Patience Paying off for Phoenix Metro Buyers?

Patience Paying off for Phoenix Metro Buyers?

The first buyer benefit to be occurring amidst the current Phoenix Metro market adjustment is the number of homes rapidly coming on the market, hence, increasing inventory.

Another buyer benefit and market gauge we’ll be looking at a little more closely today are the number of downward price changes occurring in the market. But first the main sales numbers for the month of May:

  • Active Listings: 9,439 vs 4,917 last year – up 92.0% – and up 41.1% from 6,688 last month
  • Under Contract Listings: 10,249 vs 12,317 last year – down 16.7% – and down 5.9% from 10,880 last month
  • Monthly Sales: 8,729 vs 9,663 last year – down 9.7% – and down 6.1% from 9,295 last month
  • Monthly Average Sales Price per Sq. Ft.: $303.55 vs $248.81 last year – up 22.0% – and up 0.4% from $302.43 last month
  • Monthly Median Sales Price: $475,000 vs $390,000 last year – up 21.8% – and up 1.9% from $466,000 last month

Overall, the market is in full reverse.

First, the supply of homes for sale has risen 42% in just the last month and has almost doubled (92%) from one year ago. Next, sales have dropped almost 10% compared with May of 2021. Listings under contract (currently, the best current stat to observe) are down 6% from last month and 17% versus last year.

The highest lagging indicator, closed sales prices, continue to register amazing gains (hmm, those last two words sound like that great ole hymn but I shall refrain from inserting new lyrics😉). The monthly average sales price per square foot has increased 22% from one year ago and 0.4% from last month – quite substantial still! The monthly median sales price is creeping towards a half million and is currently at $475,000 – a 21.9% gain from last year’s median of $390,000 and almost 2% higher than last month, which was $466,000.

Sellers are now strongly responding to our moving market. Price cuts are now happening at an increasing rate. Last week alone, 1764 properties changed price with a median reduction of $11,000. This is a significant sign of seller determination to get ahead of our changing market. The last week that we’ve had as many price changes was November of 2019.

The great unknown is whether this is a short-lived cycle. The recent substantial rise of mortgage rates in a two-month period is without question bolstering inventory. The buyer window for increasing their home choices may (will?) only last as long as rates remain higher. If inflation begins to cool (note “if”) rates will drop and the fever to jump back into buying will strongly increase, bringing back many multiple offers, and the rise of prices.

So, I believe we’re in a window of opportunity for buyers. If they can swing it and can find that “right” home. Gopherit!

Has the Scottsdale Area Entered the Next Industry Contraction?

Has the Scottsdale Area Entered the Next Industry Contraction?

I am a blessed man, and how well I know it! I found (fell into) a career in my very early 20’s that I have enjoyed immensely. For sure, it’s had its ups and downs. In fact when Karen and I were married, I had stepped out of real estate for a 9 month period and was never going to go back into commission sales again – EVER! Why? Because I couldn’t make a sale to save my soul. It was a period of sky-high mortgage rates, around 14%, which had come down from a record 18.45% in 1981.

The only way I got back into real estate was because a kind man named Glen Chileski hired me to manage ERA Truckee Tahoe Realty and put me on a salary, with commissions, and overrides. I owe that man a debt of huge magnitude. I got to work in a business that was different every day of the year, presenting numerous challenges, interacting with vastly different people, and it provided for my family.

But oh, the ebb and flow!

A wise King once said, “That which has been is that which will be, and that which has been done is that which will be done. So, there is nothing new under the sun.”

King Solomon could have been talking about modern day stock or real estate markets – particularly now as it relates to the changing housing market and the

numerous career changes that are and will be unfolding in the months ahead.

“Realtor contraction will happen also. It always does when change happens in the industry. I witnessed many leave the business when MLS computerization entered the real estate marketplace in the 80’s taking the place of our beloved real estate books.”

