Happy 2016!

January 16, 2016 by · Leave a Comment 

We hope your holiday season was wonderful. With the season now behind us, we can see what Santa brought the real estate market.travis graphic for Jan 2016 s
A cooling trend that began in August of 2015 quieted by November and by the end of December stabilized. Neither supply nor demand showed up in any great strength in December, so at the moment, stability seems to be the watchword. Typically, supply begins building in the 4th quarter with a sudden drop in supply at the end of the year as many listings expire. The first week of the year can therefore be misleading – with lower than normal levels of supply. The good news is that sellers return to the market in January (usually by the Super bowl, if not by MLK Day) and typically so do the buyers.
Our market still remains the “tale of two markets” at the moment. Supply for single family homes is constrained below 400K and shows no signs of easing. New inventory can come from traditional sellers, bank owned properties, and new builds. At the moment, traditional sellers below 400K are not making any strong appearance in the marketplace, banks are at below normal levels of delinquency (4%), and builders are primarily providing single family homes above 400K. Consequently, we don’t see any large increase of supply of single family homes under 400K appearing in 2016. This suggests that pricing will at a minimum hold strongly in this price range. Specifically, areas such as El Mirage, Glendale and Avondale are seeing demand strongly outpacing supply.
Probably the biggest impact the market saw was from the new financing government guidelines that were implemented in October – “Truth in Lending Real Estate Procedure Act Integrated Disclosure Rule” – thankfully known by the acronym TRID. This consumer protection act is designed to give greater transparency between lender and borrower. Like most governmental programs – new overlays of disclosure result, at least initially, in delays and confusion. This caused delays in closings which resulted in lower than normal November closed transactions and slightly higher than normal December closings due simply to delays. So any headlines regarding the booming December market should be viewed with some skepticism.
Michael Orr with the Cromford Report summarizes the market with these comments:
“It remains very much a seller’s market in the price ranges under $250,000 while the market from there up to $500,000 is close to balance with a slight edge for sellers in a few areas. Over $500,000 the advantage is slightly in favor of buyers in a number of areas, especially those that are remote from major shopping and employment centers. Some of the outlying areas, such as Casa Grande, are also weak for sellers despite their lower pricing. The strongest markets are those closest to the center of the valley with the most affordable pricing. This includes much of the inner West Valley, less expensive parts of Phoenix such as the South Valley and areas like West Mesa and the older parts of Chandler and Gilbert…
The average price per sq. ft. has moved up a healthy 2% in the last month and 6% since last year, both of which look encouraging for the market as a whole….
In summary we would say that there are no strong positive or negative trends right now. Supply remains far too low at the lower end of the market and demand is unusually weak at the very top end. However this is compensated by stronger demand between $500,000 and $1,500,000….
We would expect the next 31 days to see a drop in supply, an increase in closings and further strength in pricing. However the next real test of demand will be in early February.”
As 2016 enters the spring buying season, trends will form and we will do our best to decipher them and share them with you. In the meanwhile, we are happy to respond to your questions and concerns as always. Here’s to a fabulous 2016!

Market Notes

September 29, 2015 by · Leave a Comment

 

As we approach the last quarter, we have a few benchmarks that reveal market trends this year. Rather than trying to sweep Sales per Month sthis in to one cohesive thought – we simply offer you some observations in no particular order of importance.

Much like our weather, the real estate market has “seasonal patterns’. Keep this in mind when the headlines scream “the real estate market is declining” as they often report in the back half of the year. Two things happen once the spring buying season is over, less luxury homes sell (thereby dropping the average price per square foot of sales – as smaller and less expensive homes dominate the mix) and the volume of home sales begin to gradiently taper monthly as we head towards the end of the year. These two factors can look like a “declining market” rather than a yearly seasonal pattern that is both expected and normal. As our local real estate guru Michael Orr of the Cromford Report comments:

“So the apparent drop in pricing in the overall market is an illusion. The real cause is a big shift in the luxury market with strong sales of homes under $1 million compensating for weaker sales over $2 million. This is a normal pattern every year, but this summer the effect is particularly strong because the super-luxury homes had such a successful spring season.”

The Luxury market performed very well the first half of the year.

Although typically posting the smallest number of sales in the market, the luxury market still has the power to fascinate. Fascinate it did this year, posting some remarkable numbers. Here is what Michael Orr shared about July (a month that often is a rather tepid one for luxury sales as those buyers typically flee for cooler climates):

“Luxury single-family home sales in the Northeast Valley remained surprisingly strong during July 2015. There were 354 closed transactions over $500,000 in the Northeast Valley though ARMLS, up 25% from last year. Almost all the strength was concentrated in ranges below $1 million. Over $1 million, sales were up only 2% while between $800,000 and $1 million sales rose an astonishing 69%. The top end went suddenly quiet with only 5 closed sales over $3 million, down from 16 in June. Unit sales over $500,000 were the second highest we have seen for any July since 2000 with July 2005 still holding the record at 479.”

