Sales Rate Down - Rental Price Up!

Below you will find the Rent Check statistics published by ARMLS, and after that, a comment on sales rates from the Cromford Report.  Both reports have come out within the last 4 days.

Average rents are now over $1,300/month, and the sales rate is down to 2000 levels.

From the Cromford Report:

August 3 - The annual sales rate continues to decline with no sign of any deceleration. Here are some examples for the single family market:

• Phoenix - 14,544 per year, lower than any year since 2000 except 2007-2008
• Mesa - 5,855 per year - lower than any year since 2000 except 2007- 2009
• Scottsdale - 4,471 per year - lower than any year since 2000 except 2007-2010
• Glendale - 3,329 per year - lower than any year since 2000 except 2007-2008
• Chandler - 3,743 per year - lower than any year since 2000 except 2007-2009
• Gilbert - 4,447 per year - higher than 2001-2003 and 2006-2009
• Surprise - 3,053 - higher than 2001-2004 and 2007-2008
• Peoria - 2,762 - higher than 2001-2002 and 2007-2009
• Queen Creek - 3,081 - higher than 2001-2008
• Paradise Valley - 357 - higher than 2006-2010

The annual sales rate will stabilize and then start to rise once demand starts to recover from the slump that started this time last year. The only cities where this may possibly be starting to happen are Cave Creek, Eloy and Florence.


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Lender Conundrum - Part 1 - Lender Circumstances

By and Large, people who buy homes require a mortgage to do so.  Right now, the mortgage business is going through a slack time, so I went to visit a lender to find out what they actually do, why things take so long, and why they are continually asking for more information.

I don't know that I got satisfactory answers to my questions, but I did get some answers.  These answers make sense from the lender's perspective, but some of them leave common sense behind.

The first thing you have to realize is that lenders have come "under the microscope" lately in terms of governmental regulation and public opinion.  The combination of these two things makes the creation of legislation "for the public good" far too tempting for congress to "do something" about.  In this case, the road to lender purgatory was paved with good intentions.

According to the Consumer Protection Financial Bureau, legislation enacted this year "generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.”"

The key phrase in this, and a recurring theme across the legislation, is "ability to repay".  It used to be that ability to repay was left to the lender.  If a person was a risky prospect to make a loan to, and the lender did it anyway, then the lender was left with the problems if the buyer couldn't repay the loan.  That is no longer the case!  It is rare now for a lender to keep the loan that they create.  This will be the topic of an entire blog later in the series.

What "ability to repay" translates to in the real world, is agonizingly minute oversight of lenders that requires them to go over a file - every page - at least 5 times in their process:

1) loan officer reviews docs as they come in
2) loan officer assistant reviews docs as they are placed in file
3) loan processor reviews docs to prepare them for underwriter
4) Underwriter reviews docs
5) Compliance department reviews doc

With all the touching of documents - by the way, these are physical documents - it is no wonder how long it takes to do a loan.  Next up - Reaping of Documents!


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Phoenix Sales Rate Gradually Declining

 From the Cromford Report:  For Greater Phoenix as a whole, the annual sales rate has been in decline since November 2011. The rate for June 2014 is similar to June 2003. However the population of Maricopa County has grown by 22% since then while the population of Pinal County has almost doubled. If we select Maricopa County only, we see an annual sales count of 69,468, similar to May 2003. Pinal's annual sales are at 7,066, which is close to the pre-crash peak in December 2005. Pinal's all time high was back in April 2010at 11,106, when more than half the sales were lender owned or HUD sales.

If we look only at normal non-distressed sales, the Pinal County has been declining since February 2014 while Maricopa has been flat since December 2013. Much of the missing growth is in the price ranges below $200,000. Above that figure the annual sales rate for non-distressed homes is still growing, albeit at a modest rate. However below $200,000 the sales rate has been declining since October 2013.


This chart - normal sales below $200,000 for all of Greater Phoenix - appears to have a predictive quality. It was rising quickly from Jan 2001 to Feb 2005 then collapsed. It recovered starting in 2009 and then hesitated between mid 2010 and mid 2011, only to grow strongly until October 2013 when it started to decline gently. If you had been using it as a market signal between 2001 and 2014 it would have served you very well. This is no guarantee that it will do so in future, but personally I am watching closely to see the direction this chart takes over the next 12 months.

