6 Reasons for a Sluggish Phoenix Real Estate Market

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

Average Days to Rent in Phoenix - 49

#Rents are still the highest in the past 9 years in Phoenix!

#rentals
#AvondaleHomes , #GoodyearHomes , #BuckeyeHomes , #GlendaleHomes,  #PhoenixHomes , #SurpriseHomes , #PeoriaHomes , #TollesonHomes, #LaveenHomes , #WaddellHomes , #WittmanHomes

2 minutes - Why Invest in Phoenix-Mesa

5 Reasons to invest in the Phoenix area in 2014.

Why to invest in 2014 - Phoenix and Mesa


#AvondaleHomes , #GoodyearHomes , #BuckeyeHomes , #GlendaleHomes,  #PhoenixHomes , #SurpriseHomes , #PeoriaHomes , #TollesonHomes, #LaveenHomes , #WaddellHomes , #WittmanHomes

Oldie but a goodie...

I helped a client make an offer on a house built in 1942 today.  It is located in the center of Phoenix, made of brick blocks, had a great looking roof, and a little visible dry-rot.  List price:  $62,000 with a #renter in it!

This will be a cash cow for him, producing lots of cash flow and appreciating every year!


#AvondaleHomes , #GoodyearHomes , #BuckeyeHomes , #GlendaleHomes,  #PhoenixHomes , #SurpriseHomes , #PeoriaHomes , #TollesonHomes, #LaveenHomes , #WaddellHomes , #WittmanHomes

Monthly Statistical Update - Buyer's Market!

Here is an excerpt from the Arizona Multiple Listing Service monthly report about the current #buyersmarket:

With low demand and rising inventory, there are few doubters left -  we are in a buyer’s market. Our transition from a balanced market to a buyer’s market is further evidenced by a record number of price reductions among active listings. Pending sales contracts are increasing

as expected, but this is a seasonal normality. Pending sales contracts are 36% lower than last

year at this time at 6,654. Looking ahead to the March sales volume, it would not be unreasonable to expect that 1,400 fewer homes will be sold this year than last.  

Have a look at the graphs from The Cromford Report below, and see if you don't agree:

#AvondaleHomes , #GoodyearHomes , #BuckeyeHomes , #GlendaleHomes,  #PhoenixHomes , #SurpriseHomes , #PeoriaHomes , #TollesonHomes, #LaveenHomes , #WaddellHomes , #WittmanHomes

Door Closing on First Time Home Buyers

 Prashant Gopal & John Gittelsohn are probably the two best media writers on real estate in the USA and I recommend their article in Bloomberg News yesterday
Americans Shut Out of Home Market Threaten Recovery
The major issues country-wide seem to be:

• We have the lowest market share (26% in January) for first time home buyers since the National Association of Realtors started measuring this in 2008
• Home prices have been rising much faster than incomes, which for the majority of people have risen little in the last 15 years when adjusted for inflation. This is unsustainable.
• Americans under 40 have recovered only a third of the wealth lost after the recession of 2007 (while older Americans have recovered back to pre-2007 levels)
• FHA loan purchases have declined 38% since their peak in 2010, and are likely to fall further in 2014 due to the reduced FHA loan limits
• More than 40% of lenders in 2013 had FICO scores over 760. In 2001 the percentage was about 25%.
• Applications for mortgages to buy homes are at their lowest level since 1995
• The home ownership rate for people under 40 fell to 42.2% in 2013, the lowest in 19 years

Above from the Cromford Report

#AvondaleHomes , #GoodyearHomes , #BuckeyeHomes , #GlendaleHomes,  #PhoenixHomes , #SurpriseHomes , #PeoriaHomes , #TollesonHomes, #LaveenHomes , #WaddellHomes , #WittmanHomes

Rental Units Becoming Scarce in Phoenix Area

From the Cromford Report:

March 2 - The supply of #rentalhomes for rent continues to plummet dramatically. We have just 3,416 of them (excluding UCB) on ARMLS and this is down 32% since the start of 2014. This represents only 33 days of supply given that some 3,000 get leased each month. Each week we are seeing new record lows for the lowest days of supply on ARMLS that we have ever recorded. Although we have not yet seen much of an increase in rents for homes already leased, the remaining 3,416 homes on offer are going for an average of 74c per sq. ft. per month. This is up from 69c at the start of the year and 71c last month.

On March 2, 2013 we had 4,785 single family rentals on offer through ARMLS, a 44 day supply.

On March 2, 2012 we had 4,313 single family rentals on offer, which was a 54 day supply since were only seeing 2,500 leases signed a month in those days.

On March 2, 2011 we had 2,960 single family rentals on offer, which was a 41 day supply, with only 2,000 leases signed per month.

The single family rental market through ARMLS has grown 50% in the last 3 years and is reaching levels of inventory that will cause stress for prospective tenants.

Based on the needs and desires of the current population of Greater Phoenix, it seems that we are offering too many homes for purchase and too few homes for rent.


Despite massive purchases by landlords over the last 4 years, including institutional investors, there could be a severe shortage of homes available for rent if current trends continue.


#AvondaleHomes , #GoodyearHomes , #BuckeyeHomes , #GlendaleHomes,  #PhoenixHomes , #SurpriseHomes , #PeoriaHomes , #TollesonHomes, #LaveenHomes , #WaddellHomes , #WittmanHomes