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.
by JONATHAN BODEEN | Mar 7, 2016 | Bodeen Team Blog, Real Estate News
“So how’s the market?” you ask.
“Great!” I respond, but then quickly add; “Wait which market would you like to know about?”
While the Phoenix Metro Market is incredibly nuanced from neighborhood to neighborhood, we can divide the market here into three main categories of price ranges when determining the overall health of the market.
$250,000 and Under:
Amazing! Well, if you are a seller that is. If you are a buyer in the price range… well… I am so, so, so very sorry. Supply was low in march of 2015. It was a seller’s market and buyers were fighting each other for a place at the bargaining table. Now in March 2016, it has escalated even beyond that! The supply has dropped 20% since then, and as a result prices are appreciating at 8% annually!
Now sellers love this, but truthfully, we can’t call this a healthy market. Phoenix Metro needs a fresh supply of homes in this price range to benefit the buyers in that price range, for whom buying a home is essential in building personal financial security. While builders have again become active with a relative gusto in our fair city, they seem religiously intent on building homes that start in the 300k, not helping our buyers on the lower end.
Between $250,000 and $500,000:
This price range we find to be really more a picture of overall health here in the valley. The supply of listings is going up overall, but so the demand as well. We have more listings on the market and more deals being done than this time last year. Sellers have experienced a moderate 2.6% annual appreciate rate as a result of this. Nothing to write home about… and yet still much better than your 401k has done this year 😉
$500,000 and Over:
In the words of a Michael Orr, the man who is responsible for all of this raw data, this market is “…Wallowing in too much supply…” The supply in this price range has increased a whopping 15% since this time last year. Demand is actually up a bit since last year, but unfortunately not enough to counterweight the greater increase in supply. Some of the stats in this price range have been skewed (inadvertently I’m sure) by some analysts to suggest an appreciation here, but truthfully it looks as if we have actually seen a price depreciation of 5%.
The bulk of our market is still healthy when we remember that the 500k+ price range represents only about 8% of the entire Phoenix Metro market.
