The Good News Is

The numbers for the month of December 2018, and a look at the 2019 Real Estate Market are painting a picture of what homeowners, new and current, can expect. The good news is, it is not a “Sky is falling” scenario, but we need to be realistic about the current state of the market. We have a lot of numbers to look at, so I’ll get straight to the point.

First, let’s take a look at the sales from Dec. 2018. These numbers, courtesy of the Arizona Regional Multiple Listing Service (ARMLS) show a continued slowing in sales month over month as well as year over year. There are a couple of factors that are causing this. One being the rising interest rates throughout 2018 that we have been discussing.

The other factor being (in my opinion) bad advise from listing agents to sellers. They spent 2018 seeing low inventory as well as rising prices and advised their clients to reach for higher and higher sale prices, as they would in a typical “Sellers Market”. However, buyers were simply not paying those prices. As you can see in the graph below, sales continued to slow month over month in the second half of 2018. Something I have pointed out repeatedly.

 

The “Low Inventory” aspect of the market continues as the amount of homes on the market dropped a touch. The prediction is that will add to the trend of higher asking prices in this faux seller’s market. I can tell you that as a “Man on the street”, I am seeing lots of “Price Reduced” notes recently. This shows that sellers have over priced (in a sense that buyers aren’t paying their asking price), and they are dropping the asking prices down trying to find the “sweet spot”. I call that chasing a falling market. Not a crashing market…simply an adjusting market.

The next two graphs are the most telling to me. The first graph shows the average list, or asking price around $389k. As you can see it is slowly adjusting down. Chasing a falling (adjusting) market.

The second graph show the actual average sale price around $326k.

On average it’s a $63,000 difference between what sellers want, and what buyers are willing to pay. This is not a sellers market…but it’s also not a crashing market. We are searching for the afore mentioned “Sweet Spot”. 

I tend to approach things cautiously and my attention is drawn to one number that was released this month that needs attention, and that is the Distressed Property (REO, Foreclosure) number. ARMLS actually adjusted their numbers for the last 5 months as they had received bad data, and that number shows an ever so slight trend upwards.

The reason for this could be that homeowners who bought 5-8 years ago when prices were rock bottom made the typical mistake of cashing in on equity and over extending themselves to the point of not being able to pay the loan(s) on their homes now. That is speculation on my part, but experience tells me that cashing out equity is very appealing to some, and not always a great idea.

Whatever the case may be this number, while nowhere near a worrisome level, has been rising. It is one to watch.

 

The bottom line:

Sellers: Don’t be fooled. Your home is not worth more than what a buyer is willing to pay for it. An average asking price $63,000 over the average sale price should tell you that most sellers are getting bad advise from their agents. BE WARY OF AGENTS THAT PROMISE A WINDFALL!!!

If given the opportunity to earn your listing I will give you a realistic snapshot of ACTUAL comparable sales in your area, advise on how to sell your home fast and maximize your sales price.

I most certainly will not tell you what I think you want to hear simply to get your signature on the listing contract. Don’t fall in the “chasing falling prices” trap. Let me analyze the numbers with you, and get your home sold!

 

Buyers: I say it repeatedly. Now is the time to buy! Interest rates are continuing to trend upwards, and predictions are they will do so at a rapid pace in 2019. Historically, they are still fantastic, but you want the very best rate available and that opportunity is now.

Home prices are rising. Slowly, but they are. Waiting a few months will likely cost you a few thousand dollars more. Is that cash out of pocket, or do you give up your pool, 3rd garage, larger yard to offset the higher cost? Buy now, and don’t give up a thing!

 

I have an awesome team of professionals that I work with in all aspects of real estate. We have already helped many buyers set a path to home ownership whether they were ready to go, or needed guidance on credit etc. to get there. We are here to help you live your dream!

Call me, refer me, and THANK YOU!  (602) 818-6065 – Kevin@GiantAgent.com

 

 

Posted on January 21, 2019 at 5:43 pm
Kevin Jacobs | Category: Affordability, Market Information, Mortgage Rates

Home Sellers Adjusting Prices Down

We have discussed at times in the last few months the fact that asking prices for re-sale homes have been rising at the same rate as new contracts are falling. This now has home sellers adjusting prices down to meet the “comfortable purchase price” that buyers are willing to pay. In a sense, sellers are beginning to chase a falling market.

How far it will fall is hard to determine, and there are many factors that will effect where the “bottom” will be, but personally, I don’t see a massive disruption coming. This feels like an adjustment, not a bubble.

ARMLS released the numbers from October, as well as some expert opinion that I’d like to share with you.

First, the total sales in October on the surface look pretty good. However digging deeper, for those that are inclined to do so like “The Cromford Report’s” Michael Orr, an expert in Real Estate trends, you’ll see that they are actually a tad weaker than they should be.

He explains that the month October had 1 more working day in it in 2018 than in 2017. You may ask, “What difference does one day make?”. According to Mr. Orr, it makes about a 6% difference. In his opinion, October 2018 should have finished with up to 6% more closings due to the extra “Work day” available.