 

The Supply/Demand situation

The supply/demand front remains much as it has this entire year. New listings coming to market are still very weak when compared to historic trends. In fact 2013, 2014, and 2015 all posted anemic amounts of homes for sale. While agents bemoan this trend (after all, who wants a store with nothing on the shelves?) it has actually been beneficial to sellers. This year’s normal demand levels juxtaposed against the below average supply – led to very constricted supply in some price ranges and areas. This helped prices not only stabilize, but in most cases to gently increase.

“Overall demand is nothing special, but it is still much stronger than last year. Supply remains weak overall and although new listings are arriving at about a 5% higher pace than last year, this is well below long term average levels…

Active Listings…: 19,459 versus 23,900 last year – down 18.6% …Under Contract Listings (including Pending & UCB): 9,705 versus 9,066 last year – up 7.0%….Monthly Sales: 7,942 versus 6,858 last year – up 15.8% …

… We may see a little more supply over the next few months for the popular ranges between $150,000 and $400,000. This may in turn bring a little welcome relief for the average buyer and stop the market getting even more favorable for sellers.”       -Michael Orr

 

The “solar lease” trend.

This is a rather controversial subject – as solar leasing companies have done a very good job in selling the 21st century solar which is dramatically different from the 20th century solar some of us (cough) are old enough to recall. While “going green” is a wonderful ecological trend and one we happily support, we are often asked “will a solar lease add value to my home”? Sadly we must report the answer is “no”. In fact, our experience thus far indicates just the opposite. Buyers may happily accept a “no strings attached” solar unit (i.e. one that is owned by the seller) leases however pose a challenge. First, the buyer must qualify for the lease – not only in terms of credit worthiness, but also it must be factored in to their debt/income ratios. Secondly, buyers seem to dislike the idea of a long term commitment (many leases are 30 years) that they cannot be freed from. These factors not only fail to increase value, but in some cases prohibit a sale or even slightly reduce the value of the home. While this is not a popular answer, it is the current reality. Perhaps this will shift with time. Only time will tell.

So there are few tidbits about our current market trends. As always, we will strive to keep you posted on the shifts that continue to “normalize” our market.

New Homeowners Association Addendum

August 30, 2015 by · Leave a Comment 

Just click  to download it.

How’s The Market?

August 12, 2015 by · Leave a Comment 

Real estate affects everyone here in the valley – even those who don’t buy or sell. So being a Realtor, I get to see firsthand the level of interest the subjectTravis graphic for July attracts. The second most common question I get asked is “How’s the market?” (The most common one being “Are you that guy on TV?”)

For whom?

For the 800k seller in north Scottsdale? Or the 250k seller in Avondale? The answers are very different. Buyers in the 800k range have many homes to choose from. Juxtapose that to Avondale which currently has the hottest seller market in the valley. Glendale is just behind Avondale -but still a red hot market for sellers. Hot seller markets are simply markets that have lots of buyers – and too few sellers. It is always supply and demand.

The sticking point is that supply and demand numbers are not universal to an area or price point. So when the news reports “it’s a red hot seller’s market” take a moment and look at the valley as a series of sub-communities – each with their own numbers.

To quote directly from Michael Orr’s Cromford Report:

“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. During 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…

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…

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.

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.”

Wondering if it a good time to sell for your price and neighborhood? Most likely the answer is yes. As always, the best answer is a researched answer. We simply need an address to give you a real answer to that question – anytime.

Interview I did on KTAR

July 17, 2015 by · Leave a Comment 

ktar interview pic

Demand Is Back to Normal (whatever Normal is?)

May 7, 2015 by · Leave a Comment 

Travis graphic for May sAfter a year and a half of the real estate market being in the doldrums – low supply and low demand – demand has fully corrected. In fact, demand is now in a “normal” range.  Supply however, has failed to follow.  In fact supply is down about 15% from last year.  That is great news for sellers.

In the last 2 weeks of February, demand finally began increasing.  That increase appeared to primarily come from first time home buyers.  Even that picture has shifted a bit, and now demand is largely coming from the move up buyers.  This move up buyer has allowed improvement in higher price points as well as in most geographic areas. In real estate, this is the “trickle up theory” – that improvement begins in the lower price ranges and migrates upwards.  If demand remains strong, and supply continues to be constrained, then with time, prices follow.

