Bodeen Team Blog, Real Estate News
Back in 2011-12, Phoenix Metro real estate market values had bottomed out, though no one was a hundred percent sure at the time if it was indeed the bottom. As Realtors working during this difficult and trying time, we were seeing many home buyers, especially first time home buyers, being outbid by buyers who were paying “all cash!” In some cases, we were witnessing at least ten simultaneous offers on a property. Obviously, the word was out – Phoenix was the place to buy!
Some of us were representing individual investors who were buying a number of properties to rent, or fix and flip but all the while, large institutional buyers were buying up homes by the thousands until they pulled back in August 2013. The purpose of their purchases was to create large rental pools. And boy did they. According to data from The Information Market, large institutional investors currently hold 12,629 homes in Maricopa County.
“Phoenix has become a pretty healthy and stable market, much of it the result of these investor’s purchases.”
In retrospect, the large scale investor buy was a really good thing. Neighborhoods that had become blighted from foreclosures and empty houses were starting to be occupied again. Many of these local buyers were fixing and flipping which improved the neighborhoods leading to values increasing and increasing! Phoenix has become a pretty healthy and stable market, much of it the result of these investors’ purchases.
Question: What if these large investors all of a sudden decide to sell? What could happen to values?
Only a small number of the homes purchased by these institutions have sold to date, but that could change. In a recent Bloomberg article, John Bertling, the Chief Executive Officer of Invitation Homes states that “Invitation Homes expects to cull about 5% of its properties annually.” More notably, the article states “about 25% of Invitation Homes’ renters who move out each year are leaving to become buyers,” according to the company. That’s similar to what other large firms are experiencing. Colony Starwood Homes has reported losing about 23% of departing tenants to homeownership and American Homes 4 Rent has said it’s figure is about 30%.
All three of these companies have significant holdings in Maricopa County. Using the 25% figure, 3,163 new home buyers are coming from this rental pool each year. Right now these homes that are vacated by renters-becoming-buyers are swiftly re-rented, and for more money, but when that stops or significantly slows, these companies may alter their strategy.
Right now there doesn’t seem to be any evidence that will start to happen soon. And if it did, the result of that sell-off could be a benefit to the first time home buyer, and wouldn’t that be awesome?!
– Mike Bodeen
*With Thanks to ARMLS Information Market
by MICHAEL BODEEN | Jun 27, 2016 | Bodeen Team Blog, Real Estate News, Selling a Home
Alternate Title: The Importance of a Good Pricing Strategy
“We can always come down,” says the confident seller. This is a true statement, but there can sometimes be unintended consequences that can have a serious impact to the overall goal of selling a home for the best price and terms and in a timely manner.
“How long has this been on the market?” asks the interested buyer. In my personal and professional experience, the buyer usually wants to hear one of two responses. Either long or short. If long, the buyer’s thinking; “low-ball offer.” If short, the buyer’s thinking, “I better see this soon!”
What we know for sure:
1) More buyers will see the listing in the first 2-3 weeks of its commencement compared to any other time during the listed period.
2) If there are going to be multiple offers on a home, they usually occur in the first few days of the listing, or the first week after a good price reduction.
3) The longer that a listing is on the market, the greater the distance between the selling price and listed price.
The Phoenix Metro real estate market is currently one of the most well balanced markets in the country, which has not always been the case. In July of 2005, which was the peak of our blistering seller’s market, the average time it took to get a contract on a home was just 24 days. Contrast that with the ugly market downturn in February of 2008, where the average market time for a home to sell shot up to 140 days!
Today, the average market time is 78 days. Bear in mind that the amount of days on the market very much depends on what price range you’re in. If you’re priced under $200,000, your home should sell quickly, depending upon location. If it’s over $500,000, the length of market time increases dramatically. It’s not strange to see the million dollar+ homes sit on the market for a year or more.
For these reasons we always prefer to list the home competitively up front, so take what I’m about to say with a couple grains of salt. If you want to “test the market” with a price that is above what a professional says the home is worth, there may be away you can do so and not get burned. Well, no one can say for sure because it’s a gamble. The method we’ve used to do this, is to list a home with an automatic pre-agreed price reduction that takes place after 3 weeks down to our original recommendation. This way the seller can feel confident he/she isn’t underselling his home, but still get to a competitive price point while interest is still relatively high.
In the technologically advanced age we live in, the world of interested home buyers will see your home online before they ever decide whether or not to go see it in person. If not, they will either file it in the trash never to see it again, or perhaps save it to keep an eye on it. If the home is reduced they will then take note of it again, that is, if they haven’t already decided on different home. The best course of action for the seller is to get the home under contract during the first 3-4 weeks. In this situation the seller will most likely not be “low-balled” and still be able to obtain the best possible price.