Mr. Orr Stated:

What stands out to me in Mr. Orr’s comment was the last sentence. This is the message that I have been sending for some time now to sellers, “Buyer enthusiasm is fading”. Due to this, “Price cuts are getting more common.”

With my most recent listing I discussed this current market adjustment with the seller, and we priced the home at the current market value based on real trends. 3 weeks later we have a full price offer (which is in line with the comps).

A listing on the same street, with the same floor plan was priced based on the upward swing of selling prices this year and reaching for about $13,000 to 15,000 more than the high comps. It was listed a week prior to ours, and is today still on the market.

The market is falling away from that seller, whereas my client saw the trend for what it was, and got his home sold.


Let’s look at List Pricing vs. Sales Price from October.

As you can see below, the “New List Price” averages went up yet again, but look at the line on the chart. It seems to be leveling off. This seems to be reality setting in and agents (hopefully) are done with the “Reach for the starts” pricing advise.

Compare the “New List Price” line to the “Sale Price” line and notice how the trend up for “New” is not followed by the actual “Sale” trend. Buyers are not chasing the pricing up, it’s that simple.

What is not clear is why they aren’t. It could be rising rates, it could be that the demographics of “Millennials” simply prefer to rent, it could be folks are satisfied with their current situation? Whatever the cause buyers are, to paraphrase Mr. Orr, simply less than enthusiastic right now.

Overall, this quiet trend is not concerning to me. Buyers are out shopping. Fewer of them, but they are there.


What does concern me, just a little bit right now, is a very slight uptick in distressed sales. Foreclosures are up ever so slightly. This is a number I am going to watch in the coming months.

Right now they are still very low, so it’s not an issue, but something to watch in nonetheless…if you like watching number in real estate like I do that is.


So, bottom line, here’s my advise:

Sellers. Make your home “The One”! Put in some work tp freshen your property. Paint, perhaps new fixtures, flooring, make it stand out and give the buyers a feeling of “Move in ready”. In most cases you will fetch a more desirable sales price that will earn your investment back, maybe even a bit more, and your home should sell quicker than most.

Buyers. I have said it all year…NOW IS THE TIME! Even as pricing adjusts down, any rise in interest rates will offset the price drops. Our parents and grandparents had rates of 9, 10, even 18%…5% doesn’t look so bad when you consider what it could be.

I have a great team of professional lenders on my team with programs to fit every buyer. If you’re not ready yet, they will help you set a plan to get there with free advice and guidance. Give me a call if you would like to chat with them.

If you are ready to buy, or sell, or know someone that is, I would be honored to earn the business. Give me a call, let’s get started today! (602) 818-6065 or Kevin@GiantAgent.com

 

 

 

Posted on November 27, 2018 at 11:28 pm
Kevin Jacobs | Category: Affordability, Market Information, Mortgage Rates | Tagged , , , , , , , , , , , , , , , , ,

Interest Rates Have Risen

As expected, mortgage interest rates have risen. Many consumers understand that a change in rates will effect the cost of buying a home, but few realize the impact it has on your pocketbook.

In January, I posted a blog with a chart that showed the potential impact of rate increases in 2018. Some feedback was, “They won’t increase THAT much this year”. Well as you see above, they did. Those same people that felt it wouldn’t be a big impact are likely regretting waiting to purchase their new home. Let’s take a look at where we were, where we are now, and where we may be heading.

The afore mentioned chart is below, remember this was drafted in January when the “Current Rate” was around 4.35%.

In a simple purchase scenario where the buyers monthly mortgage payment budget is about $1525 per month, a conventional 30 year mortgage at 4.35%, with a 20% down payment would have yielded a purchase price of about $383,000. That was then…what would the purchase price be today at a rate of about 5.1%?

Looking at the same 30 yr mortgage, with a 20% down payment and the intention of keeping the monthly payments in the $1500-1525 range, todays buyer can now afford a total purchase price of approx. $331,800.

That is a difference of $51,200! In order to get the same house, today’s buyer can either increase the monthly budget over $150 per month, or come out of pocket with a larger down payment, north of 20%.

The other option is to just buy less home. So what should they give up? Location, size, a pool, home office, chef’s kitchen? Tough decisions to make there.

So where are we going now? Well, the experts in the industry see more rate increases coming, maybe even by the end of 2018, certainly in 2019. Another 1/2 to 1% increase may just price some potential homeowners out of the market.

My advice, let’s go get your home today! I have great business partners in the lending industry that will work tirelessly for you to ensure that you get the best possible loan terms, and you get into your home before rates increase more.

Call me, let’s chat about your individual situation today.

(602) 818-6065 – Kevin@GiantAgent.com – www.GiantAgent.com

Posted on November 2, 2018 at 8:01 pm
Kevin Jacobs | Category: Affordability, Mortgage Rates | Tagged , , , , , , , , , , , , , , , , , , ,

‘Tis the Season for Phoenix Area Real Estate

The real estate market in the Phoenix Metro area continues to strengthen. We are “in season” some might say, buyers are out shopping and that is creating a healthy increase in sale prices. 

