Is the Stock Market Affecting the Real Estate Market?

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I’ve been getting a lot of questions lately about the stock market and how it will affect home values as we continue into 2015. Today we are going to talk about the stock market, along with last month’s real estate market recap, to show you how they are intertwined.

When looking at the numbers for August of 2015, you can see we had 8,755 homes on the market, which was up from 8,390 in 2014.

Our active listings are sitting at 21,858 vs. 26,066 at this time in 2014. That is a 16% decrease in homes for sale! As for the number of sales last month, we had 7,092 compared to the 6,462 we had in 2014.

Between interest rates being near 4% and active inventory being down 16%, now is the perfect time to sell. There are less homes on the market, you can buy cheaper with low interest rates, and buyer demand is just starting to pick up.

Now, to talk about the stock market. Things have been pretty bumpy the last few weeks, and people have been asking us if we can expect a market correction coming soon

While we can’t say for certain that we know what’s going to happen, what we do know is that it’s a great time to sell and move while rates and inventory are low, giving you the best opportunity to sell your home for top dollar.

If you have any questions for us, or are thinking about buying or selling in Phoenix, don’t hesitate to reach out and give us a call. We look forward to hearing from you!

Should You Rent Your Current House or List It?

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Should you sell your home or should you consider renting it out for extra income? This is a question we get all the time, and an important one to know the answer to if you're thinking about selling.

Often, homeowners will decide not to sell their home because they are not happy with the current market value. There are a few assumptions to make if you're looking to sell your home for more money in the future than it's worth now: that the market is going to continue to go up, that you'll have the right tenant in the property, that you're going to manage the property yourself, that you stay in the state, and that you're not the kind of person who worries about whether a tenant is taking care of your home.

Owning rental properties myself and being a landlord, I can tell you there are some big risks to renting your home. You need to do a lot of screening to make sure you get the right tenant. Additionally, you're taking a gamble that the market is going to improve in the coming years so you can sell it for more than you can now. I typically advise my clients not to rent out a property for a short period of time. If there is equity there, it's typically best to sell the home, take the equity out, and not convert the property to a rental.

If you're looking to put the money back into real estate, when the real estate market recovers, if you buy another piece of real estate, you'll make more money on that real estate as well in most cases. The question is, would you rather convert your home into a rental and deal with the stresses that come with it or simply invest in another property to live in that will go up in value anyway? I'm not against owning rental properties, I just think there is simply more risk involved in rentals; if you do want to rent, I recommend buying a rental property up front rather than converting a property into a rental.

Of course, there are always exceptions to the rule. If you have any questions about this topic, or if you need real estate assistance, please don't hesitate to reach out to me. I look forward to helping you soon!

What’s Happening in the Phoenix Market?

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We are back again with another market update for the Phoenix area for you. Let’s start out with some statistics:

9,155 homes came on the market in July 2015 vs. 8,704 that came on the market in July 2014.

Our active inventory is down quite a bit from last year, and has dropped to 22,390 from 26,799 in 2014. This is great for sellers.

Here is one interesting thing we have found. We had 7,947 homes sell in July this year, versus 6,824 in July of last year. However, our inventory increased month-over-month from 2.58 to 2.82. This is still considered a seller’s market because we are under 3 months of inventory.

The market appears to be leveling off right now. As you can see in the chart below, the last 4 weeks have been relatively flat. Home appreciation has also been leveling off quite dramatically in the last few years. In 2013, we had about 30% appreciation, 14.5% last year, and this year we are on track for 6.4%. This is due to us having less buyers in the hottest months of the year, and the looming increase of interest rates. The Fed is meeting in September to consider raising the federal funds rate for the first time since the great recession started in 2008.

If you have any questions for us, or want to know if it’s a good idea for you to buy or sell now, give me a call or send me an email. Also, forward this video along to someone you know who is looking to buy or sell in Phoenix. I really appreciate it, and I look forward to talking to you soon!

Our Market According to the Cromford Report

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June was a particularly powerful month for closed sales, but leaves us starting July with a weaker backlog.

 
8,721 closed listings is what we see right now, but this number will change over the next week or two as corrections are posted. Helped by its 22 working days, June 2015 had the highest number of closed listings since May 2013.


