The greater Phoenix area has been experiencing a slow-down of buyers and an increase in the number of homes for sale. Where are the buyers? Why are sales less brisk than this past year? It is unlikely that there is any one reason for this situation, but there are many contributing factors that may act singly or in combination to discourage any given buyer.
1) #Interest Rates - Rates have been creeping up, and are nearly 1% higher than they were last year. Last year at this time, the average rate was 3.42, now it is 4.34. However, rates have been dancing between 4.67 and 4.15 for the past 9 months. Anecdotally, many of the people that I speak with are still expecting rates in the 3% range, despite nearly a year in the 4% range. This is probably due to advertisements for loans in the 3% range that do not reveal the type of loan program in the advertisement. 15 year mortgage rates have increased from 2.85 to 3.32 in the same time frame.
2) #Investors are leaving the market - Over the past year, sales to landlords has dropped 6%, from 23% to 17%, and the trend is continuing downward. This is an imperfect number though, because of the way the statistics are collected. Nevertheless, the large companies that have been buying huge numbers of homes for rental seem to be leaving the market.
3) Millenials are not buying homes - Until now, people have been entering the housing market in their 20's to 30's. The newest set of home buyers is being hampered by large student loans, other credit issues, and lack of a down payment large enough to allow them to own a home. Therefore, more young people are staying at home and living with their parents.
4) Higher prices - The average price of a home has gone up since August 2011. Many people believe that prices will come down again, and are just waiting for that to happen. Also, the higher prices may be holding people back because they are just suffering sticker shock as they look at home values today. Homes that just a short time ago were only $100,000 are now $140,000 and higher. Many people have the ability to put the extra $220 into a mortgage payment, but they get stuck on the overall value.
5) Difficulty in Obtaining a Loan - Obtaining a mortgage has never been a fun thing to do, but the reward of home ownership made the process worthwhile. It is an unkept statistic how many people begin the loan process only to drop out because of the onerous documentation requirements. On top of that are stricter regulations on income, credit score, and less underwriter flexibility when approving a loan. This is forcing many people into a "pidgeon hole" that excludes them from financing.
6) Housing in other parts of the country is sluggish - Many people who are relocating to the Phoenix area are doing so as a result of job-related circumstances, either accepting a new job, or receiving a promotion. Often, these people have homes that they need to sell prior to "putting down roots" in Phoenix. Lenders no longer make "bridge" loans. So, if the person has to transfer or move to the Phoenix area, they wind up renting until they can sell their house and buy another one. This takes a person out of the market for several years, because: 1) the dollar difference between renting and buying is not enough motivation to uproot the family and go through another move 2) the person has adapted to the renting lifestyle, and figures that they will own a smaller after the children are grown 3) renting is nice because someone else has to fix everything 4) after the sale of their previous home, they now have a pile of cash to have some fun with 5) the pile of cash is probably not sufficient to put 20% down and make changes to a home to suit their taste (new counter tops, paint, landscape) 6) they are always going to have a mortgage anyway, so what's the difference between paying rent and paying a mortgage? The list of rationalizations for not owning a home goes on and on.
I would be terribly interested in whatever you might have to say regarding this topic. Please add your thoughts.
#AvondaleHomes , #GoodyearHomes , #BuckeyeHomes , #GlendaleHomes, #PhoenixHomes , #SurpriseHomes , #PeoriaHomes , #TollesonHomes, #LaveenHomes , #WaddellHomes , #WittmanHomes
No comments:
Post a Comment