We are still not seeing a plethora of bidding wars driving pricing to unsustainable levels as we have seen in the past (circa 2005-2008). Personally, I don’t see that happening again anytime soon.

We do see a steady, healthy increase of pricing that is considered to be normal growth in a healthy economy.

Below are some statistics from the month of March showing the continued growth. Couple these stats with increasing mortgage interest rates and the results are going to be:

For Buyers. Waiting too long to buy could result in a higher purchase price and a higher monthly payment. You may be forced to give up a want or need in your new home to keep your monthly payment within your budget.

For Sellers. The value of your home is increasing, however, history shows that it could be short lived. Just like the stock market you want to “sell high”, but waiting too long could find you on the other side of the hill where you need to lower your price and offer many concessions.  Buyers are out there, but they are savvy. A fair deal now sells at a very good price. Waiting could put you in a less positive position. 

Consider too that you are likely looking to buy a new home. The increased cost of the new home will offset the “few thousand more” that you might get by waiting. Now is a good time to sell.

Let’s look at the numbers:

Monthly sales are up! As I said before, this is a great time of year to sell as buyers are shopping before the summer heat hits us. 

 

There are more homes coming on the market, again due to the time of the year, but we are still well below average for total listings available. This is a “sellers market”, but buyers are seeking out fairness. Overpriced homes tend to sit.

Take the advice of your listing agent on pricing and strategy in order to sell as quickly as possible for top dollar.

 

Not a surprise to see the total days on the market go down a bit this time of year. This number is the average in the entire Phoenix Metro area. Your neighborhood will vary.  Some areas are selling in a matter of days.  Contact me if you would like more specific information. 

 

To illustrate the “Sellers Market” a bit more.  If there were no more listings added, and the pace of sales continued as they are, there would be no homes for sale in the Valley in just over 2 months. Of course that’s not going to happen, but it shows that it pays for you to have a well connected real estate agent to find your home, get your offer accepted, and get it closed  before someone else snatches it up. 

 

To Summarize:

Sellers – Now is the time to get a great price on your home. Use an experienced REALTOR® to advise on pricing in your neighborhood, and market your home directly to buyers and buyers agents, stage your home beautifully, and get it sold fast!

BuyersDon’t wait! Interest rates are on the rise as expected. Just last week they went up about .15%. That may not sound like a lot, but when you look at the monthly mortgage payment that you have allowed in your budget, an increase of .15% could force you into a lower priced home for the same monthly payment.  Perhaps you won’t be able to afford that 3rd garage, or extra bedroom?

Bottom line. REALTORS® are here to maximize your value, buying or selling. We work for you in your best interest, and I would love to be YOUR REALTOR®.

 

 

 

 

 

Posted on April 27, 2018 at 6:16 pm
Kevin Jacobs | Category: Affordability, Market Information, Mortgage Rates, Uncategorized | Tagged , , , , , , , , , , , , , , , , , , , , , , , ,

Why rent? You CAN buy!

Recently, I saw an article from the Urban Institute about a new metric they created called HARI (Housing Affordability for Renters Index). The index measures the percentage of renters who can actually afford to own a home.

To simplify, they examine the price range of homes available on the market, what the cost of ownership would be, and compare it to what renters are currently paying monthly. The results paint a picture that renters should explore.  

I was surprised to see that 31% of renters may not be aware that they can own a home in the Phoenix Metro area. 

Yes! You read that right. Almost 1/3 of renters may not realize that they have the option to own a home. It seems that the healthy economy paired with loosening lending restrictions has created new opportunities for people that they aren’t aware of.

Are you one of those renters? Do you know someone that may be? 

Reach out to me today. Along with my lending partners we can review your current situation and lay out a roadmap to home ownership. Let’s flip that monthly rent payment around and get it to work for YOU, and not some landlord.

 

(CLICK HERE to read the article from the Urban Institute.)

 

Posted on April 3, 2018 at 5:06 pm
Kevin Jacobs | Category: Affordability, First Time Buyer, Market Information, Mortgage Rates | Tagged , , , , , , , , , , , , , , , ,

How Does A Mortgage Rate Increase Effect Your Buying Power?

With the booming economy and rising consumer confidence in the United States, it is almost assured the we will see an increase in Mortgage Interest Rates in the coming year. Many experts expect an increase of 0.5% by mid year, and up to as much as 1% by December.

That doesn’t seem like a big deal. After all, generations before ours had rates of 15, even 18% for mortgages. We are no where near those rates of the past…right?

Think of it in terms of your personal “Buying Power”.  How much home do you need? How much home do you want?

An interest rate increase of as little as 0.5% can drastically change how much home you can afford. As a result, you might not end up with the perfect home for your family.  That is without paying thousands of dollars more either out-of-pocket as a down payment, or over the life of your loan.

In 2018, the best time to buy your new home is right now.  Let’s get started, save you thousands of dollars, and get you your perfect home!

Click on this link (Mortgage rate increase effects) for an example I drafted to show how your home buying power will change when those rate are raised. Feel free to email or call me with any questions.

 

 

 

Posted on January 23, 2018 at 2:00 am
Kevin Jacobs | Category: Mortgage Rates, Uncategorized