Beginning in 2007, millions of folks lost their job in the Great Recession when we experienced the bursting of the housing bubble. In the years that followed, tens of thousands of foreclosures were happening each year. We Realtors were surviving on doing “short sales.” In all my history of working in this industry, that was the bleakest. Right and left, friends and neighbors were losing their homes. Thousands of Realtors threw in the career towel during that distressing market.

And what of the present? We’re beginning to see large scale layoffs in the mortgage industry as thousands of jobs are being eliminated as new purchase mortgages and refinances fall off the table due to the rising mortgage rates that now exceed 5%. (That last sentence -5%- blows my mind)

Realtor contraction will happen also. It always does when change happens in the industry. I witnessed many leave the business when MLS computerization entered the real estate marketplace in the 80’s taking the place of our beloved real estate books. Now, with low inventory, huge corporate investors buying up homes for rentals, sales are dropping. The reduction of first time and move-up buyers due to higher rates doesn’t help either

The next wave of change is now happening. There is nothing new under the sun! Not even our hot Scottsdale sun!

 

Scottsdale and Phoenix Sellers Jumping on the Bandwagon?

Scottsdale and Phoenix Sellers Jumping on the Bandwagon?

It’s in our nature. We want to buy low and sell high. “Timing the Market” is certainly on the lips of lots of stock market pundits these days – and is now a part of the residential real estate discussion, both locally here in Scottsdale and Phoenix, and nationally.

Questions abound: Has our market peaked? If not, when will it? If I’m buying, should I buy now or wait for more supply and lower prices? Will mortgage rates continue rising or will they decrease, or at least stabilize? Open the envelope, please. (Just kidding😉)

What we do know, is that sales prices are continuing to rise (market lag) and will do so for a number of (unknown) months until homes take longer to sell (now happening), and asking prices begin to drop (now happening).

The good news for buyers, is that supply is increasing – rabidly and rapidly. Active supply has increased 71% over the same time last year (as of May 21st). And per the Cromford report, it has increased 45% in just the past 30 days, though still historically low

What is most interesting is that, again, per Cromford, it’s “not coming from a massive flood of new listings hitting the market. New listings are at normal levels, and not excessive, but fast rising mortgage rates and fewer sales have reduced the number of accepted contracts.” If sellers want to hit the peak of the market, now may be the time to sell, but as has been questioned by Mike’s Market Snapshot ad nauseum in the past months, “THEN what are you gonna do?”

“If you can afford it, be on the lookout to find the right home that you will enjoy living in day after day. And if you find it, go for it. After all, isn’t a home’s enjoyment the right investment strategy?”

With massive untold millions of homeowners having sub-3% mortgage rates, why would they want to sell and step up to 5.5% current rates, unless their existing situation mandates they sell, such as relocation out of the Valley, or regular ole life issues of births and deaths. This could include us aging boomers going into assisted living, and/or investors wanting to sell at the top of the market. The latter would not appear to be much in play however, as right now, investors are reaping the whirlwind of the highest rental returns ever.

And to buyers, my advice remains: If you can afford it, be on the lookout to find the right home that you will enjoy living in day after day. And if you find it, go for it. After all, isn’t a home’s enjoyment the right investment strategy?

 

As the Market Turns – Real Estate Changes Occurring Now in Scottsdale and Phoenix

As the Market Turns – Real Estate Changes Occurring Now in Scottsdale and Phoenix

It’s happening folks, right before our eyes. The market is changing, umm, cooling. But before we go there, we’ll report on April’s sales numbers:

  • Active Listings: 6,688 versus 5,080 last year – up 31.7% – and up 32.4% from 5,051 last month
  • Under Contract Listings: 10,889 versus 12,187 last year – down 10.7% – and down 6.3% from 11,620 last month
  • Monthly Sales: 9,270 versus 10,200 last year – down 9.1% – and down 8.6% from 10,144 last month
  • Monthly Average Sales Price per Sq. Ft.: $302.64 versus $243.36 last year – up 24.4% – and up 4.1% from $290.75 last month
  • Monthly Median Sales Price: $466,000 vs $373,000 last year – up 24.9% – and up 2.3% from $456,000 last month

As you can see, the numbers continue to change favoring buyers. Listings are up over 32% in just the last month. Under contract listings are down compared to last year AND last month. Sales are down 9% from last year, and almost 9% since last month. And in one of the few owner bright spots, sales prices, the lagging indicators, are up 24% versus last year, and, get this, over 4% from just last month.