Overall demand remains normal with little signs of change. However, overall supply continues to dwindle. The most interesting thing to watch is for which price ranges supply is increasing and which are reducing.
For single-family active listings (excluding UCB) within Greater Phoenix:

• Under $100,000 - down to 251 from 277 last month
• $100,000 to $199,999 - up to 2,672 from 2,605 last month
• $200,000 to $299,999 - down to 3,412 from 3,542 last month
• $300,000 to $499,999 - down to 4,315 from 4,408 last month
• $500,000 to $999,999 - down to 2,525 from 2,705 last month
• $1,000,000 and over - down to 1,346 from 1,622 last month

In contrast to previous months, the price range between $100,000 and $199,999 got a little relief while the luxury market lost the most supply in percentage terms. The latter was partly due to a larger number of expired and cancelled listings.

Here are the basic ARMLS numbers for July 1, 2015 relative to July 1, 2014 for all areas & types:

• Active Listings (excluding UCB): 19,548 versus 24,440 last year - down 20.0% - and down 3.9% from 20,351 last month
• Active Listings (including UCB): 23,228 versus 27,695 last year - down 15.9% - and down 5.3% compared with 24,595 last month
• Pending Listings: 7,007 versus 6,426 last year - up 9.0% - but down 10.4% from 7,819 last month
• Under Contract Listings (including Pending & UCB): 10,747 versus 9,681 last year - up 11.0% - but down 10.9% from 12,063 last month
• Monthly Sales: 8,721 versus 7,228 last year - up 20.7% - and up 5.6% from 8,261 last month
• Monthly Average Sales Price per Sq. Ft.: $135.79 versus $129.67 last year - up 4.7% - but down 0.3% from $136.16 last month
• Monthly Median Sales Price: $214,990 versus $198,000 last year - up 8.5% - and up 0.9% from $213,000 last month

Pricing did not change much over the last month, with a slight increase in the monthly median and a slight decrease in the price per square foot. However, pricing is substantially higher than it was 6 months ago, especially when considered against the very weak inflation numbers,.

The busy spring is now well and truly over and we are entering the summer doldrums. Contract signings and closings will slow and we are likely to see directionless trends until we get to the end of September.

-The Cromford Report

Four Ways to Add Value to Your Home

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 It's selling season here in Phoenix, and I want to briefly discuss four different ways for you to make sure that you get top dollar on your home. 

1. Landscaping: Make sure that everything is in supreme condition. This is what initially attracts most buyers, so pay close attention and make sure the exterior of your home looks clean, organized, and inviting.
2. Paint: Repainting your home can bring you a very nice return on the investment. Think of a car with a bad paint job. Do you think someone would be willing to buy that car for top dollar? Probably not, so be sure to repaint your home to add some extra value.
3. Flooring: Buyers need to see great flooring, and so it doesn't matter if it needs to be cleaned or replaced. Just be sure that your floors sparkle.
4. Clean your home again and again: I cannot stress enough how important it is that you clean your home before you sell it. Clean in places that you've never cleaned before, because buyers will notice every little detail. Nothing turns a buyer off more than a dirty home because it tells them it has not been maintained.

Hopefully these four tips can help you to get top dollar for your home in Phoenix. The market is really heating up this year, so be sure to get a head start and get your home on the market right now.

Phoenix Real Estate Market Update

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May continued to be a good time to be a seller in most areas & price ranges. Demand quickly recovered from well below normal in January to slightly above normal by mid-April and it has stayed there throughout May with barely any detectable change. Meanwhile supply continues to drop for an ever-widening collection of areas & price ranges, giving plenty of problems for most buyers who are bumping into each other at the few listings that remain. Multiple offer situations are increasing. If buyers are wanting to spend more than $500,000 then they are in luck - supply is much more plentiful above that mark, though a few very popular areas like Arcadia have relatively slim pickings. 

Throughout  May even those upper price ranges saw a downward trend in active listing counts, but not enough to cause any real problems for most buyers. If today's normal demand can cause supply to drop as much as it did in the last month, then buyers are going to have an even harder time if demand were to grow. This is especially true for the entry level market which is desperately short of homes for sale or rent.

The price trend is now very different for the low end, where strong appreciation is likely, and for the high end where a gently drift sideways is more likely, except in those areas where inventory is unusually low.

