I've been going non-stop since my last recap of September when I reported that our nation implemented TRID ("Know Before You Owe"), affecting all loans, including mortgages) and the market cooled as buyer demand seemed to retreat & the supply of homes picked substantially.

Here's my recap of residential real estate for October & November to keep you on top of the changes and trends:

How TRID Affected Real Estate (Implemented on October 3rd, 2015)

  • Escrow periods increased from the typical 30-day escrow to~45-days as all real estate professionals (lenders, title companies, Realtors, etc.) scurried to stay in compliance with the changes to allow time for the new lender-required buyer disclosures.
  • It took us till the middle of November to even see the impact of these changes on financed sales
    • One of my deals went beautifully- one deal I did was ready to go a full 3 weeks early and we all sat on our hands waiting for the anticipated close date to arrive.
    • Another was a little more hectic- the escrow officer & lender didn't quite gel on their interpretations of what each of their roles and responsibilities were; that deal never quite made it off the ground and fell out of escrow.
  • The number of cash purchases increased perhaps as a byproduct of overly cautious sellers not wanting to mess around with this uncharted territory with financed purchases
    • September- 20.1% of all of sold homes
    • October- 22.2% of sold
    • November- 24.5% of sold

The Market's Cooling Trend I Reported Reversed Course (~End of November 2015)

Cromford Market Index- 12/27/15

  • Whether related to TRID or seasonal changes, the increase in inventory & decrease in demand seemed to retreat. The changes in the Cromford Market Index from the 17 major cities in the Phoenix Metro are the best indication of what happened from mid-November to present:

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  • November was not a strong month- no more than 3 cities showed improvements in their index; the trend started to reverse as of Nov. 28th, and the Cromford Report economists declared the "cooling trend" over on Dec. 12th.
  • By December, all but 7 cities were showing index improvements.
  • If you are familiar with the geography of the major cities in the 17-city chart, you know most of the cities with the higher indices are in the West Valley. I gained additional perspective just after Thanksgiving from a nice chat with Michael Orr, creator of the Cromford Report and Director for ASU's Center for Real Estate Theory.
    • He told me that areas like the West Valley, which have lots of affordable housing and more job creation, are “hot” and were balanced by the abundance of higher end listings coming on.
    • A Cromford Report Daily Observation on 11/16 summed it up nicely: "The West Valley has seen the strongest appreciation in 2015, and it is not all concentrated at the lower end of the market. For homes listed over $500,000 the average sales price per sq. ft. over the past 3 months has been $175.07, up from $162.84 a year ago. This is an appreciation rate of 8.3%. At the same time, unit sales have grown 57% from 54 to 85. This is not a huge market but it does seem to be experiencing healthier price trends than the rest of the Phoenix area for homes over $500,000."

Buyer Activity (Demand) Increased & New Listings (Supply) Increased then Decreased

Annual % Change in Active Listings- Maricopa County

  • Many buyers who opted sit on the sidelines after being discouraged by few decent options, jumped back into the market to take advantage of the new fall supply of homes.
  • Listing counts for homes above $400K are up between 6-17% over 2014; below $400K they are down, by as much as 53% for the lower priced homes under $150K.
  • It's possible some buyers also jumped back in to try to lock in lower interest rates ahead of the Federal Reserve's anticipated Fed Funds rate hike.
  • With the start of the fall and the arrival of our well-heeled winter visitors, we started to see demand pick up again, which helped to absorb some of the new supply of "luxury" homes in the market.
  • For buyers lucky enough to jump in during this time, there were some DEALS to be had. I saw it first-hand on both on the selling and listing side of a number of these sales.
  • Seasonal expectations are:
    • Demand slows down during the holidays (Thanksgiving through the start of the New Year holiday)
    • Inventory increases in the fall and then also slows during the holidays
    • Demand & Increase increase for most areas starting in the spring (~March-June)
    • Demand from Winter buyers increases from late fall through April.
    • So far, we seem to be par for the course.

Mortgage Interest Rates are Rising

  • Rates were down and almost as quickly, they were back up. Here's a snippet from an article on Nov. 11th showing just how drastic the changes were:
    • "The journey has been a quick one, with the spike from six-month lows to four-month highs happening in just under two weeks," said Matthew Graham, chief operating officer of Mortgage News Daily. Read the full article here.
  • Then on 12/15/16, the Federal Reserve increased the Fed Funds rate for the first time since 2008, which had been at near-zero. We're not expecting any imminent market-busting rate increases, but it's important to note that rates will likely trend higher, not lower, over the coming months & years.
  • Buyers who plan to buy a home in the near future should become intimately familiar with mortgage rate trends. Here's what that could do to your monthly mortgage payment: (does not factor taxes, property insurance, mortgage insurance or HOA fees)
    • A $250K purchase with a 5% down payment, a .25% rate increase from 3.875-4.125% could increase your payment by about $35/mo.
    • At $550K with 20% down, a .25% rate increase from 3.75-4% could increase your payment by about $63/mo. (Thanks to Tom Ross of Nova Home Loans for the rate info)

Overall Sales & Home Values are up!

