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.
by JONATHAN BODEEN | May 16, 2016 | Bodeen Team Blog, Mike's "Real State" of the Market, Real Estate News
The health of a residential real estate market can be written about in many ways, often depicting(or spinning) the author’s own viewpoint or opinion. Certainly as real estate professionals we’re prone to do this as much as anyone, so it’s best just to let the facts speak for themselves.
Home Prices Running Steady
In 2004, our local Phoenix Metro area began an upward rise in the median sales price that reached a frenetic peak in July of 2006. In January of 2001, the median sales price in the Phoenix Metro area was $128,000. Three years later it had risen to $151,000, a robust increase of 18%, or 6% per year. Then it went up 14% the next year (2005). Then it soared to its peak in July of 2006 at $260,000. I think we all agree that this price rise was NOT HEALTHY. Just as dramatically unhealthy was the market collapse that saw the median sales price drop to $110,000 in October of 2011, a frightening 58% in 5 years with most of that decrease happening in just 18 months during 2008-2009.
Since 2011, prices have been steadily rising. I realize that “steadily” is not very sexy but in fact, it beats the heck out of two up and down market flings that ruined millions across the country and hundreds of thousands in Arizona. Perhaps steadily should be the new sexy. Prices are again rising, as are rental rates, Arizona’s population is increasing again, jobs are being created, and new home construction is heading up. This is evidence (see below) of our states residential real estate health.
Foreclosures Have Virtually Disappeared.
Foreclosures, which saw hundreds of families lose their homes weekly, have swung to an amazing,almost nation leading, basement rate of .05%. Arizona ranks 43 out 51 states (including DC) for non-current loans and 49 out of 51 for homes in foreclosure. Considering that just a few years ago we were leading the nation in foreclosures, this is an amazing turnaround.
Michael Orr (Cromford Report/ASU) details how the Black Knight Financial Service Mortgage Monitor report for March shows a dramatic fall in mortgage loan delinquency over the past 2 months. There is something of a seasonal pattern in these numbers and January to March is the time of year when the delinquency rate tumbles almost every year. However, it is significant that the total delinquency rate for the USA is now at pre-housing crisis levels and the 30-day delinquency rate is the lowest in well over 15 years.
To provide some perspective, these states have the highest rate of foreclosures compared to AZ’s .05%:
- New Jersey 4.3%
- New York 3.7%
- Hawaii 3.5%
- Maine 2.7%
- Florida 2.6%
- New Mexico 2.4%
- Delaware 2.3%
- District of Columbia 2.2%
- Rhode Island 2.2%
- Connecticut 2.1%
New Construction Permits Highest in 9 Years
For the first quarter of 2016 there were 4,436 single family permits in total, up 33% from 3,333 last year and the highest number since 2007, when there were 8,710. Mesa and Chandler are the two cities with the fastest growth in new home construction while Goodyear and Gilbert are decelerating.
The top locations so far in 2016 are:
- Phoenix 656 – up 47% from 445 in Q1 2015
- Mesa 478 – up 76% from 271
- Gilbert 468 – down 1% from 475
- Peoria 374 – up 22% from 307
- Unincorporated Pinal County 358 – up 37% from 261
- Chandler 340 – up 73% from 196
- Buckeye 314 – up 64% from 191
- Queen Creek 239 up 24% from 192
- Scottsdale 212 – up 13% from 187
- Goodyear 200 – down 17% from 242
- Maricopa 200 – up 36% from 147
So without exaggerating, based on these stories anyway, we’d have to say this checkup went pretty well.
by JONATHAN BODEEN | Apr 25, 2016 | Bodeen Team Blog, Real Estate News
Well, now that I’ve turned 62, more senior financial options are presenting themselves to me even besides being able to take Social Security payments, though I won’t just presently. Since this is a real estate column, I’ll discuss one of these options as it relates to your home sweet home; the “Reverse Mortgage.”
