February and March seems to be the time of year when the real estate industry of our fair city of Phoenix is at its most active. This is true both for the most amount of listings coming on the market as well as the time when the most buyers are out and about scurrying to find their dream home. But who does this advantage the most, buyers or sellers? Does this mean we are in a buyers’ market or sellers’ market?
Well that can depend. Ultimately whether we find ourselves in a seller’s or buyers’ market seems to vary from year to year rather than from season to season, albeit with minor bumps up and down throughout the year. Most of 2015, for example was a seller’s market overall for much of the valley, where as 2014 leaned much more toward buyers.
Around this time, we usually see a burst of homes going under contract and higher volume of real estate transactions overall. Many would think this would bode worst for buyers with the increase of competition over homes with other buyers. However, if the increase in new listings, which also rise in the spring, outpace the buyer push, well then seller’s do not necessarily gain the advantage.
What about right now though? According to Michael Orr, a locally renowned real estate statistician whose assessments we follow diligently, the Phoenix Metro Area has already hit its peak for new listings arriving on the market in most areas. This is good news for most currently trying to sell, as competition begins to dwindle, while buyers remain out in force.
Not all sellers can say this however, with some of the more upscale areas continuing to outpace buyer demand with increasing supply. Paradise Valley and Scottsdale for example, are both very balanced markets right now, with no decided advantage for buyers or sellers either way. These areas and a few others are trending toward a buyers’ market.
Always remember that we are forced to speak in generalities in these short little updates. Markets vary from different prices ranges, types of homes, areas, and even from neighborhood to neighborhood.
Solid and Balances Market Continues
The good news is that the Phoenix Metro real estate market will surpass the last two years in many important categories including the number of sales, average and median sales prices, numbers of homes under contract and the time it takes to sell a home. The only bad news is that the good news is good news for sellers, not for buyers who find themselves still on the sideline.
Compared to 2013 and 2014, this year is doing well. Balanced is the term we’ve used consistently this past year which benefits both buyers and sellers. Some Examples:
|Listings Under Contract
|Median Sales Price
|Average Sales Price
|Days on Market (Sales)
|Month’s Supply Inventory
How Much Can You Buy?
Buyers Take Note!
The Phoenix Metro communities remain some of the most affordable in the nation. A recent article by mortgage firm HSH.com indicated Phoenix home buyers who make $43,836 can afford to buy the median priced home here, currently at $213,000. The mortgage payment on that priced home, per the article is $1023 per month.
When one considers the average cost to rent which is $1200 – $1377 per month, home
ownership begins to look pretty good.
Remember, the first place to start home shopping is through an excellent and reputable lender. Buyers will need a PQF (Pre-Qual Form) for us to give to the listing agent as part of the offer. Give us a call and we’ll be happy to recommend one of these professionals.
Barb (one of my team members) called me yesterday as she was going to write an offer for some young clients who found that proverbial “perfect home.” Our football Cardinals had already demolished Detroit earlier in the day, so I was good to go. For my real estate team, I help our agents prepare the contract paperwork. I would prefer it wasn’t on a Sunday, but hey, it’s our job!
The home they wanted to buy had been originally listed at $315,000, and was then reduced in $5000 increments until it hit $299,500. And that’s where Ben and Benita (not their real names) saw the home as the listing info had been automatically e-mailed to them. Now the price had fallen within their buying parameters which was under $300,000.
Barb showed Ben and Benita the home immediately, and they both loved it, and wanted to buy – NOW! In their words, this was the only house they found that they both agreed on the location and home.
There was, as we so often say in our business, some issues. First, we needed to get the PQF (Pre-Qual Form). Very fortunately our lender Sandy who they had been working with answered her phone. She agreed to prepare the PQF and e-mail it to me. Secondly, they were only pre-approved up to $285,000 and this home seemed like a deal at $285K. On top of that, they needed to get an FHA loan as they were just coming out of their three year wait penalty due to a previous foreclosure. To complicate matters, another buyer had submitted an offer earlier that day as well. There would be a competing offer. This deal was no slam dunk!
After discussing with Barb and the buyers, we decided to meet at our office to write the contract. Barb called the seller’s agent to see if an FHA offer of $285k would even fly. She was informed that the other offer had not been accepted and would not be addressed until Monday morning. Further she told Barb the other offer was for $285,000 AND was FHA also. So get this! This house was on the market for 66 days, had three price reductions, and two offers come in on the same day for the same price and both FHA. Wow, we had a fighting chance.
