Besides some recent evidence that Millennial buyers are moving off the buying sidelines onto the real estate playing field, another block of mostly idled buyers, known as MUBs, (Move-Up-Buyers) may now be suiting up to play as well. If so, our market will continue to heat up – even more.
MUBs will be a large number of new buyers that will fill in the buying blanks of higher price ranges above those of the millennials who would typically be buying in the more affordable lower price ranges.
MUBs have been mostly inactive due to a foreclosure or short sale or not having enough equity in their home to close the sale without having to write a check. A rising market and improved credit are enabling this new freedom. As mentioned in past blogs these previous homeowners get released from the “penalty box” starting this year and will continue for an additional 2-3 years following 2015.
Importantly also is the current willingness of sellers to accept offers from buyers “contingent” on the sale of their existing home. You can thank a healthy and normalized market for that.
How do we know this is happening? Take a look at Michael Orr’s (ASU) recent Cromford Report chart comparing normal non-distressed sales under contract today (April 13th) compared with the same date last year in 2014. We can see where demand is highest:
Interesting enough the lower ranges are down, but this is due to lack of inventory. Under contract homes from $150,000 to $600,000 pricing have enormously increased. The $300,000 to $600,000 (move up range) and even the $600,000 to $1,000,000 range all are experiencing double digit increases. And the market with the largest increase? Amazingly it’s over $3 Million.
For sellers, the good news continues. For buyers, the prices you see today, will be soon changing upwards. And if that happens, you’ll have the MUB’s to thank – or curse.
Son and business partner, Jonathan got his first live taste on the state of the buyer’s market out there making an offer on he and Sarah’s first home. He is one of those millennials that will practice what we’ve been preaching which is to get off the sidelines and start looking. You’ll have to tune in later to find the outcome, but suffice to say, the house they made an offer on within two days had two other offers on it. He’s learning first-hand about multiple offers and buying strategy. Oh yea, and home buying emotions.
…regular home buyers are leading the surge rather than investors. This may yet change, but currently it’s a stronger and safer market.
Considering what’s happening in the market-place, it’s no surprise. As we’ve been suggesting for several months and likewise advocating for buyers longer than that, buyer’s need to take action if they want in on the current bottom of the market, for it is moving forward and upward.
Consider These Market Stats:
- Active Listings: 19,835 versus 23,096 last year – down 14.1% – and down 6.0% from 21,103 last month
- Under Contract Listings: 10,039 versus 8,173 last year – up 22.8% – and up 16.4% from 8,628 last month
- Monthly Sales: 7,174 versus 5,825 last year – up 23.2% – and up 38.8% from 5,170 last month
- Monthly Average Sales Price per Sq. Ft.: $134.78 versus $135.18 last year – down 0.3% – but up 0.6% from $134.04 last month (Prospective Buyers, memorize this number)
- Monthly Median Sales Price: $207,000 versus $198,050 last year – up 4.5% – and up 2.0% from $203,000 last month (Prospective Buyers, memorize this number). (Thanks to Michael Orr of ASU and the Cromford Report for these timely numbers)
You’ll note our highlighted instruction above for buyers to memorize the Monthly Average Sales Price per square foot and Monthly Median Sales Price. I think these numbers will be a new price appreciation benchmark, as they will begin to rise considerably shortly due to increasing sales, (demand) and further supply decrease. Another Caveat Emptor (Buyer Beware).
What’s so healthy about this market versus our frenetic market in 2005, is that right now, regular home buyers are leading the surge rather than investors. This may yet change, but currently it’s a stronger and safer market. Amen to that!
Oh and by the way buyers, the standard 30 year fixed rate mortgage, has just dropped to a two year low at 3.71%.
First things first, we welcome a new team member, Barbara Anderson, to the Bodeen Team and the HomeSmart Elite group. Though new to our group, Barb is not a novice to real estate. She is however getting back into the game after a prolonged absence in the education field. Barb and hubby Bruce just celebrated their 44th wedding anniversary.
Barb joined us yesterday for her first HomeSmart Elite monthly meeting. It was indeed timely as our keynote speaker, Director Michael Orr of ASU’s W.P. Carey School of Business presented the Elite Group with encouraging homeowner data and trends indicating that change is already afoot in our local real estate market. You will be hearing about this starting now in the local news.
The Bodeen Team subscribes to Mr. Orr’s market data which we view in real-time each day. Our subscription grants us permission to reproduce his information to you. I would say that there are few, if any entities in the country that have the amazing statistical data that Orr does. He starts each meeting with the caveat that his background is mathematics, and his passion is real estate trends and numbers.
And I should clarify that the news was positive for homeowners but not so much for buyers who are still on the sidelines, unless they decide to become a homeowner sooner rather than later. That to me was the important take-away from this meeting yesterday.