Many seniors today own their homes free and clear or very nearly free and clear. Quite a few of them are also living on Social Security alone, or close to it. By leveraging some of their home equity to receive monthly payments, their quality of life could substantially improve. Using their equity in that way however, is also one of the downsides as there could be less inheritance for family members down the line.
Reverse Mortgages have been around since the 80’s and originally they did not have such a great reputation. Nowadays most folk don’t even know they exist. If they knew more about them, they might want to consider checking into the program. It has its advantages. But first,what is a Reverse Mortgage?
A reverse mortgage is a type of home equity loan for homeowners who are 62 or over. It does not require monthly mortgage payments. The loan is repaid after the borrower moves out or dies. It is also known as a home equity conversion mortgage, or HECM. People who can benefit from a reverse mortgage include people that:
- Don’t plan to move.
- Can afford the cost of maintaining their home.
- Want to access the equity in their home to supplement their income or have money available for a rainy day.
To qualify, borrowers have to be at least 62, own their home outright or carry a mortgage small enough to be paid off by the proceeds. There are no income or credit qualifications, although homeowners are responsible for paying the annual taxes, property insurance and maintenance. No loans have to be repaid until the owners move or die, in which case the bank takes its share and anything left goes to the heirs. However, if the owner fails to pay insurance and property taxes, the reverse mortgage is deemed in default and the owner is in danger of foreclosure.
Disclosures and protections are much better than they were back in the 80’s. Like any financial product, it’s a good idea to get wise counsel from an attorney, family member or trusted friend. As always, the best advice often comes from someone who isn’t financially remunerated from their advice.
To learn more about Reverse Mortgages and their benefits and risks, check these links:
http://www.bankrate.com/finance/retirement/basics-of-reverse-mortgages-1.aspx#ixzz46sLog12J
http://portal.hud.gov/hudportal/HUDsrc=/program_offices/housing/sfh/hecm/rmtopten
http://www.aarp.org/money/credit-loans-debt/info-04-2013/are-reverse-mortgages-helpful.html
http://www.consumerfinance.gov/about-us/blog/consumer-advisory-dont-be-misled-by-reverse-mortgage-advertising/
by JONATHAN BODEEN | Apr 18, 2016 | Bodeen Team Blog, Buying a Home, Real Estate News
When my family relocated to the Valley in 1994, it was a hot new-home sales market. North Scottsdale in particular was building incredible communities such as Grayhawk, McDowell Mountain Ranch, Scottsdale Mountain, Scottsdale Ranch ad infinitum. These brand new communities also provided top notch amenities, and certainly qualified as move-in ready at the time.
Fast forward 20 years. The communities are still a huge draw, but the new home newness has worn off. These upscale homeowners have discovered that roofs leak, heating and A/C units fail and need replacement, hot water heaters were probably replaced 2-3 times, and exteriors need attention/painting, again. In short, they are no longer “move-in ready.”
And that’s just the outside.
Inside, that wonderful Corian hard surface countertop is still in great shape, just not what HGTV is serving up in 2016. Slab Granite is still popular, but 10 year old granite counters look like, well, 10 year old granite counters. Quartz (engineered stone) and newer designed slab granite are the new popularity winner. Even the wonderful Travertine tile that was so “in” ten years ago is now showing its age susceptibility. Hardwood (always in), and wood-design tiled floors are the new (old) kids on the block. Here’s a good website to check out: http://homerenovations.about.com/
It’s no accident that flippers are again starting to experience a lot of success in the Phoenix Metro real estate market. They are providing a finished product much in demand, especially with the rise and success of HGTV cable TV programs, such as “Love it or List It,” “Fixer Upper” and “Property Brothers” among others.
“Local sellers are taking quite the hit on price if they’re not updated, and if the updating was ten years ago, that’s ancient, design-wise. Buyers want new and now…”
Local sellers are taking quite the hit on price if they’re not move-in ready, and if the updating was ten years ago, that’s ancient, design-wise. Buyers want new and now, which is a big reason why new home sales are taking off again in the valley. Though many buyers would love to remodel new, very few buyers have the additional cash required to accomplish that expensive feat. In the financing heydays of not that long ago, but before the crash, banks were so happy when you closed on your home they gave you a $50,000 line of credit at closing which you didn’t even have to spend on your home. Hey, new car, vacations, you name it. Spend it. Well, no more.
