The Phoenix Metro residential real estate market continues to slog along…supposedly. What’s interesting is that when we compare now with the past few years, the pace of the market has slowed because there are a lot less sales. Why are there a lot less sales? The main difference is that the investor gold rush has slowed. Now that the investor market has cooled its jets, what we’re left with is a “traditional” market.
So what does our traditional market look like? Fewer sales. Longer market times. Conservative annual appreciation rates. Oh, you mean like most of the rest of the country? As I’ve mentioned many times in the past, what most often has described the Phoenix and Scottsdale real estate market is radical, frenzied, hurried. Adjectives such as conservative, moderate, and subdued have seldom described this market, but this is where we currently find ourselves.
Much of the rest of the country is also in a lull and many cities are experiencing decreasing prices. We are currently through our 24 month price run up, and now in moderation mode, but NOT decreasing in value, in fact still slightly increasing.
The good news for Sellers is that even though demand has remained low over the last 6 months, creating a mild buyer’s market, the supply is quickly shrinking. Even in just the last 30 days we have seen a dramatic decrease in the amount of homes available. As I’ll explain more below, this is mainly due to a lack of new listings, probably sellers reticent to try selling in the recent buyer’s market. As a result, we are back in the balanced zone, though probably not for long. This is Arizona after all.
NEW PHOENIX-METRO LISTINGS AT 14 YEAR LOW
In a recent analysis of new listings hitting our market, Michael Orr of ASU and the Cromford Report has compared the first two weeks of July 2014, to the same two weeks for each of the previous 14 years going back to 2001, and states that new listings are at their “lowest” point since then. July 2014 registered 3568 new listings. When compared to previous years, the next lowest listing total was 4027 back in 2012. In 2001, for example, there were 4021 new listings. The high point of 6651 new listings was in 2006. So, if you’ve been considering selling your home, now might be an opportune time.
CANADIANS LOVE ARIZONA REAL ESTATE – CHINESE? NOT SO MUCH!
We’ve long known that Canadians love to buy real estate in Arizona. For a while last year, Canadians were the largest out of state buyers even surpassing Californians. With the booming economy of China, some have wondered if the Chinese will commence a buying spree in Arizona. Well, according to the National Association of Realtors, that is not likely in the near future. I quote from NAR:
There is little to no evidence of a large amount of buying from China in Arizona. It seems from all the evidence that the Chinese, many of whom are wealthy people looking to diversify where they keep their assets, are focused on the most expensive places to find housing, namely the fashionable areas of California. The median price paid by a Chinese buyer, according to NAR, is $523,148 for the
period April 2013 to March 2014. This is far higher than the buyers from other major countries and more than double the median for Canadians which was $212,500. When it comes to the Chinese buyer, our affordability seems to be a disadvantage. Canadians, however, appreciate a bargain and also our overdoses of sunshine.
2013 PROFILES OF HOME BUYERS AND SELLERS
So what do we know about the Buyers and Sellers of 2013? Who’s bought? How old were they? How much money did they make? What was the typical size of their home purchased? These and a multitude of other data are available to Realtors who opt to purchase it. Some of the findings include:
Characteristics of Home Buyers
– Typical buyer was 42 years old; 31 for the first time home buyer, and 52 for the repeat buyer
– 2012 Median income of buyers was $83,300. $64,400 for First Timers. $96,000 for repeats
– 66% of Home Buyers were married couples. The highest share since 2001
– Typical home purchased was 1900 SqFt in size, was built in 1992, and had 3 Bedrooms and 2 Baths
– 80% of home buyers purchased a detached single-family home
– 14% of recent buyers over the age of 50 bought a home in senior related housing
The Home Search Process
– The first step for 42% of Home Buyers was to look online for properties
– 14% looked online for information about the Home Buying Process
– The overall use of the internet for the buyer’s home search rose to 92% from last year
– The typical home buyer searched for 12 weeks and viewed 10 homes
– For more than half of buyers finding the right house was the most difficult step in the process
Home Sellers and Their Selling Experience
– Almost half of home sellers traded up to a larger size and higher priced home
– The typical seller has lived in their home for nine years, up from six years in 2007
– 88% of sellers were assisted by a real estate agent
– Recent sellers sold their homes for 97% of listed price. 47% reported they reduced the price at least once
– 13% of recent sellers had to delay selling due to their home’s value being less than their mortgage
A very special thanks to those of you who have recommended or referred me to others to help them in the home buying or selling process. Referrals are truly the lifeblood of our business and are the highest compliment we can receive. I personally meet with the client and handle their business. Jon handles the administrative, marketing, and follow through for which I’m grateful. It frees me up to do what I do best, which is to accomplish our client’s goals!
So, if you know of someone considering whether or not to make a real estate move, please let me know, or give them my direct line. I’d love the opportunity to help them anyway I can. 602-689-3100.