Here are the basic ARMLS numbers for June 1, 2015 relative to June 1, 2014 for all areas & types:

• Active Listings (excluding UCB): 20,351 versus 25,555 last year - down 20.4% - and down 5.4% from 21,512 last month
• Active Listings (including UCB): 24,595 versus 28,950 last year - down 15.0% - and down 3.1% compared with 25,387 last month
• Pending Listings: 7,819 versus 6,965 last year - up 12.3% - but down 1.7% from 7,951 last month
• Under Contract Listings (including Pending & UCB): 12,063 versus 10,360 last year - up 16.4% - but down 1.7% from 12,276 last month
• Monthly Sales: 8,293 versus 7,509 last year - up 10.4% - but down 2.3% from 8,490 last month
• Monthly Average Sales Price per Sq. Ft.: $136.19 versus $127.65 last year - up 6.7% - and up 0.5% from $135.45 last month
• Monthly Median Sales Price: $211,000 versus $192,500 last year - up 9.6% - and up 4.5% from $202,000 last month

We note that the monthly median sales price has increased much faster than the monthly average price per sq. ft. The low end of the market is not pulling its usual weight due to the painfully low levels of supply in so many areas. This generates insufficient sales to keep the median down at its natural level. Prices are not really improving as much as the median suggests, except in a few very affordable areas, which may not remain so affordable for much longer.

May was another good month for high end sales, though this time it was those priced over $2 million that over-achieved the most, with 34 closed transactions compared with 18 in May last year.

The growing sense of justifiable optimism in the housing market tends to bring out ever more ridiculous articles in the media, usually forecasting doom and gloom ahead. Some even pretend to use mathematics to justify their case. One recent article claimed that jumbo loans had a far higher delinquency rate than conventional loans. This conclusion was based on a formula that counts REO properties among the delinquent loans. Since REO properties cannot have a loan (it was extinguished at foreclosure) this is very strange math. In any case, all lenders are all too aware that the true default rate among jumbo loans has been extremely low for some time. In fact delinquency on all types of home loans is down dramatically from a few years ago. Black Knight Financial Services reported that in March 2015, of every 10,000 borrowers that were current at the end of February, only 73 missed a payment during March. This was the lowest "roll rate", as they call it, in over 15 years - right back to the last millennium.

In Greater Phoenix we saw just 2 REO sales of homes listed for $500,000 or more during May 2015, along with 14 short sales and/or pre-foreclosures. The other 566 sales (97%) were normal. Five years ago, things were very different - 46 REOs, 67 short sales and/or pre-foreclosures and only 216 (66%) normal sales. The luxury market in Greater Phoenix definitely does NOT have a delinquency problem in 2015.

Others get concerned by such foolish items as "a Bank of America analyst forecast calls for home values to rise 3.7 percent this year and 0.8 percent next year, before declining 1.7 percent in 2017, 2.1 percent in 2018 and 0.8 percent in 2019." That is a forecast that the US housing market will experience three straight years of 'modest' declines in property values. While the basis for this forecast is certainly a valid concern - incomes are not keeping up with the pace of home price increases - the idea that some analyst's formula can accurately predict an average home price in 2017, 2018 or 2019 is simply nuts. I invite you to save this quote and look at it again in 5 years to see what I mean.

As John Kenneth Galbraith said (or was it Ezra Solomon; we don't even know the past for certain), "The only function of economic forecasting is to make astrology look respectable".

We will continue to stick to reporting the present and very short term forecasts. Right now the Greater Phoenix housing market is experiencing more than usual upward price pressure due to a chronic shortage of affordable housing to buy or rent. The majority of new development is focused on the mid-range or luxury markets, not the affordable market, for understandable business reasons, so there is no imminent solution to this shortage of affordable homes. Slow growth in incomes has been stunting home purchase demand in Arizona for some considerable time, but we don't need more demand to drive price increases. The chronic lack of supply will do that all on its own. The upward price pressure will probably be counterbalanced by the seasonal effect which pulls average prices lower between June and September each year. After that, well who knows? The correct answer is: nobody right now. But if you keep your eyes on supply and demand measures, you will know before almost everyone else, which we think is an important competitive advantage.

 

Should I Sell My Home Occupied or Vacant?

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 Call me at (480) 596-2900 for a FREE home buying or selling consultation

If you're selling your home, you're probably wondering whether you should move out now or wait until you have found a buyer. There isn't an easy answer to this - whether you should move before you sell is dependent on many factors.

Do you have a lot of stuff in your home? Does the home feel cluttered? If the answer is yes, you have two options: one, thin out the furniture or, two, completely move out so the home can be shown in its entirety. If a home has too much stuff in it, it will feel cluttered. 

Another thing to consider is whether you can keep your home in show-ready condition at all times. Depending on your situation, it might be better to move out so that the home is clear and clean once buyers arrive. On the other hand, if you're a clean person who doesn't have to clean up after kids, staying in the home while selling might be a more convenient option.

When selling, you should ask yourself whether your furniture is in showing condition. If it is old and ragged, you should either replace it or move out and have your home professionally staged!

If you have questions about the moving process, or if you would like our assistance, give us a call or shoot us a quick email. We're always available to help!