For someone who has the financial resources, there are very good buying opportunities availing themselves right now, because these outdated but well located homes are not getting decent offers, if any at all. They’re lagging on the market if not priced aggressively. Prices for homes over $500,000 are slipping.
It’s now apparent that we are in a difficult market for homes that are not “move-in ready.” What’s an owner to do if they’re thinking of selling? Here are some options:
1) Price it aggressively
2) Rent it out if you’re relocating
3) Stay, fix it up and enjoy it
4) Stay, don’t fix it up and enjoy it
On the positive flip side, if your home is “move in ready” or fairly close to it, you will do well. Best neighborhood price, shorter market time.
by JONATHAN BODEEN | Apr 11, 2016 | Bodeen Team Blog, Real Estate News
As we’ve been reporting fairly regularly, price matters. The more expensive a home is, the fewer the buyers who can afford even looking at a home. Yes, this would seem to be obvious to even a casual market observer, but if that’s so, we could actually be in a long term national trend that’s worth pondering, at least for someone whose profession is to sell homes.
According to Stephen Kim of Barclays, and several other national analysts, ‘a long term trend is currently underway that theorizes that a wave of empty nesters is seeking to downsize, and now that the market has recovered from the crisis of 2006-2009 they are planning to do so in greater numbers. If a large number of boomers want to sell their suburban expensive home at the same time, we are going to see an imbalance of supply and demand. Today’s younger buyers appear to prefer density and proximity to urban facilities like shops, restaurants and entertainment. Far fewer of them are playing golf. In any case, can enough of the younger generations afford to live in suburban luxury even if they wanted to? The “boomers” are the ones with the equity. Gen X (early 60’s to early 80’s) was badly hit by the foreclosure wave and many of the millennials are still deciding what they want. We are seeing a rise in discretionary renting, where older homeowners sell their large homes and move into smaller rental homes. They appear to prefer upgrades and amenities to square footage. They are probably using their home equity as a source of funds to enjoy their retirement.’
” ‘…We are seeing a rise in discretionary renting…’ “
If the above is true, it certainly makes for interesting discussion. I think it could definitely have an impact on builders in their consideration of the size of homes to build in their communities. I think one possibility is that the large suburban luxury home becomes at least tri-generational that will fit boomers, boomer’s parents, X, and maybe even Y (1982-2004) generations. In order to accomplish that, major remodeling will need to happen, which will reinvigorate the construction industry from new to re-new.
In the Phoenix metro area, we’re currently seeing many active listings above $500,000 with (according to Michael Orr of the Cromford Report) an average sales price per square foot of $232, down from $237 in August. Unlike the median price, the more expensive homes affect the average sales price more than the median sales price. This, according to Orr, reflects the oversupply in the higher price ranges. If the higher priced homes don’t fetch higher dollars, owners may keep reducing the price to get it sold, or rent it out living in smaller accommodations or retirement oriented communities.
In order to afford the more expensive homes, higher incomes are needed, be it with those moving to Arizona, or higher paying jobs that are created in the state. We’ve certainly seen the latter occur, but not so much the former.
by MICHAEL BODEEN | Apr 4, 2016 | Bodeen Team Blog, Mike's "Real State" of the Market, Real Estate News
Though Jonathan and I like to provide market updates each week, the most accurate data comparisons are quarter vs quarter, and having just wrapped up the first quarter, we can now compare this 2016 first quarter with the first quarter of 2015, with much thanks to Michael Orr of the Cromford Report.
For readers who would prefer the, “Just get to the bottom line Mike,” in a nutshell, the market is quite healthy except for the low end (hugely diminished inventory making it tough on entry level buyers) and the high end luxury (too much supply) which is great for our high end buyers who have lots of choices.