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  • Quarterly Sales (units) are UP annually from $150K-2M.
    • Above $2M, sales are down 22% or more- due to the overabundance of supply and lower buyer demand
    • Below $150K, sales are down by at least 9%- due to the opposite, the lack of supply at the lower end

Annual % Change in Active Listings

  • Quarterly Avg $/SF is flat or up at all prices EXCEPT above $3M

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Noteworthy Daily Observations (from the Cromford Report):

  • 12/20/15- Rental listings in ARMLS are down 29% over December 2014- this may be due to the lack of inventory and possibly to landlords choosing not to have listings go into MLS at all
    • "We are noting a significant drop in the number of new rental listings being added to the ARMLS database. Year to date in 2015 we have counted 38,140 new listings, which is 16% down from the 45,553 we had counted on December 20, 2014. This was already down 15% from the 53,333 on December 2013."
  • 12/14/15- Canadian buyers back out of the Phoenix/Scottsdale market due to a weakening Canadian dollar
    • "Canadian purchase activity continues to look very sad - there were only 292 homes bought by Canadians in the last 6 month across the whole of Maricopa County. This is the lowest 6 month total since July 2007."
  • 12/7/15- Arcadia (85018) eclipses Paradise Valley (85253) as the most expensive area in the Valley (price per SF)
    • "Over the last six months, Arcadia has become more expensive than Paradise Valley for single family detached homes. The six month average price per sq. ft. in Arcadia is $346.50 while Paradise Valley has slipped to $335.11."
  • 10/30/15- There are many listed homes that are not in good showing condition and buyers gravitate toward the "shiny penny" or homes that show well. Though this observation is older, the main point is something I see almost daily while out viewing properties on the market.
    • "Buyers like new homes and modern amenities. Even in the resale market we are seeing older homes that have not been modernized take much longer to sell than recently built or refurbished properties. Investors don't mind properties that need a lot of work if they can buy them at the right (low) price. However there is a widening gap between average asking prices and average sales prices which suggests too many sellers are over-optimistic when they first list their home. This is confirmed by the number of downward price changes which is growing again. This is another signal of a cooling market."


What all this info means for Buyers:

  • You have more home options than you did earlier in the year, but rising interest rates and a healthy dose of competition from other buyers will keep your reality in check.
  • Prepare, prepare, prepare- get your finances in order
    • prepare to file your taxes in a timely manner
    • get a prequal lined up
    • stay on top of market trends in the areas you like most
  • You also have some decent loan program options (10% down jumbo with no mortgage insurance anyone??); do your homework and know what's out there before you pull the trigger on the home of your dreams!

What all this info means for Sellers:

  • Pay close attention to your local market, at your price point. I still see a lot of overly exuberant sellers who've lost touch with reality. Your biggest competition is likely to be new homes if you're in the peripherals of the valley and infill projects of remodeled homes if you're in "the core" of the Metro. If you don't believe me, let's go out and take a look together. One upcoming seller got some good perspective on the very first home we saw and quickly saw reality.
  • Clean up your home as best you can within your budget; the leaky faucet and squeaky doors will take you some elbow grease and a weekend to pull together in most cases or if time is your enemy, my handyman can get most of this done for a few hundred dollars in a day.
  • Pay attention to prices of other sold (closed) homes, not asking prices of active listings. If active listings aren't selling, do you really want to follow their lead?? As a reminder:
    • SOLD homes indicate actual, current values
    • Watch PENDING homes to know what is attracting buyers (condition & asking price)
    • Use ACTIVE listings to help you price your home among the competition
  • Repeat the previous step every 3-4 weeks to stay competitive in the market.

Please call me with any questions about any of this info and I'll be happy to put you on the path to success!

Happy New Year!!


Related Info:

Skipping Repair Estimates During Your Inspection Period Can Cost You!

December 2015 Phoenix Metro Real Estate Snapshot

The Best Phoenix Metro Zip Codes to Sell a $1M+ Home in November 2015

November 2015 Phoenix Metro Real Estate Snapshot