Obviously, multiple buyers/offers benefit the seller. We prepared the buyer that the “normal” thing would have the seller countering the offer on a “multiple counter offer” form and that if the other buyer raises their price, they will probably get the home. And typically, the seller says to the competing buyers, “give me your highest and best deal.” Usually this is how a seller will get their best price. And considering that Barb and the buyers felt this was a strong value at $299,500, it would seem logical that the seller could easily get more than $285K. In other words, we needed to temper our client’s expectations.
But here’s the thing. We usually never really know what’s really going on in the personal life of the seller. I’ve seen unbelievable things in over 35 years in this biz!
We were however limited by their $285K PQF. Well, all we could do was to make some small adjustments within the contract to try and rise above the other offer. So Barb found out that the seller would prefer to close in 60 days which is long by today’s standards, but in this case, this worked out great for the buyer as well. Then, we agreed to use the title company of the listing agents choice, which was also a national reputable company. The buyer also agreed to pay for a home warranty themselves, rather than having the seller pay for it which is customary. And finally we reduced by two days the “Due Diligence” (inspection) period. Ben and Benita signed the contract.
Oh and lastly, we had Benita write a letter directly to the seller letting the seller know how much they loved their home – and their dogs! Hello, personal!
I wasn’t really prepared for Barb’s phone call this am to say that the sellers accepted Ben and Benita’s offer! No multiple counter offer. No raised price. Acceptance. Incredible.
Why did the seller accept their offer? According to the seller’s agent, there were a few things in the offer that worked better for them! According to Benita, she had asked everyone she knew to pray they could get this home. Hmm.
It was bound to happen and now it’s beginning. Millennial buyers are starting to move into the market in earnest. This is good news for our overall market for a number of reasons.
But first, an expert’s statement: Tom Ruff of The Information Market (owned by our MLS) said that FHA financed loans accounted for 32% of all home sales in April. This is a significant rise in the use of these loans. Ruff stated:
“The biggest change in homes financed occurred with FHA loans. In 2014 FHA loans accounted for 18.4% of home loan purchases, in April 2015 this percentage grew to 32%. The percentage of home purchases financed continues to trend higher which translates into an improving housing market.
Obviously we don’t have exact demographics about who these FHA buyers are, but it’s a pretty safe bet that they are the millennials (born from early 1980’s to early 2000’s or Gen X’ers) who need help with down payments, closing costs and qualifying ratios, which is what is attractive about FHA.
The good of this trend for Phoenix Metro is the continued solidification of our local real estate market. With more millennials buying this frees up the lower to mid-price range sellers to get their home sold and to then “move up” the home buying ladder. Move up buyers are another part of our market that we have sorely missed. If the $150K to $300K sellers can now sell, they can “move up” to the $300K to $500K price ranges. And then these sellers can move up or out, or whatever. This is all about a market getting “freed up” to do what it normally does in a healthy economy.
As we’ve mentioned before what’s good for sellers is not so good for buyers. This same lower to moderate price range is getting skimpier on inventory creating price increases, fewer buyer selections, with hyper buying activity.
More evidence? Well, on a personal level, millennial son and partner Jonathan had to offer on three homes before getting the home that he and Sarah just moved into. Jonathan then just sold a home to millennial friends Travis and Autumn who also experienced feverish activity in their home search before finally securing one last week.
All in all, we feel it’s a very healthy market for buyers and sellers and by all appearance it’s getting even stronger.
Although not great news for Phoenician buyers, sellers and prospective sellers of single family homes across the Valley can start their happy dance. For the monthly period ending April 15th, the Valley’s prices have moved up 2.1(% since March 15th. The new average sales price per SqFt is 133.49 averaged for all areas and types of housing across the MLS database, which is what we refer to as “the Valley.” Last month it measured $130.70. This is on top of a 1% increase from mid-February to mid-March.
Other indicators are also falling into line to bolster the continued strengthening of what might soon be a very active Seller’s market:
Current Listings: 22,574 One Month Ago: 22,934 (1% Drop)
Pending Listings: 8375 “ 8,048 (4% Increase)
Sales Per Month: 8368 “ 6655 (26% Increase)
Avg Market Time: 88 Days “ 95 Days (7% Drop)
Pending Sales PSF: $138* “ $134 (3% Increase)
Months of Supply: 3.3 “ 4.2 (21% Drop)
*PSF = Price Per SqFt
Based on a number of stats, including the Pending Sales price per SqFt, we can, with relative certainty see that the May report will have another bounce in values. Aside from the obvious negative buyer ramifications of rising values, further property increases will continue to release more homeowners to be able to sell who have still been underwater (home value less than mortgage debt).