Now a little more detail: Market conditions remain very diverse with different price ranges in dramatically different situations. We will start with the overall numbers and then break them down to try to make more sense of what is going on.
Here are the basic ARMLS (Arizona Regional Multiple Listing Service) numbers for April 1, 2016 relative to April 1, 2015 for all areas & types:
- Active Listings: 22,493 versus 22,303 last year – up 0.9% – but down 0.4% from 22,587 last month
- Under Contract Listings: 12,427 versus 11,986 last year – up 3.7% – and up 5.6% from 11,773 last month
- Monthly Sales: 8,548 versus 7,893 last year – up 8.3% – and up 46.6% from 5,829 last month
- Monthly Average Sales Price per Sq. Ft.: $138.96 vs $131.99 last year – up 5.3% – and down 1.7% from $141.09 last month
- Monthly Median Sales Price: $215,000 versus $200,000 last year – up 7.5% – and up 1.4% from $212,000 last month
Sales, pending listings and under contract counts are all up from both last month and last year. This represents a firming of demand, which has brought the Cromford® Demand Index to a level we have not seen since June 2013, almost 3 years ago. This demand increase mainly affects the price range from $175,000 up to $600,000.
The supply of active listings is now higher than 12 months earlier for the first time since December 2014. However the Cromford® Supply Index has stopped rising and reached a plateau of 81.3, telling us we have a continued shortage of homes for sale compared with a normal market. This is deceptive for much of the market because almost all of the missing homes for sale are at the affordable end of the market below $175,000, where they are missing in huge numbers. The absence of the normal low end supply is not just in homes for sale. Affordable homes for rent are also extremely scarce. Entry level buyers and potential tenants are facing strong rises in price with no sign of relief.
So the low-end of the market has too little supply while the high end has too much. The mid-range is in the happiest “Goldilocks” state, with neither too little nor too much. Mid-range prices are stable and volumes are growing. Since the mid-range is by far the most important sector for the construction industry this is excellent news for most builders.
Despite the excessive supply, the high-end luxury market had a good first quarter from a volume perspective, with 79 closed sales for ARMLS listings priced over $2 million. This compares well with 68 in the first quarter of 2015 and we have to go all the way back to 2008 to find a first quarter with higher sales volume. The abundance of supply means there is plenty of choice for high-end luxury buyers and they are finding homes they like. For sellers it means they will need plenty of patience because of all the competition from other sellers. It also means they may have to settle for a lower contract price than they anticipated, especially if they are accustomed to looking up their home on Zillow.
by JONATHAN BODEEN | Mar 28, 2016 | Bodeen Team Blog, Real Estate News
Over the last few weeks, some positive trends have given sellers’ encouragement. If you follow our market index you’ll notice that over the last couple of market updates it has been ticking upwards, whereas over the last month or so it had been doing the opposite.
It seems as though the pace of new residential listings hitting the market has slowed, which is of course favorable to sellers as they have less competition to deal with. At the same time, demand does not seem to be slowing. This is particularly true in parts of the valley where the $250k and under homes are to be found.
Phoenix, Avondale, Glendale, Mesa, Gilbert, Surprise, Peoria, and Buckeye have all seen 2-7% rise toward a seller’s market over the last month.
Unfortunately, a few areas have seen the opposite trend and are actually, contrary to the metro area averages, pacing downward towards buyer markets, and quickly at that. Tempe, Fountain Hills, and Paradise Valley have seen slopes of 11-16%.
All real estate is local, and the market is always moving. For personalized info for your home in your neighborhood, we are always here!
by MICHAEL BODEEN | Mar 21, 2016 | Bodeen Team Blog, Real Estate News
Rental demand continues to skyrocket and with it rental prices have risen dramatically. The average lease price for an active rental listing in the Arizona Regional MLS is now at $2087 per month, which is 11% higher than last year at this time. Recently there were only 2,140 home listings available on the MLS, a veritable dearth of inventory. The all-time low, per Michael Orr of The Cromford Report, was a couple weeks ago when there were just 2090 rental listings available.