Yes, It Takes Longer to Sell Now

This has been an interesting year, because so many people think I am exaggerating when I say that the average time on market is 90 days!  I usually get a "yeah, sure..." type of look and response.  They think that "just last year, homes here were selling in a couple weeks, and now it will take 3 months?  No way!".  I can't blame them for this line of reasoning, if I were not as "tuned in" to the market as I am, I don't know if I would believe me either.

Here are two graphs that show just how much the market has changed since last year, and how different the patterns are than they used to be.

#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

The Importance of Questions

As a listing agent, I have lots of interesting conversations with Buyer's agents.

Usually, when I receive an offer, all I get is an email.  Sometimes it has an "important" flag, and sometimes it doesn't.  It is rare that I also receive a phone call to let me know that an offer has been sent, on the off chance that it was sent to the wrong email address.

When I get the offer, the first thing I do is call the other agent and ask them lots of questions about their client, the activity they have had, and about the lender.  For some reason, this seems to annoy many agents!

Why would a Buyer's agent be annoyed at getting questions about their client and their history?

I ask questions like:

1)  How long have you been working together
2)  Have you made any offers
3)  Have you ever worked with this lender
4)  Where have you been looking
5)  Why did you choose this house

And depending on the circumstances, I ask other more penetrating questions.  For example, if the Buyer wants huge concessions, I will ask the other agent if their client has any cash, or if the transaction hinges on the Seller providing closing costs.

To me, all these sound reasonable.  I can take the information back to my Seller, and give them a complete picture of the Buyer, and give them a feel for what course the transaction will take.  I can give the Seller a reasonable expectation of the success of a transaction.  I can say "If you accept this offer, your house is going to be tied up in escrow for a month, and you have a 50% chance that it will close", or 75% or 95% or whatever.  However if I didn't ask the questions, I wouldn't be able to say that.

Don't you want your Seller or Buyer to be able to have confidence in their decisions?  That's what the questions are for.  That's why people like my services so much - I actually find information that helps them!


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Canadians and Californians Leaving Arizona Market?

From the Cromford Report:  Demand is down almost everywhere but it is particularly down hard compared with last year for our two biggest out-of-state buyer groups - Californians and Canadians.

• Californians only purchased 295 single family and townhouse/condo homes in Maricopa County during June which is 34% less than in June 2013
• Canadians only purchased 126 homes which is down 33%

The decline is even more dramatic if we go back two years or more.

Overall out-of-state purchases dropped by 16% over the last 12 months so the fall is more than twice as large among our best customer groups. However in-state purchases only declined by 5% so it seems that Arizona's attractiveness to out of state residents has take a significant hit over the past 12 months.

Median Sales Prices in Phoenix a bit Misleading

This graph is misleading.  A quick glance makes it appear that the economic plan is gaining favor.  Yet, a close look reveals that the time frame moves from right-to-left.  Confidence in the plan is actually dropping!

The current median sales prices for the Phoenix area are also misleading - Mike Orr from the Cromford report described it this way:

July 6 - It's all in the mix. If we examine the monthly median sales price for all areas & types we get $196,200 today, which is up 7.2% from this time last year. However the majority of that price improvement is due to a change in the mix, not an increase in home sales prices between July 2013 and now. This is revealed if we look at the individual monthly median sales prices for the 3 major types of transactions across Greater Phoenix:

• Normal sales - $205,000 - up 2.5% from $200,000 last year
• REO sales - $134,045 - down 1.5% from $136,050 last year
• Short sales & pre-foreclosures - $138,000 - down 1.4% from $140,000 last year

Two of the categories are down from last year while the third (and most important) is up a mere 2.5%, not much more than inflation.
The big change is in the share of the market that each transaction type has taken:

• Normal sales - 89.7% - up from 79.5% last year
• REO sales - 6.5% - down from 8.7% last year
• Short sales & pre-foreclosures - 3.8% - down from 11.8% last year

The swing away from distressed sales (which have much lower prices) towards normal sales (which have slightly increased prices) accounts for a much larger increase in the overall median sales price than for any of the 3 individual transaction types.


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman