by MICHAEL BODEEN | Jun 13, 2022 | Bodeen Team Blog, North Scottsdale Schools, Real Estate News
If you’re a Star Wars junkie, like my son and business partner, you might get a chuckle from today’s Snapshot Heading.
If not, then what I’m referring to today is that our Phoenix Metro real estate market is reversing course, cooling its (X-Wing Starfighter) jets from a rabid seller’s market to a potential state of normalcy. And it’s happening rapidly.
The Cromford Market Index, which measures the balance of supply and demand (defined as between 90-110) in our market, in the first week of January, stood at 474 – its peak for the year. Today, less than 6 months later, it has dropped to 237 – exactly by half! And our lightspeed (faster than the speed of light weirdly enough, per Wookieepeida), descent from the heights does not seem to be abating, least not yet.
And before I get myself into more Star Wars vernacular battles with Jonathan, I’d better pull up😉
In related news, the Phoenix Business Journal released an article today (link below) about the dramatic cost-of-living increase in the nation and Phoenix Metro. The cost-of-living index in the Valley has increased over 24% in the last 3 years, far out-pacing the national average of 9.76%. And nationally, as well as locally, the article stated that the “recent surge in gas prices wasn’t accounted for in the report.”
Honestly, there needs to be a retreat or sustained leveling off in housing prices, both rentals and purchases. Yes, as property owners we love to see our home-equity/net worth increase, but on the other side of the equation, buyers and renters could use a break.
“as property owners we love to see our home-equity/net worth increase, but on the other side of the equation, buyers and renters could use a break.”
Jonathan and I were discussing this matter last night, and both of us are concerned that Phoenix and Arizona are on a business growth path that has, and probably will continue to change the affordability landscape for years to come. What we’re seeing is the immensely high rate of growth in new business (e.g., TSMC) and start-ups, plus the growth of many existing businesses (e.g., Intel) throughout the region and state.
Of course, Phoenix and Arizona are not alone. This is a national problem. The highest cost of living increase in the country is Dayton, Ohio. And smaller cities such as Bozeman, MT and Cape Coral, FL, have some of the largest cost of living spikes as well.
But the cost of housing is at the center of our economic universe, and something’s got to give. Real estate balance would be a great place to start.
May that force be with us.
by MICHAEL BODEEN | May 23, 2022 | Bodeen Team Blog, Buying a Home, Featured Communities, Mike's "Real State" of the Market, Real Estate News
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?
by MICHAEL BODEEN | Apr 18, 2022 | Bodeen Team Blog, Buying a Home, Featured Communities, Mike's "Real State" of the Market, North Scottsdale News, Real Estate News
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.
by MICHAEL BODEEN | Apr 11, 2022 | Bodeen Team Blog, Buying a Home, Mike's "Real State" of the Market, North Scottsdale News, Real Estate News
March numbers are showing continued huge strength in appreciation, but also possible trends that could slow the market. First, the stats:
- Active Listings: 5,051 vs 4,088 last year – up 23.6% – and up 10.1% from 4,588 last month
- Under Contract Listings: 11,620 vs 12,575 last year – down 7.6% – and down 3.6% vs 12,050 last month
- Monthly Sales: 10,123 vs 10,398 last year – down 2.6% – but up 26.6% from 7,998 last month
- Monthly Average Sales Price per Sq. Ft.: $291 versus $232 last year – up 25% – and up 2.3% from $285 last month
- Monthly Median Sales Price: $456,000 versus $358,250 last year – up 27.3% – and up 2.5% from $445,000 last month
First, let’s look at our still hugely deficient listing inventory. Active (current) listings are up 24% (all numbers rounded) from one year ago and up 10% from last month – positive news for buyers! I’m not sure, however, how much help at this point this will be for our buyers, since mortgage rates are near 5%. Click here to read a great NPR article about it.
As expected, sales are slowing – somewhat. Under contract listings are down near 8% from last year, and down 3.6% from last month.
Sales spiked last month versus February, up near 27%, but have decreased versus last year by nearly 3%.
Crazy price increases continue. The monthly average sales price per square foot (PSF) is now at $291, compared with $232 just one year ago – a 25% rise. Of particular note is that the PSF is up from $285 just last month – a 2.3% rise. The Monthly Median has risen to $456,000 – a 27% increase from last year and up 2.5% from last month.
The huge bounce in mortgage rates these past few months (now near 5%) is combining with the higher priced inventory is eliminating MANY buyers from the market, especially the newbies. In fact, with all the purchases and owner refi’s over the past three years, there will be little incentive for homeowners to sell. There’s not much upside financially for them.
In fact, with all the purchases and owner refi’s over the past three years, there will be little incentive for homeowners to sell. There’s not much upside financially for them.
There also seems to be a possible turn in rentals. Rent prices are now decreasing, though not significantly. Average asking lease prices have fallen also, which is a leading indicator of closed rental prices.
