The “Big Picture”
A lot happened between May and June. It’s 2A and I’m working on this long-overdue blog after a solid month of listing and selling. June is turning out to be another good month for real estate in the Phoenix/Scottsdale area. Even if you’re just skimming through, look at the pictures and make sure you get to the “Bottom Line” below.
What’s increasing: sales volume, dollar volume, appreciation & the median home price. What’s decreasing: active listings, months supply (inventory) & pending sales (due to seasonality- it’s 110-degrees here!!!). Do note: mortgage interest rates are trending up, which could put some pressure on buyers to get off the fence and take action to not lose buying power. That being said, there are an abundance of loan options out there for every buyer, ranging from the “A++ client” with FICO scores above 760 & verifiable income (W2 & Tax returns) to the buyer who has had a substantial credit blemish within the last few years, but has a good down payment ready to go. No- I’m not kidding about the clients with the “credit blemish”; I have one such client closing in a few days and another ready to pull the trigger. Here are the highlights for the month:
A Look by City
At the beginning of the month, the Cromford Report Major City Index looked solid with all but 3 of the 17 major cities boasting an index at or above 100.
As a reminder, the Cromford Market Index is defined as: “a value that provides a short term forecast for the balance of the market. It is derived from the trends in pending, active and sold listings compared with historical data over the previous four years. Values below 100 indicate a buyer’s market, while values above 100 indicate a seller’s market. A value of 100 indicates a balanced market.” In a nutshell, all but 1 major city favors sellers over buyers. Because the market doesn’t appear to have “peaked” yet, summer 2015 could be right up there with summer of 2013, which sailed along smoothly until July before dropping back for most of 2014.
YTD Change in Revenue per Price Range
Life is pretty good if you’re a seller listing a home between $150K-$600K. Even above $600K, while growth is barely in the double-digit range, it’s still up by nearly double-digits. And did you check out the sales of luxury homes over $3M?? It is the single best performing segment year-to-date. If you’re wondering why there are so few sales below $150K, keep in mind that while our market continues to recover and improve, home sales at the lower end are not doing poorly- there simply just aren’t any homes at that price point to buy, which will make this segment continue to evaporate.
However, did you notice how the $600-800K market is performing the worst among all the price points. There are a lot of homes on the market at this price range. I think all of these higher end sellers decided at some point that the time to sell was “now”! However, if you look that are closely at the $350-400K market, you can see that it’s outperforming most price points with the exception of the ultra-luxury market.
For Buyers & Sellers
Homes under $200K are evaporating quickly. Look at how they went from an abundance of listings under $200K in March 2010 to falling to their 2nd lowest level in June 2015. Buyers buying below $250K also beware. As these single family homes up to $200K next, the market will likely gobble up the $200-250K market soon and/or cause buyers to start focusing heavily on the condo/townhome market. A townhome I listed in mid-June in Tempe, near ASU got multiple, CASH offers in 14 days and under contract to sell at full price in only 3 weeks. When I initially put it out there to my agent colleagues, the lack of inventory caused a few to ask me if I had quoted the asking price correctly. If you are a seller with a home in this range, it’s a great time to list a home, but it’s a pretty lousy time to be a buyer. Check out how monthly sales overtook the volume of new listings on 6/23/15.
As we saw in the section above, the entry & move-up markets are the most impacted by the recent changes in the market. The move-up buyer is likely competing with a number of other buyers. And even crazier than that, May and June both had lots of buyers still looking. One home that I listed in McCormick Ranch in June got an offer in 4 days. Another home I listed in the heart of Scottsdale, 85254 right before Memorial Day got multiple, CASH offers in only 3 days! We are closing at just under list price in a 26-day escrow. Sellers at this price point are sitting pretty with lots of competition among buyers.
From $600K to $3M, it’s actually quite a good time to be a buyer in this range. Though the market is still improving in this segment, there are lots of options readily available. Some areas that have a higher concentration of luxury homes (Paradise Valley, North Scottsdale, Carefree & Cave Creek) are fairly saturated. I see a LOT of opportunity for either sellers who are willing to make improvements to their homes at this price point to position their homes against others that are not updated or buyers who are willing to tackle the repairs themselves.
A word of caution to all: even though our market is improving, property values tend to be the last thing that moves higher after, higher demand, reduced supply and higher asking prices. Because of this, appraisals have been giving a lot of us agents (and sellers for that matter) a run for our money. Appraisers use closed sales to value homes, not asking prices. And while they will look to pending sales to identify trends, they have little bearing on the confirmed, closed sales upon which appraiser rely.
Rentals are cooling a bit, or so the trend appears.
June 21 (Cromford Report) – The rental supply situation has started to ease a little. We see 3,271 active long term rental listings on ARMLS today, which is up 11% from April 21. However it is still down 24% from this time last year. Single family listings are up 15% from 2 months ago, while condo listings are up only 6%.
Among the active single family rentals, the average monthly lease rate has dropped from $2,086 to $1,993, the lowest since March 10. Last year on June 21, it was only $1,776.
The situation remains poor for tenants and great for landlords, but the trends have reversed for the time being at least.
April 2, 2015 had the tightest supply of single family rentals and the highest average monthly lease rate of $2,124.
Long term rental listings increased by 11% from April 2015 to June 2015 and asking prices actually decreased for single family rentals?! Maybe this is a little bit of relief for tenants who have been searching for affordable rental homes to live in. Mind you, prices are still substantially up over 2014. So while this may be a signal to landlords that the market could be changing, I can certainly vouch for the fact that rentals are hard to come by at any price point or area- from 1BR condos or apartments in Midtown Phoenix or North Central Phoenix, to fully furnished rentals in Scottsdale, the Biltmore, Arcadia and beyond, I’ve struggled to find reasonable options for many clients this spring.
The “Bottom Line”
Real estate is “hyperlocal”. The “what” and the “where” are critical to determining a course of action, whether you’re a buyer, seller, landlord or tenant. I can say that since I focus on properties in the “Core” of Metro Phoenix, I am seeing a push for many buyers to find homes that are centrally located with easy access to freeways, amenities, shopping & places of business. All of the mature neighborhoods that have existed for many years like Arcadia, the Historic Districts, McCormick Ranch, Old Town Scottsdale & many others are really holding their value.
I also believe there are “sleeper” neighborhoods like Sunnyslope that are under-valued and present a unique opportunity for an “in-town” location with good access to everything, that are good for buyers who may not have tons of options available in more established areas like North Central Phoenix, Biltmore Heights, Pointe Tapatio & Moon Valley.
Stay close to me for detailed info as it relates to your situation to chart your course. Have a happy 4th!