Over the years we have seen too many sellers waste time and money because they fail to price their home correctly in the beginning, and worse than that, not reduce the price in time to still capture that initial wave of market interest. This is especially important in our current $500k+ market range where demand is low and supply is high.
by MICHAEL BODEEN | Jun 6, 2016 | Bodeen Team Blog, Real Estate News
The current statewide real estate agent numbers are in. And based on the swelling ranks of folks getting into our industry, business must be good! We now total just over 30,000 compared with 28,000+ one year ago. If you or someone you know is considering a real estate career in Arizona, you might have them look at the chart below. But first we need to make some clarifications to the chart.
(Chart Removed for proprietary purposes, original article written for clients only)
At the far right is the average commission based on a 6% commission per agent. It’s actually closer to half that as a 6% commission is split 50/50 with both the buyer’s and seller’s agent’s. So the average commission per agent is more like $23,000. Gross. Now a portion of that fee goes to the company, usually anywhere from 10% to 50%. Let’s assume an average of 25% fees go to the company. This will leave the agent’s share (75%) at $17,250. Gross.
Expenses. Ah yes, remember as a real estate agent no one will pay you a salary. You’re an independent contractor working solely on commissions and are responsible for all your own expenses. The good news is that you’re your own boss. The bad news is that you’re your own boss!
Expenses are, in a word, “expensive.” First there are National, State, and local Realtor association dues (assuming one belongs to a Realtor board), and many of us do. Then there are the MLS dues, which we pay for the privilege of having access to the database of all homes, lots, rentals, etc for sale. These easily total a grand per year, so now the agent’s share is down to just over $16,000.
Then we have marketing expenses including but not limited to listing expenses, photography expenses, printing expenses, errors and omissions insurance (E&O), internet/website expenses, utility (cell phone) expenses, and oh yea, auto expenses, entertainment expenses, ad nauseam.
Taxes. As an independent contractor you pay the full Self Employment tax, which is another 8+% compared to your employee brethren. And you’ll need to pay your taxes quarterly. Long story short you can figure expenses to be about half of your gross income after paying your broker/company. In our example here, let’s err on the generous side so you’ll figure your annual take home pay before taxes to be $8,500.
The number of real estate agents has increased 7% this past year which means that with sales increasing about 4%, this will leave agents with a smaller piece of the income pie.
Anyone want an application?
by MICHAEL BODEEN | May 30, 2016 | Bodeen Team Blog, Real Estate News, Realtors
Is this Good or Bad for the Consumer?
When I arrived on the real estate scene in 1976 in Truckee, California, I was a mere 22 years old. I knew nothing about real estate. While it was technically accurate to call myself a real estate practitioner, I shudder to think of all the folks I “practiced” on in those days.
So when I read these newer studies that show how Realtors are increasing in number and decreasing in age, my gut reaction is to be frightened for an unsuspecting populace. Of course back when I started, it was much harder to find quality training, education and mentorship that encouraged best practices than it is today.
According to the National Association of Realtors (NAR), the median age of a Realtor, as of 2015, is now 53. This is reduced from 57 in 2014 and is the lowest since 1952. This means a lot of younger people are joining the real estate industry.
Our local market is no exception to these statistics. We have been observing large increases in the number of ARMLS members over the past two months. This is the listing service that almost all local agents register with that enables them to hunt for homes and list them publicly as well. Today we topped 36,000 entries in this database. As recently as March 24, we saw fewer than 35,000, which is an increase of 500 agents a month! All of the largest 20 real estate brokerages except (except for one) saw increases in the number of agents as well.
So is this a good thing for Joe Q. Public? Is my gut twisting in knots needlessly? From a base economic standpoint, more laborers within a single industry creates more competition, more choice and, theoretically, lower average costs for the public to employ those agents. So from that perspective alone that can be seen as a gain to the public.
On the other hand, new agents mean inexperience, and in our industry, the knowledge we gain from experience is half our worth. A successful listing agent must also understand marketing, negotiating, and how to price a home correctly to get their clients the highest value for their property. If an agent is representing a buyer they need to know how to read a local market, and to understand the basics of lending so they can guide their client to an honest and fair lender. The 90 hours of classes you must take to become a licensed Realtor in Arizona will not give a person these skills.
My son actually began his career working for a very successful agent in Idaho as a licensed assistant in 2009. He was involved with 50 transactions from start to finish before he ever represented his first client, and I wish more agents would begin their careers this way.
It’s not that you should never work with a newer agent, because many of them are motivated, high energy, and desperate for a payday, which means they will break their back for you. The questions you need to ask are; 1. Does this agent know where to find the right answers when they are unsure of something? 2. Does the agent have a mentor/business partner they can lean on for experience? 3. Is this agent taking steps to educate themselves regularly? 4. Is this agent full time?
Fortunately, with larger companies such as our firm, HomeSmart, excellent training is made available to all agents and that’s a plus. We also have tremendous Broker Support, all of which I wished I had when I started in the biz back in 1976.
My greatest plea to a consumer searching for an agent, is not to just go with the first one you meet, which is what most do. Instead attempt to evaluate their level of experience, industry knowledge, and integrity.
