Market Update – March 2017 – Supply Shortage Giving Buyers Headaches

Infographic - 2017-03

It’s extremely rough to be a buyer right now, especially for those looking for lower priced homes.  While active listings are down 15% overall in the Valley, listings under $200K are down a whopping 30% from this time last year and declining, and active listings between $200K-$300K are down 10% and not rising. Properties under $300K comprise 70% of all year-to-date sales, making areas such as the West Valley and Southeast Valley the most frantic and competitive for buyers.

March, April and May are typically the most active months for buyer contracts and this year is not expected to be any different.  Sellers are enjoying less competition for increasing demand, driven by more qualified buyers entering the market.  While the total number of listings under contract is not increasing due to fewer homes for sale, contracts on listings between $200K-$400K are up 12% compared to this time last year, and contracts between $400K-$800K are up 18%.  Over $800K, supply and demand are near identical to last year’s levels at this time.

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Market Update – February 2017

Metro Phoenix February 2017

More Qualified Buyers Expected in 2017
Supply is Down 9.3%, Buyer Demand is Up 4.5%!

For Buyers:
Buyers be prepared for another year of increased competition for existing active listings in the Phoenix Metropolitan Area, partly because of over 50,000 more foreclosures due to be removed from credit reports in 2017.  That’s in addition to the nearly 50,000 foreclosures that were removed from credit reports in 2016.  A foreclosure can suppress a credit score by 100 points in many cases, so their removal is resulting in a higher number of qualified buyers and a 20% increase in the rate of approved mortgage applications over the past 2 years. Increases in buyer activity are expected across all price points under $1,000,000.

For Sellers:
It’s starting off very good for existing sellers thus far, as January was the 3rd slowest month for new listings on the market dating back to 2001.  This, combined with increases in demand, is resulting in active listings remaining very low when it typically rises in the first quarter just before spring buyer season. New home builders have been creating new supply for buyers, mostly in the $300,000 to $500,000 price range, especially in North Phoenix, South Phoenix, Mesa, Gilbert, Peoria and Buckeye.  With the supply and demand imbalance giving sellers a negotiating advantage, it’s reasonable to expect more appraisals coming in lower than negotiated sales price and buyers who are either unwilling or unable to cover the difference.

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Market Update – January 2017

Phoenix Metro Real Estate Market Infographic January 2017

2016 Sales up 7% over 2015
2016 Median Sales Price 7.7% Higher than 2015

Welcome 2017!  The headlines these days are full of projections and reflections for the Phoenix Metropolitan Area residential real estate market.  To complement our monthly measures here are some year-end numbers to reflect on.

2016 MLS Sales – Up 7.0% overall compared to 2015
·        72.9% of sales were under $300,000 (# of sales up 3.4%)
·        19.6% of sales were between $300,000 and $500,000 (# of sales up 20.2%)
·        6.1% of sales were between $500,000 and $1,000,000 (# of sales up 15.4%)
·        1.4% of sales were over $1,000,000 (# of sales up 8.1%)

2016 New Listings – up 4.6% overall compared to 2015
·        65.8% of new listings were under $300,000 (# of new listings up 0.8%)
·        22.0% of new listings were between $300,000 and $500,000 (# of new listings up 13.5%)
·        9.2% of new listings were between $500,000 and $1,000,000 (# of new listings up 13.6%)
·        3.0% of new listings were over $1,000,000 (# of new listings up 5.7%)

2016 Appreciation based on Annual Sales Price per Square Foot – up 5.4% from 2015
·        Under $300,000 – up 7.6%
·        $300,000 – $500,000 – up 2.0%
·        $500,000 – $1,000,000 – Less than 1% change
·        Over $1,000,000 – Less than 1% change

It’s been a good news/bad news year for sellers over $500,000.  The good news is that more buyers purchased in the higher price ranges in 2016 than in 2015.  The bad news is the neighbors also noticed increased demand and listed their homes too, increasing the number of new listings on the market simultaneously.  This increased supply, combined with builders getting in on the action over $250,000, created a more competitive and balanced market and put price increases in check.

It’s been good news/bad news for buyers under $300,000.  The good news is their homes have appreciated nicely over the past year.  The bad news, finding move-in ready homes and winning the bid was more stressful and competitive than many expected.  Especially for single family homes under $200,000.  (Yes, they do exist.)