Where Is the Phoenix Market Heading?

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April continued the trends we saw in March with significant improvement in demand and volumes, though different price ranges are experiencing very different supply dynamics.

 

Overall demand has returned to just above normal with little to no sign of further momentum beyond this point. Currently the supply situation is the most important thing to watch and this is what determines how much competition buyers will experience.

Here are the basic ARMLS numbers for May 1, 2015 relative to May 1, 2014 for all areas & types (UCB - Under Contract Accepting Backups):

• Active Listings (excluding UCB): 21,512 versus 26,205 last year - down 17.9% - and down 3.5% from 22,303 last month

• Active Listings (including UCB): 25,837 versus 29,590 last year - down 12.7% - and down 2.3% compared with 26,436 last month

• Pending Listings: 7,951 versus 7,199 last year - up 10.4% - and up 1.2% from 7,853 last month

• Under Contract Listings (including Pending & UCB): 12,276 versus 10,584 last year - up 15.8% - and up 2.4% from 11,988 last month

• Monthly Sales: 8,363 versus 7,572 last year - up 10.4% - and up 6.0% from 7,887 last month

• Monthly Average Sales Price per Sq. Ft.: $135.88 versus $130.27 last year - up 4.3% - and up 2.9% from $131.99 last month

• Monthly Median Sales Price: $202,000 versus $190,000 last year - up 6.3% - and up 1.0% from $200,000 last month

From a seller's perspective there is a lot of encouragement in this batch of numbers, though buyers might be dismayed to see price per sq. ft. rise by almost 3% in a single month.

For the market as a whole we currently see 3.1 months of supply, which is significantly below normal, but not excessively so. However, when we look at the single-family market by price range we see certain price bands with much lower supply:

• $100K-$125K - 1.3 months (versus 2.3 on May 1, 2014)
• $125K-$150K - 1.4 months (versus 2.3)
• $150K-$175K - 1.6 months (versus 2.6)
• $175K-$200K - 1.8 months (versus 3.0)

These price bands are seeing mostly unexceptional demand, but exceptionally low supply, which is leading to multiple offer situations and strong upward price pressure. The situation is even worse for buyers than these numbers suggest, because "supply" includes many UCB listings which are only soliciting backup offers in theory and not in reality. Before Zillow these would have been in pending status and not considered part of "supply".

Excluding the UCB listings, we get the following numbers:

• $100K-$125K - 0.8 months (versus 1.8 on May 1, 2014)
• $125K-$150K - 0.9 months (versus 1.9)
• $150K-$175K - 1.1 months (versus 2.3)
• $175K-$200K - 1.3 months (versus 2.6)

Demand is actually lower than last year between $100K and $150K with only 1,040 sales in April 2015 versus 1,192 in April 2014, but the lack of fresh inventory is having a dramatic impact on this sector of the market. A few years ago we had almost 7,000 active listings between $100K and $150K. Now we have just 909.

The price band from $175K to $200K is extremely popular at the moment with 825 closed sales in April, the highest total since July 2005. $200K to $225 is another popular price range with 555 closed sales in April, the highest total since September 2006. For $225K to $250K we have to go back to June 2007 to find a month with a higher total than April 2015's 624.

As we move upmarket from $250K, things become a little easier for buyers because supply is less scarce. Once we get above $400K there are more active listings than last year and most buyers are having a much easier time with less competition from other buyers. In other words, demand is good but supply is plentiful at these higher price points.

April was an outstanding month for closed sales for homes over $3 million, with 19 in all and $81.4 million in dollar volume. We have to go back to June 2006 to find a month that exceeds that total.

Although many people are feeling more optimistic about the market, and justifiably so, the lack of supply of entry-level homes is a very troubling sign. The most obvious source of new supply would be the large number of homes that are currently owned by landlords and used as rentals. However, vacancy rates are low, rents are rising, and these landlords would probably buy more properties if they could, rather than sell them off. 

There are remarkably few new homes being built below $200K and if this situation persists, it is going to remain a very competitive market for buyers. Prices are likely to rise faster than earnings. This is good for current homeowners but bad for those currently renting and wanting to get started in home ownership. This could become even more of a problem if mortgage interest rates rise, which would be adding to the affordability problems for the first time home buyer.

Source: Cromford Report

What You Need to Know Before Refinancing Your Mortgage

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Recently, I was asked by a client whether switching to a 15-year mortgage from a 30-year mortgage would be a good idea. If you're in a similar situation where you're thinking about refinancing, it's helpful to answer three questions first:

1. Is it going to reduce your interest rate by at least 1%?
2. How much is your payment going up, will it cause financial hardship?
3. Can you rent the home for the 15-year payment? 
   