Personally, I don’t see any major changes in pricing, either for sales or rentals. This was foreseen when we projected ahead of what the sales year has in store. We’re on the money regarding market slowing, but prices are still high. Is this a result of continued cash-buying investor groups?
Another story for another Monday!
Pray for Ukraine!
by MICHAEL BODEEN | Apr 4, 2022 | Bodeen Team Blog, Mike's "Real State" of the Market, Real Estate News
I love our chamber of commerce 85-degree temps. In April of 1994, my wife and I were asked to visit friends from the Truckee/Tahoe California area who had bought a home in Scottsdale. It also coincided with our 10-year wedding anniversary. We weighed the options: 25 degrees and snowing in Truckee, vs 80 degrees and sunny in Scottsdale. And they said, “Oh, and bring your swimsuit.” SOLD! We moved to Scottsdale later that same year.
Swapna Venugopal Ramaswamy, a USA Today writer, wrote an s an article in the Arizona Republic yesterday. This article’s title was “Lock in Mortgage Rate Now.” In the article the writer mentioned that rates were 4.2%, week ending March 17th. In just over two weeks, the rate jumped to almost 5%.
FYI: Today’s Mortgage Rates from NextAdvisor
Our advice? Even though the rates are near 5%, if you’re buying a home, yes, you should lock in the rate. Rates move according to long term risk. If you believe in the next few weeks/months that inflation will persist, then rates will probably not back down, and would continue higher. If the price of oil steadily drops, that would help lower inflation which would help lower rates.
The article mentions that now would be a good time to refinance. That would of course depend on what your current rate is. There’s a large cost to refi. I would be pretty surprised that someone’s rate would be at 5% or more and they had not already refinanced.
by MICHAEL BODEEN | Mar 21, 2022 | Bodeen Team Blog, Mike's "Real State" of the Market, Real Estate News
I haven’t seen any other articles about this yet, but the counter-intuitive conclusive message, at least now, seems to be getting clear: Global and national bad news, at least in Phoenix, Arizona, means home values continue spiking upward.
Some history:
Pricewise, in August of 2011, based on the Monthly Average Sales Price Per Square Foot, (PSF) the Phoenix Metro residential real estate market hit rock bottom – $79.00 PSF. This was a time which local veteran real state agents would just as soon forget. Foreclosures, Short Sales, abandoned homes, many displaced families, it was a nightmare.
But then, the market turned. Investors began buying homes traditionally and the through the foreclosure market, fixing and flipping, or fixing and renting. Gradually, neighborhoods began to change – for the better. Between that August 2011 bottom and February of 2020, the PSF rose to $185. This was a $106 PSF rise in 9 years, or $12.00 PSF per year average. If you had a 2000 SqFt home, your home appreciated $24,000 per year. Wow, a great time to own a home.
In February of 2020, the Covid 19 reality began hitting home. The local market screeched to a halt. In two months, the PSF dropped $7.00. Listing inventory rose by over 30% in one month! At this rate we would be soon seeing a return to a huge inventory of homes for sale. The pandemic increased intensity and hundreds of thousands of Americans were dying, not to mention the millions world-wide. The great and healthy 9-year real estate ride we homeowners were enjoying, was ending – at least that’s what we “experts” thought.
The great and healthy 9-year real estate ride we were all enjoying, was ending – at least that’s what we “experts” thought.
But then, inexplicably, unexplainably, incredulously, the market changed – again. We went from $180 PSF in May of 2020 to $296 in March of 2022 – in less than two years! That’s $116 PSF, or more than $58 PSF per year! That 2,000 SqFt home has now increased over $116,000 each of the last two years.
That was Covid-19. As this terrible pandemic has been winding down, we have a new war in the world with Russia and Ukraine spiraling up. It has World War potential. Oil, the still major global currency, has spiked, bringing with it inflation not seen in our country since the 80’s. Mortgage rates are also rising, now over 4%.
Are these new geo-political events halting the rise of local real estate values? No! Incredibly, prices are continuing to rise at a greater rate as is now being reported by the Cromford Report, the most accurate source of real estate statistical reporting in Arizona.
So here’s the scoop:
Per Cromford, last month, on February 15th, the closed sales PSF for the Phoenix Metro area for all types, namely single family detached, condo/townhome, etc., was $277. On March 15th, the closed sales PSF was $290 – an increase of 4.5% – in one month. That used to be Phoenix’s annual long term appreciation rate!
I’m not through. As of March 15th, the current average Pending Sales PSF is at $296. Based on current Pending PSF, Cromford is projecting a 4.4% rise for April 15th. If this happens, prices will have risen 9% in just 2 months, or an annual rate of 54%!
My conclusion? It seems simple enough. In the storms of life, people gravitate to what is solid and real. And recently at least, it seems like folks aren’t letting go.