Looking forward in the short term, the market can expect more buyers emerging with improved credit scores as we move farther away in time from the foreclosure and short sale crisis.  Recent announcements regarding FHA loan limit increases and lower mortgage insurance premium fees signify a loosening up in lending that will contribute to more demand for listings under $300,000. Higher interest rates will cause some buyers to purchase smaller homes than they anticipated, putting even more pressure on the market under $300,000; which is already short of supply for existing demand.  With nearly 73% of all sales in this price point, it’s reasonable to expect appreciation to continue to be positive for the Phoenix Metropolitan Area overall.

Commentary written by:  Tina Tamboer, Senior Real Estate Analyst | The Cromford Report
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Market Update – December 2016

Phoenix Metro Real Estate Infographic December 2016

Listings Under Contract Up 2.6%
Monthly Closed Sales Up 19%

For Buyers:
There’s both good and bad news for first-time home buyers this month.  The good news is that there’s been a 22% increase in single family active listings asking between $175,000-$200,000 over the last 10 weeks, going from 1,065 to 1,295.  Current inventory is 10% higher than where it was in week 49 of last year, adding some much needed choice to a high demand price range.  The added supply is not universal across the valley; increases have been marked specifically in Buckeye, Surprise, Sun City, Peoria and Mesa.

The bad news for home buyers is that supply overall is down 3.7% while the level of competing buyers is remaining seasonally consistent.  The Southeast Valley specifically has not seen the typical increase in supply that happens this time of year.  This indicates that the area will kick off 2017 with low supply just before the expected increase in buyer activity come February.  In this case, the cost of waiting to purchase will be a lack of choice and possibly having to compromise on the condition or location of the property they choose to buy.

For Sellers:
Bad news for buyers usually translates into good news for sellers, especially after positive news reports of ranking Phoenix as the #1 projected real estate market in the country for 2017.  However, it’s still not a market to be overpriced regardless of the strong demand for homes.  Some price ranges have more competing listings than others, especially in areas such as North Phoenix, Mesa, Gilbert and Peoria where there is competition from new home subdivisions.  Permits for single family homes have been on the rise to accommodate the demand.  This provides more choice for buyers in those areas, balances out the market and keeps annual appreciation in check.  The areas projected to have the highest appreciation rates are those where there is a high level of fix and flip activity along with a more affordable price range under $175,000.

Commentary written by:  Tina Tamboer, Senior Real Estate Analyst | The Cromford Report
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Market Update – November 2016

Phoenix Metro Real Estate Infographic November 2016

New Listings Under $300,000 Down 10% in October
Average Sales Price per Square Foot Up 8%

For Buyers:
October was a disappointing month for new active listings under $300,000.  Normally October is a good month to buy as there is a boost of new listings without an increase in competing buyers.  This rang true for new listings between $300,000 and $1,000,000 (up nearly 7%). New listings over $1,000,000 were down by nearly 14%, however this price point has been suffering from oversupply most of the year and the drop only equated to 57 fewer new listings in the past month. More importantly, new listings under $300,000 were down by nearly 10% with 669 fewer new listings than this time last year.  For a price range that is already under supplied for the current demand, this was not good news for buyers.  The fact that sales under $300,000 comprised 72% of all sales in the past month tells us to expect prices to continue rising with the current lack of new supply hitting the market.

For Sellers:
Under supply for listings under $300,000 has had a positive effect on sellers.  The Monthly Average Sales Price per Square Foot in this price point went up 8.4% from $110.42 last November to $119.72 this November.  The $300,000 – $500,000 price range saw this measure go from $146.03 to $151.50, up 3.7%.  The $500,000-$1,000,000 price range increased 1.2% from $196.65 to $199.03; the Over $1,000,000 price range increased by 12.3% from $308.73 to $346.68 (with only 108 sales in this price point, average price measures will fluctuate dramatically from month to month).

Average Days on Market  is still very good for sellers under $300,000 at 61 days.  The measure increases to 91 days within $300,000-$500,000; 142 days within $500,000-$1,000,000; and 191 days Over $1,000,000.

Commentary written by:  Tina Tamboer, Senior Real Estate Analyst | The Cromford Report
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