Let’s be honest, many potential and qualified home buyers are not presently shopping for a single family home. They seem to be content with non-home ownership. Renting, as some of them say allows for more freedom. They saw what happened to their parents or friends by getting into a situation they could not easily get out of. (i.e., underwater property, foreclosure) And they don’t like what they’ve seen.
Tough to argue with that one. But make no mistake, there is a downside risk for buyers not buying at this time, and quite honestly, many buyers may regret that they have not acted. Here are some risks:
1) Government Action: I’ll give you one real world example of a consequence for buyers who could have bought 6 months or a year ago and didn’t because the government adjusted downwards the maximum loan amount that would be loaned on an FHA in Maricopa County from $346,250.00 to $271,050. Now many can’t buy in a neighborhood they can afford because of needing a substantially greater down payment. (FHA will provide funding with just 3.5% cash down payment which means that a buyer could have bought a $355,000 home with a lot less cash than is required now with conventional financing. (i.e., 10% to 20% cash down)
2) Home Values Moving Up: The local market bottomed out during the fall of 2011. For 24 straight months, prices increased and have now leveled off. Have they stopped increasing? Well, it’s a risk, but consider that our market is still almost 30% below the peak we reached back in December 2008.
3) Further Mortgage Rate Increases: One year ago, mortgage rates were in the mid 3% range. Today they are averaging between 4.25% and 4.5%. Nuff said.
4) Selection of Homes Could Decrease: Right now there’s a healthy assortment of homes for sale. If sales begin to increase, inventory of available homes will fall, thereby decreasing buyer choice.
5) Rents Moving Up: Landlords are happy with this one. With so many renters, the demand for rentals has increased, thereby increasing average rents.
One of the most asked questions I get in the Phoenix/Scottsdale area is, “When’s the best time to sell my home?
In general, if it’s a Seller’s market where inventory is low and buyers are plentiful – all months are good, but there are some months, that if you have a choice, it would be best to stay away from – the holidays for sure. Reasons being is that there are fewer buyers, and practically, it’s a stress that few homeowners want to endure. Plus, the best time of year, when most buyers are looking commences in February and by that time you will have accumulated added “days on the market” which will work against you.
Statistically, most “closings” occur in Spring, specifically, March and April. Therefore, most homes go “under contract” in February and March. Most buyers tend to look in the spring following the holiday season. So sellers, ideally, you will want to have your house on the market by February 1st – in Arizona that is.
Having said all that, having your house on the market during the holidays is not the end of the world, especially if you live in an “over 55” community like Sun City West for example. In that case being on the market during our winter months is a benefit as that has the most buyers for that particular market. Scottsdale also has plentiful buyers for second homes in the winter months.
And this next year, Arizona will have an immense amount of out of town visitors coming to the valley for the Super Bowl and Pro Bowl, not to mention all the other great winter attractions we have while the rest of the country is still digging out.
But Student Loans are a Drag…
Demand for homes continues to stall according to the most recent report on mortgage applications from the Mortgage Bankers Association (MBA). Equity researcher Stephen Kim has released an in-depth report titled: The Return of the First-Time Buyer. In this report he cites three solid reasons why potential homebuyers could enter the market:
1) Job growth is reaching an important threshold for improved household formation. The cumulative number of jobs created over the past several years has now reached the point where each new job will drive greater household growth.
2) Credit Availability starting to loosen: Lenders’ willingness to extend credit to borrowers in the entry-level “sweet spot” of 600-700 FICOs is gaining momentum.
3) Affordability still favorable: Buying a home is still 20% cheaper than renting and affordability is unlikely ever to be better, given interest rate and home price trends.
There is a BIG negative out there as well, he writes. And that is that Student Debt is the thorniest problem for the mortgage (hence housing) industry. Kim predicts that this period of slower growth is consistent with the view that the housing market will recover back to normalized levels by 2016.
I would add one other market incentive to include the return of the Boomer Buyer — getting back into the real estate game following their short sale or foreclosure.
I get a lot of questions asked of me — thousands and thousands over the years. I also read many questions from folks who purportedly ask their Realtor a question, but you can pretty easily tell that it’s more marketing generated than actual and factual.
As part of our blogging, we’ll be adding our own Q and A’s as well. Some, like the one posted today, is verbatim from my client and my response. Others are questions asked in the past, or a really good question that I’ve come across recently.
Either way they’re unusual questions, hence my answers can also tend to be unusual.
I hope this email finds you well. I’ve been getting your monthly newsletter and I appreciate your notes!!!
I need some advice for a co-worker. I would love for her to work with you instead of the realtor she is currently working with. My co-worker is a divorced mom looking for a single home in the Surprise/El Mirage area. She is available to view homes on weekends and during week M/W/F after 7pm. Her realtor says she doesn’t show homes that late. Is my co-worker asking too much or is that too late? She’s trying to decide if she needs to change realtors.
Any of your advice is greatly appreciated!!!
All my best,
Great to hear from you Cathy. And it’s a great question.
Does her agent show her homes Sat AND Sun? How long has she been looking for a home? How many homes has she seen? How long has she been working with the Realtor? It’s not real cut and dry. Sometimes the buyer can have too high an expectation on spending time with the agent. On the other hand, many of us will work with our buyers as much as we can, because to do work for them. Showing homes when it’s dark is not recommended, but as daylight time increases we can show later into the evening.
With my son Jonathan now working with me we are able to increase our time with clients, but we also don’t want to interfere in the agency relationship of another agent. The real question concerns your co-worker’s comfort level with the business relationship. If she’s not “reasonably” satisfied, she should interview other professionals.
I would be happy to talk with her, and of course would not coerce her into leaving her existing agent. That’s a business decision she needs to make.
And thank you so much for thinking about me. That means a lot!