To give perspective on this problem (yes, it’s a problem), back in 2008, there were close to 10,000 MLS rental listings available. The current count for rental listings is 27% below last year and 45% less than 2014.
The average leased price per square foot is currently 79.1 cents psf, while last year it was 71.7 cents psf. That represents an annual increase of over 10%.
So, what’s a Renter To Do?
So, what’s a renter to do if they can’t buy a home yet and they don’t want to move? Can they avoid a landlord’s annual rent increase? Not always, but here’s our advice: Be Nice! Being a really good renter can sometimes soften a landlord when it comes time to consider raising rents.
I have some clients who began renting their Scottsdale investment property to some folks over 15 years ago. The same people are renting the house today with few rent increases because they were nice and my clients liked them.
What is my definition of nice?
1) Be on time with your rent! (Yes, this is obvious, but it goes long in the goodwill department) If there is a month where there’s a rent shortfall, send what you can with an explanation of why, and that you’ll get caught up next week, or whenever. Some rent plus timely communication will go a long way for you. And then do it!
2) Don’t sweat the small stuff! If you can fix something yourself at little to no cost, do it! Landlords don’t like renter phone calls for the minutia. Look at it this way, if your rent is $1500 per month and you’ve had to fork out $150 yourself over the past year on small stuff, that’s cheap considering a 5% rent increase (which totals $900).
3) Keep your yard, especially your front yard looking great. Mow the lawn, pull the weeds, plant flowers. Hey, you’ll enjoy it too!
4) Be a good neighbor. Often the neighbors are connected to the landlords. If you’re a renter who gets along with the neighbors, this may aid you come renegotiation time. And if not, your neighbors will really like you.
5) Every three months or so, let your landlord or property manager know that you’re taking care of the place. Mail them a front yard photo of the house with a short note telling them you’re really enjoying their home. “Oh, and by the way, Mr./Mrs. Landlord, we took care of that leaky bathroom faucet — just needed a washer.”
You get the picture? And if you still can’t stop the annual rent price spiral? Get into the ownership side of the game. That’s where you need to be anyway.
by JONATHAN BODEEN | Mar 14, 2016 | Bodeen Team Blog, Real Estate News
Zillow has become probably the most widely used home searching tool in the United States. If you, like many of our clients have browsed Zillow, you may have seen, or even used their “Zestimate” tool. With a click of a button Zillow will give you a quick price analysis of your home. So many of our buyers or sellers come to us with preconceived notions about what their home is worth, or what a home they might want to buy is worth based on this fancy tool from Zillow.
The real question is, can you trust this tool for accuracy, and if so to what degree.
The simple and easy answer is no, you should not trust this tool. That is not to say it doesn’t have any benefits or uses, but the bottom line, it just doesn’t have enough information to make any sort of accurate assessment of a property. Zillow actually admits this in small print on another page somewhere on their website, saying “Zestimate is a good starting point as well as a historical reference, but it should not be used for pricing a home.”
And that really is a good way to say it. Some clients of ours recently sold their home for over 75,000 more than what the Zestimate stated it should be. We have another set of clients, where the Zestimate is 68,000 more than what they were able to get for the property. The Zestimate is not always this far off, but it is very rarely spot on.
Zestimate is an attempt at being a Kelley Blue Book for Houses. The problem is that, unlike cars, homes generally have very little uniformity. Even homes in the same neighborhood with the same floorplan can have whole different levels of upgrades that Zillow can’t see which can mean the difference between tens of thousands of dollars.
In related news, The Arizona Republic is actually setting up a locally charged website called Street Scout that aims to give consumers a better idea of value. Unlike Zillow or other online valuation tools, Streetscout.com will use local real estate experts and data. The site is yet in its infancy, but I already feel better about this tool than the Zestimate.
The best answer though, is to have a real estate professional to do a market analysis on your home. We do these free of charge for all of our clients, and not just if your planning to buy or sell. Often you’re simply curious to see the state of your assets and the current value of your home is a big part of that. We are happy to help.