Supply and demand trends tend to follow certain patterns, ultimately adjusting with the effect of coming in to balance.  For example, when supply stays low but demand accelerates, the first signs of the shift are multiple offers – often pushing contract prices above listing prices.  Then the appraisals begin to come in “low” (as rising prices are not supported by historical prices) often forcing sellers to accept less and thereby artificially holding down prices.  Eventually enough demand creates buyers who will pay above appraisal or enough attractive cash offers, and prices begin their climb.  Higher pricing then encourages more sellers to come to market, and as supply builds price appreciation moderates. Supply and demand then are brought back in to balance.

Where are we currently in this cycle?  At the moment, we are seeing multiple offers with contract pricing pushing upwards, only to be depressed by low appraisals.  If this trend continues, we likely will see price increases in the next few months.
Summing up the market shift is our favorite guru, Michael Orr of the Cromford Report:

Now we are fully into the height of the prime selling season it is becoming clear that it is not the first time home buyer who is making the biggest impact. It is the move up price ranges that are doing best compared with last year.
Here are the price ranges which have growth dollar volume the most between March 2014 and March 2015:

1.       $350K-$400K – up 46%
2.       $300K-$350K – up 40%
3.       $500K-$600K – up 40%
4.       $275K-$300K – up 28%
5.       $200K-$225K – up 26%
6.       $800K-$1M – up 26%
7.       $250K-$275K – up 26%
8.       $175K-$200K – up 24%
9.       $2M-$3M – up 23%
10.    $600K-$800K – up 21%
11.    $400K-$500K – up 21%

All ranges below $125,000 are delivering lower dollar volume than last year and so are the ranges over $3 million and between $1.5 million and $2 million.
The mid range and the lower luxury ranges are where we are seeing the most strength and this is in stark contrast to last year.

All in all, encouraging news for most sellers.  After a year and a half, it’s nice news to report.

Where Buyer’s can Win

May 5, 2015 by · Leave a Comment 

While sellers are gaining the upper hand in the marketplace this spring buying season, they don’t have power in all areas. Let’s evaluate where buyers are winning and losing. Relatively strong supplies (which give buyer’s potentially more bargaining power) currently exist in:compass

Chandler –supplies have been rising since early March and are about at the same level as last year

Fountain Hills – starting to fall but higher than any time since 2010

Gilbert – active listings are climbing in 2015 (although still below 2014)

Scottsdale – listings are slightly down from last year but still plentiful

Laveen – listings are up and at equivalent levels of 2012

Cave Creek & Paradise Valley – both areas have abundant supply and are hitting new highs for supplies

Gold Canyon- listings are more plentiful than last year

Where can buyers expect tough competition for homes? The west valley is particularly low in supply, largely because housing is most affordable there. Glendale, Tolleson, El Mirage are seeing multiple offers and stiff competition from buyers for homes. As demand is up in all areas, smart buyers will learn the dynamics of their particular shopping area to learn how to win.

The Frenzy Begins

April 22, 2015 by · Leave a Comment 

Travis graphic for April sThe early suspicions that 2015 might actually see an increase in demand are finally proving to be fact.  In real estate, improvement in a market goes from the bottom up, rather than from the top down.  This means that to stimulate a market place (i.e. see price improvement and a high volume of turnover) you need the entry level buyer to show up in force.  That purchase then allows for the seller to buy their next home, which then allows that seller to buy and so on.  It is said that the first time home buyer can spark a domino effect of 7 sales on average.  This was the thought process that spurred the dubious tax credit back in 2009.  The government seeing that the housing market was in severe meltdown mode, decided to stimulate the first time home buyers through a purchaser tax credit.  In one sense it worked – first time home buyers started buying.  In another sense, it was an utter failure. Unlike a “normal” housing domino effect, in the distressed market it simply meant that the first time buyer bought the foreclosed home or short sale – spurring exactly nothing.  Once the tax credit expired and the artificial stimulation of the market ended, the market dipped and simply reverted to the full blown distress market.

Fast forward to today’s market which for the last year and a half has stubbornly remained in the doldrums. In that time an abnormally low number of homes exchanged hands despite extremely favorable interest rates and flat pricing.  The only thing that saved that market from becoming a strong buyers market is that sellers disappeared at the same time the buyers did.  So the recent spike in demand is a welcome one.  But even welcome changes bring challenges, demand is not spiking in all areas and price points – and demand changes much more quickly than supply can. The areas and price points that are currently adding supply are not where the demand is strongest.  As  Michael Orr of the Cromford Report recently so succinctly stated :

“Demand is up strongly for the lower and middle price ranges but new supply is heavily skewed towards the higher price ranges, where demand is actually lower than last year. As a result, sellers of properties over $800,000 are facing stronger competition from other sellers. Sellers below this price point are in a much more favorable position than last year, particularly those with homes priced below $400,000.