In updating one of our websites, NorthScottsdale.com, we have come to find that there has been a bunch of accolades recently lavished on Scottsdale that I’m guessing most people aren’t aware of. Even I wasn’t aware of them all. Pretty heady stuff. Let’s look at some of them:
- Scottsdale ranked No. 1 place to raise children, according to a study published in early June 2014 by MyLife.com. Cities were judged using five criteria: crime rate, public school rating, public parks per capita, average family salary and cost of living.
- Scottsdale ranked No. 6 safest city in America (out of 100 most populous cities) by Movoto.com. This study is ranked on per capita statistics relating to property crime, violent crime and the chance of being a victim of crime. In all of 2012, Scottsdale only had one murder and just 147 violent crimes making it on the safest big cities in America.
- Scottsdale earned the No. 6 spot on 24/7 Wall St.’s “Best Run Cities in America.” To determine the performance of the nation’s largest cities, 24/7 Wall St. reviewed the 100 largest U.S. cities by population and considered a variety of factors, including the area’s economy, job market, crime level, and welfare of the population.
- Top Ten Tech Savvy City: The Center for Digital Government recently honored Scottsdale as a top 10 tech-savvy city for using technology to eliminate waste, enhance service levels, improve transparency and engage with citizens in the digital world.
- Scottsdale named one of Top 100 Best Places to Live – Livability.com, a national website that ranks quality of life in America’s small and mid-sized cities, has named Scottsdale one of the Top 100 Best Places to Live. Scottsdale, touted for education and amenities, ranked No. 89 on the list. It is one of only two Arizona cities named to the list. The other is Tempe. 1,700 U.S. cities were considered and the factors that make them the best places to live, work and play.
- Google honors Scottsdale as Arizona’s 2013 “eCity”
Scottsdale recently captured the 2013 eCity Award from Google, an honor that recognizes the strongest online business community in each state. Google said, “The businesses in these communities are embracing the web to find new customers, connect with existing clients and fuel their local economies. Scottsdale joins the ranks of America’s leading cities in the digital economy.” For more information, visitwww.google.com/ecities
- Scottsdale ranks in top 20 of “America’s Thriving Cities”
The Daily Beast ranks Scottsdale 15th on a list of “America’s Thriving Cities.” To find the country’s top 20 thriving cities, the news reporting and opinion website looked at the 100 largest cities in the United States and compared them in various categories including: population growth; employment and earnings; market strength; infrastructure; and intellectual capital.
- Scottsdale ranks No. 1 spot for retirees
MSN Money named Scottsdale the No. 1 city to retire in. Here’s what it had to say, “The city packing the heaviest post-65 punch in America sits just off the northeastern fringe of Phoenix, luring newcomers — or retaining longtime locals — with plenty of play and rays. The biggest attraction is the weather (and) just how pleasant it is here.”
- Scottsdale recognized for top innovative green initiatives
NerdWallet, a San Francisco-based consumer advocacy website, recently featured Scottsdale as a top city for innovative green initiatives. The website applauded Scottsdale for protecting natural areas like the McDowell Sonoran Preserve, incorporating multiuse paths, and using compressed natural gas trucks, solar power to generate electricity and energy-efficient LED light fixtures.
The Cromford Report provides us with very interesting and timely reports regarding the local sales and rental market – as always. It’s our goal to pass on this information to our clients. Whether you’re a landlord, tenant, prospective buyer, or seller, this news today should be of interest.
One of Michael Orr’s (founder of Cromford) most recent reports deals with the effect that the low supply and high demand for rental housing is currently forcing rent prices up. Overall rates for closed leases, he reports, are currently averaging 74.7 cents per SqFt over the past month. In 2013 for the exact same time of the year, the rental rates were 69.6 cents. This is an annual increase of 7.3%.
Active lease listings, which Orr says are skewed towards expensive homes because they stay active longer than cheaper ones is 86.4 cents. Last year it was 81.2 cents – an annual increase of 6.4%.
We knew that rent price increases were going to start happening considering that many prospective home buyers who are currently renters and who would normally be in the buying mode, are choosing to remain renters. Also, many who are renting are still doing so because they cannot qualify for a home loan due to poor credit from foreclosure, short sales or bankruptcies.
As long as rental supply remains low and demand high, consistent rent increases will continue. So not only will renters pay more, but will have less choice in the amount of inventory. With 30 year mortgage rates in the low 4% range, it makes a lot of sense for some to look at the buying market.
And remember, Jon and I are NACA certified to help you get that amazing low rate (high 3% range), with no down payment, no closing costs, and no mortgage insurance too. Just give us a call at 602-689-3100 to get started.