These are all things you need to think about if you're considering switching to a 15-year mortgage. I personally prefer the conservative approach of keeping the 30-year mortgage and paying it off early. That way, if for some reason you find yourself in a tight financial situation, you're not stuck with a 15-year mortgage payment.

If you know anyone who might be interested in this topic, be sure to share this information with them. If you have any questions, or need real estate assistance of any kind, give us a call or shoot us an email. We would love to hear from you!

How an Amateur Agent Could Cost You Money When Selling Your Home

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With so many Realtors in the Greater Phoenix area, it can be very difficult to select the right one. Today, we share with you some of the most common mistakes people make when choosing an agent, so you can avoid these pitfalls when the time comes for you to make your move.

Most homeowners will use a friend or family member to sell their home. While there is a relationship there, it doesn't necessarily mean they're the right person for the job. Here's a few things to consider:

1. 87% of Realtors are part-time: You don't want to work with someone who isn't completely dedicated to the success of your home sale. You'll leave money on the table and may even make yourself liable for lawsuits. 
   
2. Work with a reputable firm: Work with an agent who is with an experienced team, who has seen everything the world of real estate has to offer. 
3. Hire an expert negotiator: A good agent will be able to get you the best possible deal when buying or selling a home. An agent who sells at least 100 homes a year has the expertise necessary to get you what you want.
4. Check the commission: If an agent is charging less than 6%, chances are they're going to do a list-and-leave, where they'll throw your home up on the MLS and sit around hoping someone will come along and buy it. There's no marketing plan to get you more money for your home, and that could cost you.

If you are moving out of town, we can put you in touch with the best agents in other areas, so you're taken care of and your interests are defended. We want to make sure you achieve your real estate goals! If you have questions about selecting the right agent, so you don't leave money on the table, give us a call or shoot us a quick email. We would love to show you how we can help you get the most out of your real estate experience! 

How You Can Take Advantage of the Phoenix Real Estate Market

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February was an excellent month for the real estate market in and around Phoenix. There were improvements for sellers across the majority of price ranges and geographic areas, but the main exception was the luxury market, where supply has been growing and demand has been diminishing.

Here are the basic ARMLS numbers for March 1, 2015 relative to March 1, 2014 for all areas & types:

• Active Listings (excluding UCB): 23,541 versus 26,589 last year - down 11.5% - and down 1.7% from 23,950 last month
  
• Active Listings (including UCB): 27,315 versus 29,613 last year - down 7.8% - but up 0.8% compared with 27,095 last month
• A total of 9,307 homes came on the market in 2015, compared to 9,908 in 2014
• Pending Listings: 6,709 versus 6,462 last year - up 3.8% - and up 25.1% from 5,631 last month
• Under Contract Listings (including Pending & UCB): 10,483 versus 9,486 last year - up 10.5% - and up 30.5% from 8,776 last month
• Monthly Sales: 5,982 versus 5,444 last year - up 9.9% - and up 24.9% from 4,790 last month
• Monthly Average Sales Price per Sq. Ft.: $130.08 versus $127.38 last year - up 2.1% - but down 0.6% from $130.86 last month
• Monthly Median Sales Price: $195,000 versus $182,000 last year - up 7.1% - and the same as last month

 The rise in the under contract count over last year - up 10.5% - understates the magnitude of the improvement because it includes all areas and types of homes.The balance between supply and demand has altered the most for the price ranges between $75,000 and $800,000. Outside that price range, things don't look like they are improving much at all. 

The luxury market has certainly weakened, but it has had a very good run for the past 2 years while the rest of the market has floundered. Everything in real estate is cyclical, so it's probably time for the luxury market to rest for a while and let the lower and mid-range markets have their turn.

Sales in January were slightly below January 2014, but February more than made up for that and we saw an increase of almost 10% over February 2014. Also, the most encouraging development is the return of the entry level home buyer, and this can be seen in the places where demand is clearly outstripping supply. Specific examples include Mesa, Phoenix, El Mirage, Avondale, Glendale, Chandler, Youngtown, Tolleson and Tempe. All of these areas have a Contract Ratio over 90, qualifying them as "hot spots". Last year at this time only 2 ZIP codes - Youngtown and Mesa were higher than 90 across the entire valley.

Last month we commented that the first-time home buyer is critical to the next stage of the recovery, and it looks like we finally got what we have been waiting for. Now we have to hope that February was not a one-time blip and that the trend will continue through the spring.

Click here to read the full Cromford Report.