When we look at listings added from February 7 to March 6 in 2015 and compare with the same dates in 2014, we find:

  • new listings priced below $100,000 are down 30% (total value at list down 27%)
  • new listings between $100,000 and $200,000 are down 16% (total value at list down 15%)
  • new listings between $200,000 and $400,000 are up 1% (total value at list up 2%)
  • new listings between $400,000 and $800,000 are up 6% (total value at list up 7%)
  • new listings at $800,000 or more are up 13% (total value up 12%)

 

The surge in demand is for homes between $75,000 and $800,000, so the extra supply above $800,000 is joining inventory that is already plentiful.

Meanwhile inventory for the first time home buyer is in short supply and contract ratios for the well-located areas that are dominated by such homes are headed into “frenzy” territory.”

So does this “frenzy” mean that prices are immediately rising?  No.  As we’ve mentioned in the past, price is a trailing indicator.  It will likely take a few months to begin showing up in pricing – but price improvements do seem to be on their way.  That is very good news for sellers and a strong nudge to buyers to get buying sooner than later.

The Spring Buying Season Has Begun

March 4, 2015 by · Leave a Comment 

Spring is here, bringing not only spring breakers but also the real estate spring “buying season”.  Real estate is cyclical – in both long term and short term Travis graphic for March s trends.  Annual trends typically follow the same pattern year after year.  Demand begins picking up in February, continues to climb to the peak in May then remains at this peak thru July (yes, even with our summers) and falling as it approaches the end of the year.  Because of this, the first signals for the year’s pattern really begin to emerge near the end of February.

As pricing and the health of the market depend solidly on supply and demand, we tend to focus our lens solely on those two factors.  Let’s begin first with supply.  In 2014 sellers were placing their homes on the market at very low levels.  2015 has continued that trend to date.  In fact, supply is actually weaker than this time last year.  The supply of short sales is down 38% and is continuing to fall.  REO (foreclosed) properties are down a whopping 49.6%.  If the supply of active listings continues to remain at low levels, this should bode well for sellers and actually result in some upward price movement in the second half of the year.  While we can speculate as to exactly why sellers are not coming to market in great numbers (i.e. distress properties are diminishing, sellers who survived the distress market still lack sufficient equity, etc.) the fact is they simply are not.  Given the recent jump in FHA refinances due to changes in the mortgage insurance premiums (the Mortgage Bankers Association reports a rise of 76.5% of FHA refinances at the end of January) if one were looking for proof that sellers are staying put, the level of refinancing seems to provide that proof.  So if the story of supply can be summarized by the word “constrained”, how is demand shaping up by comparison?

The good news is that demand is far more robust than supply.  While demand seemed to be in a deepfreeze in January and the early part of February, the later part of February saw a very different story.  As Michael Orr of the Cromford Report so perfectly states:

“Since the Super Bowl ended we have seen the liveliest two weeks for demand for a long time and we can see several areas with very strong numbers of listings under contract compared with this time last year.  The most popular ranges are $150,000 to $600,000, which is good news for developers and for sellers of existing homes. Here we see a very sudden upswing in buyer interest that wasn’t there in January…

In 2014, pending listings grew from 5,420 to 6,395, between January 15 and February 15, a jump of 18%

In 2015, pending listings grew from 5,047 to 6,689 between January 15 and February 15, a jump of 33% …

We have not seen such a large percentage increase between January 15 and February 15 since 2009 when investors started to snap up the low hanging REO fruit.

As usual the recovery is not spread evenly…

Our first observation is that the price ranges

  • $175,000 to $200,000
  • $200,000 to $250,000
  • $300,000 to $400,000

 

are the ones that are very hot and are seeing a large spike in listings going under contract. There were more normal listings under contract on February 14 than there were at any time during 2015 for these three price ranges.”

Zillow is Zawful

February 3, 2015 by · Leave a Comment 

Although the market remains very subdued  (low volume of home exchanging hands) and pricing remains flat,  much like 2014, the public seems to be zillow is zawfulreceiving a very different message.  It is easy to look for villains,  and frankly we needn’t look that far. (Hint:  Zillow).  Case in point, in speaking to a cable company technician the other day, he lamented that his home had dropped in value 60K in just the last few months.  What??  The valley has had no major ups or downs in the last year and a half –  how did his home drop 60K in just two months?  We quickly assured him that short of a fire, his home did not drop 60K but asked the source of his information.  As suspected, his source was Zillow.  To their credit, they have done an amazing job at becoming the go to valuation site.  Sadly they do a very poor job of deserving it.  Zestimates are simply a fun tool but in no way are accurate for determining value nor the state of the market.  The only accurate way to determine value is with a supply/demand analysis – and that takes a person to evaluate what is relevant and what isn’t.  Automation is not a substitute for thinking.  Don’t be fooled in to thinking otherwise.

Next Page »