For a few more months perhaps, we will continue to read of increasing sales prices, as sales are closing higher due to existing pending sales in the past weeks. But soon enough, if the current trend continues (and it will), inventory will continue to increase providing buyers with many more choices and less competition. Alas, we could well be on our way to a more normal market – a novel Phoenician thought, for sure.

But soon enough, if the current trend continues (and it will), inventory will continue to increase providing buyers with many more choices and less competition.

But then there are the investors. What’s up their sleeves?

Real estate investors can be pretty savvy. The successful ones understand market dynamics. They know “when to hold em, and when to fold em.” Today’s large scale investors, like the huge behemoths in the stock market, can often determine (manipulate?) direction for an entire market.

Since mortgage rates have escalated to over 5.5% recently, the regular mom and pop market, including first time homebuyers and move-up homebuyers, is slowing.

So, how are investors reacting to the market? Or asked another way, what should a shrewd investor be looking to do?

The current Phoenician investor, in my opinion, unlike stock market sellers, will be pulling back on purchases, but not liquidation. If buyers aren’t buying, they’re renting. The rental market will not be slowing until (if and when) new home construction, apartments, etc catches up to the demand. This could then further slow the sales market. Investors will wait and only look for the best buys that are out there – and they could have plenty to choose from.

Softness Beginning in the Phoenix and Scottsdale Rental Market?

Softness Beginning in the Phoenix and Scottsdale Rental Market?

We knew it was bound to happen, the question was when? It’s looking like the when is now! The rental market is showing signs of slow-down. If we compare our rental market with 2021 at this time, we see the following supply changes occurring as reported by the Cromford Report:

  • single-family detached actives have increased by 99%
  • apartment actives have increased by 69%
  • townhouse actives have increased by 15%

Single-family detached (SFD) rentals are in much greater supply in 2022 and are currently 71% of all rental listings in the Arizona Regional MLS (ARMLS). At the same point in 2021 they were only 51% of rental listings. (Caveat: The ARMLS numbers represented here are not the entire market, however they do provide a fairly accurate picture of the whole market)

Cromford is also seeing the average asking price for single family detached rentals drop in the last year where the SFD is now averaging $1.61 per square foot (PSF). It was $1.97 this time last year having peaked at $2.09 per month previously.

Apartment average rents are currently at $2.16 PSF per month. For all types of condos, townhomes, and apartments (attached), the average asking price is currently $2.02 PSF per month. It was $1.90 this time last year.

Interestingly, the drop in rental prices is NOT happening to townhomes. In fact they have been increasing. They also remain in short supply. Apartment rents have also increased but supply is much better than a year ago. The appeal of townhomes for renters and investors is due to a at least a few factors:

  • Townhomes are attached like condos and apartments, but often with just 2-4 units being attached providing better privacy – more or less.
  • Many townhomes provide garages. Condos and apartments not so much.
  • Town home communities are more often gated

The big changes are in single-family rentals where supply has doubled over twelve months and the average rent asked has declined by 18%. SFD’s are actually less expensive to rent PSF, so if a prospective renter needs more space, they will get more for the money with an SFD.

Currently there is a large number of attached homes being built in Phoenix Metro. There is always a danger of overbuilding and we’ve certainly seen that in our past. Developers are no doubt seriously eyeing our market to discern future expansion (or not).

So today, while it’s still called today, there is market movement favoring renters. Now if the same thing could only be said for our first time home-buyers.

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