You may recall that a recent blog discussed a home we have in escrow in the Desert Hills area of North Phoenix and that the VA (buyer’s lender) wanted a passing water quality test because it’s a private well. Well, (pun intended) we didn’t get the passing grade as this home had elevated arsenic levels. Come to find out that this was not uncommon in the North Phoenix areas serviced by private wells.
We then proceeded to find a company who could install a water purification system (Reverse Osmosis) that would reduce the arsenic to acceptable EPA levels. The problem was compounded when the buyer wanted to have the whole house treated, which could have cost tens of thousands of dollars, effectively killing the deal.
Further frustration ensued for us because no one from the buyer’s end was helping him to be reasonable. We couldn’t talk to the selling agents as this company’s system only allows for other Realtors (that would be me) to talk to the Transaction Manager, not the Realtors. This was a so called “Realtor Efficiency.”
So what did we do? I suggested that I and the Transaction Manager talk to the buyer directly on a conference call. This we did. I recommended that the buyer speak directly with the water company rep that I had spoken with so that the buyer would have confidence that by having one unit under his kitchen sink would provide him with excellent drinking water protection. He took our advice and contacted the rep and the rep was able to convince him that this was indeed the case. There were several companies that had R.O. systems that could likewise solve the problem, but in the end the buyer’s comfort level was with Kinetico’s brand.
So, did the deal finally get done? Well, the short answer is that the deal is ALMOST done, as we close on the 7th of July (sometime today), but the arsenic in the well water issue has been solved to the satisfaction of all parties.
With the sluggish Single Family (SF) market currently in place in the Phoenix Metro area, builders have slowed on SF construction and instead have been focusing on the Multi-Family market.
Michael Orr’s Cromford Report quotes the following:
“Multi-family permits were strong again in May 2014 with a total of 757 units for Maricopa and Pinal Counties. The permit numbers were confined to the 3 cities of Phoenix, Scottsdale and Tempe. The count of 757 is lower than the previous 3 months but the annual average has increased to 6,992 units. This is well up from the 4,792 we saw in May 2013. The “Blue Chip” consensus forecast for multi-family permits is currently 6,172, up from 5,906 three months ago. This is still looking too low and a 2014 total over 7,000 appears increasingly likely.
Phoenix (2,648), Scottsdale (1,933) and Tempe (1,698) are responsible for 6,279 (90%) of the total of 6,992 multi-family units permitted over the last 12 months. Chandler (446) is the only other city with a significant number of permits. All the other cities and county areas contributed less than 4% of the total.
Permits are reflecting a strong swing towards rental units and away from homes to purchase. This is also happening in the rest of the market so is unsurprising. The unknown question is how long this trend will continue.”
We’re seeing another market correction that attempts to fill the vacuum caused by the consequences of our hot rental/slow resale market. Rents will continue to increase, which landlords are thrilled about and renters not so much. This often gets the resale market in gear when people can actually see that home ownership is more cost effective than renting.
On that note, due to the continued sluggish economy, mortgage rates have been dropping again, now down in the low 4% range for the typical 30 year fixed rate product.
OK you number junkies, check this out!
Now, I can’t swear to it exactly, but I would have to say (nay, repeat) that the Phoenix Metro area has some, if not the best real estate reporting in the nation from a variety of credible and intelligent – and dare I add, accurate, sources. And these sources are mostly from the private sector including our own Arizona Republic, ASU School of Real Estate and Business including Michael Orr’s Cromford Report. There is really no excuse for anyone, least of all Realtors, to not be on top of what’s happening in the local real estate numbers game. The key for Professionals is to be able to honestly cherry pick this information for our clients in a quick and painless way so that you “catch the drift” of what’s happening in our market.
There is really no excuse for anyone, least of all Realtors,
to not be on top of what’s happening in the local real estate market.
Why is this important you ask? If you can have the best available information on any given matter, you can (should) proceed wisely to make decisions, or certainly to help point others to an honest and credible source for this direction. An example would be in our current Phoenix Metro area market, that has continued to slow since last August – some have used the word “stalled.”
The Full report is available on our weekly blog which goes out every Monday morning. We call it “Mike’s Monday Morning Market Snapshot.”
In a Nutshell, Here are the Highlights of the data for Phoenix Metro:
1) Monthly Sales are down 21% from this time last year
2) Total inventory of homes for sale is up 46% from last year
3) 3.90 Month Supply of Available Homes for Sale – No change from last month
4) Average sales price up 4% over last year. Median sales price up 9.7% year over year
5) Median Sales Price Forecast from Pending Price Index for next month: No change.
6) Foreclosures Pending: Down 49% from one year ago
7) Average Days on Market: 83 vs. 66 last year
8) Purchase Applications: Phoenix ranks 38th out of 50 states for new loan applications. (Note: Michael Orr stated, “We have just seen the highest percentage of sales ﬁnanced by loans since November 2008.”