That’s the question everyone is asking right now. Because we have had such rapid price rises in most market segments since 2011.
What’s The General Mood?
Buyers: In general buyers are a bit frustrated. They feel that it’s hard to find value right now. And it is. Distressed sales are almost non-existant. And sellers with no financial difficulty to address price their house very differently.
Sellers: Are an altogether happier bunch these days. Prices are not at 2006 levels but in general are at a level sellers feel comfortable with. Very few people are excited to sell when there is 2 shorts sales and a lender owned already for sale on their street. We’ll be seeing more and more sellers soon.
What’s In Play?
Supply: Still low supply. 21,754 active in Arizona Regional Multiple Listing Service (ARMLS). Closer to 30,000 is more normal in supply terms.
Demand: There were 7,116 sales in August according to ARMLS. Sales in August 2006 were 10,031. Sales in 2007 were 4,378. I’m calling demand as flat, seasonally adjusted sales are steady but if demand falls anywhere from here I would categorize it on the low side of normal. ARMLS is reporting homes under contract as 10,722 that looks positive for demand.
Mortgage Rates: While the Fed keeps muttering about reducing quantitative easing interests can really head in only one direction.
If I was a buyer considering increasing their exposure to residential real estate and doing so on a normal 80/20 loan this is the area that would concern me most. Many buyers are waiting for supply to go up so there is more to choose from and increased competition amongst sellers. While that is somewhat likely to happen at any given moment rates could head from where we are today to something like 5.5%. Waiting 6 months to get a price saving on $10,000 on the house purchase could costs many thousands more in interest charges.
External Factors: Unemployment, possible war in Syria, the weather. You really can’t worry about such things. Buyers especially will ask about the impact of such things. The baseline demographics for our region look good, so long term real estate in Phoenix metro is a buy. Things will go up and down though. Just remember the number one rule. Location. Try to buy something in a nice location. Better to have a nice small house in a great neighborhood than a mansion in the middle of nowhere.
Sellers: Buyers are looking for value. They are starting to clue in that they missed the short sale bonanza. So they are looking for value anywhere they can get it. The main desire is upgrades. So sellers ask yourself what things I can do to get buyers to see value in the price you are asking. While you don’t have to completely renovate adding a few upgrades will push nervous buyers over the line.
Buyers: Breath. Relax. Breath again. Forget what the seller paid for the place in 2011. That was then. This is now. You can find nice homes in good areas for fair prices. The key is to find your location. Pick the location you know you will be happy in.
Buyer Tip: A lot of buyers are excited to view “fix & flip” properties. The interior finishes are nice, new and modern. However, many of the flippers focus very heavily on cosmetics and don’t do fixes to the unseen areas of the house such AC / plumbing etc. If you are going to pay a premium for something upgraded make sure you know what hasn’t been improved.
2012 and spring 2013 was a wild ride for real estate. Prices went up, inventory went down. Bidding wars even came back. My prediction for the rest of the year and 2014 is consolidation. The gains will slow down but will solidify. Supply and demand will both get closer to norms for the area.
There’s a good market out there for buyers and sellers you just a need a focused and engaged agent. ( Such as me! 🙂 ) A focused set of goals to achieve and patience to achieve them.