Michael provided us with a whimsical chart (see below) showing us his “Market Cycles.” As you can see, he believes we are re-entering a period of “Optimism” which last occurred 12 years ago in 2003. This period historically preceded the Three E’s: Enthusiasm, Exhilaration, Euphoria. This is when sales and appreciation happened at dizzying intensity. It was an exciting time, but it wasn’t fun.
Another very interesting chart shows the annual rate for U.S. Household Formation. According to this chart, the number of newly formed households radically spiked in the last quarter of 2014. This, among other issues (see Summary below) could create huge demand.
There are a number of reasons why Orr is so Seller Bullish
- Supply is well below normal (83% of normal)
- Demand is low but growing (95% of normal)
- AZ loan delinquency below normal at 4.5%
- Foreclosures below long term average
- Lending rules starting to loosen
- Entry market heating up
- High end market cooling down
- Economy and jobs continue to improve
- Time to change from relief to optimism
He also didn’t see any slowdown for single family detached rental demand as he points out that we have only a 25 day amount of rental inventory available. And, he adds, is in the higher priced end. The supply for home rentals priced between $900 and $1200 per month is down 50% from a year ago.
So there we have it. In the words first memorialized in song by Bob Dylan, ‘The times they are a changin.’ Hang on.
Few things in modern life can be as frustrating as having a home on the sales market week after week and month after month without it selling. We are currently in a real estate market that’s neither hot nor cold, but bordering on a buyer’s market. The average market time for a Phoenix Metro area single family detached home that has not sold is 134 days.
In Part 1 of our home sales series, we discussed the importance of timing the listing to go on the market. We made mention that timing may be different based on the type and location of the neighborhood and the amount of buyers that are typically drawn to it.
Last week we learned that correct home pricing trumps all marketing and home preparation. This week we will learn the importance of condition and staging to get the best selling price in the shortest amount of time possible.
There are many good articles and HGTV programming that extol the benefits of staging a home to sell. Indeed many companies and services have sprouted in the past 10 years for just this purpose. How needful, how helpful is it to have your home staged? Much, but it may not be as difficult as you think.
In my 35 PLUS years of experience I can boil down staging advice to a half dozen “its” in the order of importance.
1) Clear it.
2) Clean it.
3) Fix it.
4) Lighten it.
5) Appeal it.
6) Stage it.
1) Clear it: We are a nation of stuffers. Ideally, this step should be taken well in advance of your listing period. One of the (albeit few) advantages of moving is the golden opportunity to get rid of stuff. E-Bay or relatives for the good stuff, Garage sales or Goodwill for the rest. If you’re selling everything, you may want to consider going the “estate sale” route. You won’t make a ton of money but you get rid of everything in one fell swoop. And there is a lot to say for that. With a few exceptions, remove all clutter including family photos and wall posters. Clean and organize closets. Pack everything you’re not using. You’ll have to pack it soon anyway.
2) Clean it: If you’re not one that knows how to or wants to thoroughly clean a home, hire a professional to clean all the nooks and crannies. Believe me, people notice, appreciate, and mention cleanliness when they see it. Make the kitchen, bathrooms, and hard surfaced floors shine. Find and eliminate all odors. Ask someone who doesn’t live in the home to give it their nose test. We’re too use to these smells but someone from the outside will notice. If there are pet or smoking odors, get rid of them, even if you have to remove and replace carpet and pad. As the old commercial puts it, “You can pay me now or pay me later. In experience, strong negative odors will prevent, or at best delay, a home sale. Some buyers will ask to leave right away. What about odor masking such as scented candles? It may help, but it’s not the best. Masking is often a red flag for people to wonder what the sellers are hiding. Some owners have loaned out their pets to friends or family members while the home is on the market. And clean the windows – yes, inside and out! The bottom line is that many buyers will judge the condition of your whole house by its cleanliness.
3) Fix it: The Arizona residential purchase contracts stipulate that all the mechanicals (moving components) be in working condition prior to close of escrow. Plumbing (including leaks), electrical, appliances, heating and AC, and pool cleaning apparatus needs to be repaired if not in working order. Replace all burnt out bulbs and make sure the doorbell is operative. Repair any fences/gates and give them a fresh coat of paint or stain if necessary. Though not a requirement in the contract, having a roof that’s in good order is a huge help come inspection time. Replace any cracked windows or broken screens. Repair caulking in tubs and showers.
4) Lighten it: Natural light is a huge feature in a home. Whatever we can do to increase it, will help our sales efforts. Often times it’s as simple as having window coverings open. Painting walls can have the dual benefit of a positive fresh scent and lightening up a dark room. And always have lights on when the home is being shown.
5) Appeal it: Curb appeal is talked about a lot by us Realtors, and for very good reason. It helps us get potential buyers into your home and you can’t sell your home unless buyers take the time to go see it! Many buyers do “drive-byes” and if a house looks great from the outside, there’s a good chance they will want to go see it – and vice versa. All buyers typically view online photos and the quality of those photos is perhaps the most important reason why a buyer may or may not see a home. So a fresh coat of exterior paint, always trimmed and mowed lawns, and a clean yard will help bring those buyers into your home. Make sure all debris, toys and lawn equipment are removed. Trim shrubs and eliminate dead trees and branches.
6) Stage it: The tough part is already done including, clearing, cleaning, painting, fixing. Now the question, should we stage it? Maybe yes, maybe no. This is where a Realtor professional’s experience can be a big time help. Once all the above has occurred, you may not need to stage, but in most cases some staging advice is important. We provide the services of a professional interior designer who literally goes room to room suggesting what can be done to enhance the show-appeal. She may recommend painting (and which colors to use), item removal, cleaning if necessary, and item addition (if important). (In this staging section, it may be possible that your home could benefit by doing some updating, which falls under remodeling. This is an entirely separate issue and article that we’ll address soon)
Bottom line? Prepare well and your home will sell well!
In last week’s blog, we discussed the importance of timing the listing to go on the market. We made mention that timing may be different based on the type and location of the neighborhood and the amount of buyers that are typically drawn to it.
This week we want to look at the MOST IMPORTANT part of the property listing. Pricing.
Without argument, the most important part of the home sale process is the home’s pricing. As important as timing, staging, and property conditioning are, they will not trump bad pricing. One of the most important responsibilities of the Realtor professional is to provide an accurate market analysis of the property’s value. The other part of this equation is the seller being on board with the right price. Trust in your Realtor professional’s price opinion will go a long way toward a successful and timely transaction.
In determining the right listing price, the Realtor professional needs to show the homeowner not only the neighborhood comparable sales during the past six months, but also the current “Pendings” and “Actives.” If the market is feverish (either rising or falling) then sales should only go back 3 months. If it’s a slow, plodding market, with little price change, we can look at sales longer than 6 months, but lenders may not.
Why do we look at Pendings and Actives? Well, for one, Appraisers look at them, because lenders want to know what’s going on in the overall market. Pending sales can be the MOST accurate gauge of CURRENT sales activity and values, but since they may not close and we may not know the closing price yet, best practices would dictate using only closed sales.
Active listings are used to help determine the competition. If for example a similar floorplan has been for sale for 6 months and has not sold, we will want to compare that listing with our listing to ask why hasn’t this listing sold? Usually, nothing less than a phone call to this other Realtor is in order. This is where Realtor experience and savvy could be the difference in getting top dollars.
So now comes the time for structuring the listed price. If the recent comparable sales dictate a $375,000 sales price, should you price it at $375K? This is where knowing the current market trends is key. In a normal market we would probably advise a price slightly about 3% above the sold pricing. In a slumping market, we would probably want to price it no higher than comps. And vice versa in a strong appreciating market, pricing slightly more than that may be in order. Either way, if we have priced the property correctly, we’re pretty much assured that a sale won’t get “kicked out” of escrow down the line by the buyer’s lender but will close as scheduled.
And in the end, closing is the goal right?
Next week, we will look at what should take place in property preparing the home for sale.
The holidays are over and you’ve sworn you’ll never have ALL the family over for Christmas dinner again, at least not uncle, “Lampshade” Louie. Discussion has once again turned to, “Should we put the house on the market?”
The all too common spousal back and forth banter takes place, but this time, you’re both in agreement. Though we may love it, we’re going to list it!
But when? Is there a best time to put the house on the market? Or does it even matter? Important question. Unfortunately sometimes there’s no choice about the “when” because your job transfer finally came through, or finances dictate the time to be NOW!
With few exceptions, more Phoenix-Scottsdale homes are under contract in April and May than any other month.
But if you had a choice, and you wanted to peg it according to the season that most buyers are looking, then yes, there is a statistical difference, but with caveats.
If you’re looking at pure statistics, and perhaps common sense, the ideal time to list your house in the Phoenix-Scottsdale metro area begins in March/April. With few exceptions, more Phoenix-Scottsdale homes are under contract in April and May than any other month. Of course if you live in a colder, snowier part of the country, then that timing will be delayed.
The best time to list should be when your curb appeal looks the very best. Green lawns, blooming flora, and a freshly painted exterior (if needed) will by themselves increase your house showings. In general, the more house showings, the quicker the sale and for the best price.
The other reason why spring is the better time to sell is that so families can be settled in their new home before school starts up again in August.
Now, having said all that, the choice of “when” will be different for the type of area you live in. If you live in an “Over 55” community, such as Sun City West, Trilogy in Vistancia, or McCormick Ranch, then you will want your house on the market as soon as you can following the holidays. This is when snowbirds who are renting and enjoying our mild winter desert temps, or out of town visitors, are going to be looking at homes for sale, especially seeking out Open Houses to go through.
Next week (Part Two) we’ll look at how best to prepare your Phoenix-Scottsdale home for sale and how much you should do, and not do.