If you joined us at the last Quarterly Market Briefing, you saw that we are in a bit of an odd market. Properties over $500,000 are selling quickly because financing above that price (jumbo) has opened up, after years of severe restrictions. Properties under about $200,000 are dropping in price because most of the investors and distressed properties have left the market. Everything, everywhere, is more likely to sell if is properly staged, updated and renovated –unlike the gritty days of the recession.
In a market that Cromford Report founder, Mike Orr calls “boring”, we are seeing a pretty flat market without as much activity as last year –and we are going in to summer. The high-end homes stop selling then as those folks leave the state for the summer. The “middle class” and “working class” homes continue to sell as these folks stay in Phoenix, but might move to a bigger house or a new school district.
Orr points to several causes for a weaker market, which I find more credible, especially the idea that an entire generation of potential home buyers has been undermined by decades of higher university tuition and therefore higher debt. But, don’t get me started on the way our legislature has failed eduction. It almost makes me want to run for office.
To quote Orr:
Now we are seeing an increasing number of commentators adding to the discussion of what we believe are more realistic causes of the continued weak demand for homes to buy, not just in Phoenix but across much of the country:
- low participation by first time home buyers
- the inhibiting effects of massive student loan debt
- millennials preference for the flexibility of renting
- the foreclosure wave in 2008 through 2012 which has introduced a new sensitivity to the fact that home ownership can sometimes be financially hazardous
- a large tranche of former home owners who have not yet repaired their credit enough to re-enter the market
- low rates of household formation, especially among 20-30 year-olds
- a growing wealth gap causing stronger demand for high end homes but leaving large numbers of people renting for the foreseeable future
Back to me: So, what are you to take from all of this? Two things:
1) If you are a buyer, get in the game now while sales are low, other buyers are delaying for all the reasons above. You will be one step ahead later, especially as interest rates have only one way to go –up. This is where I rock on my figurative rocking chair on my imaginary front porch and tell you that I wish I would’a bought my first house a couple years before I did. I’d be fair bit better off, I’ll tell ya. Whipper-snappers!
2) If you are a seller, you are still doing better than you were even a year ago, because sales for nicely-renovated and properly priced homes are good. Just expect to update that kitchen, or bathroom, etc.
See below for two charts.
1) The number of active listings in CenPho between about $150k to $500k are shrinking in number. So, if you are looking, there is a decreasing number of homes to see (probably through the summer). If you see something that looks good, expect it to be gone in hours or a day. So, be ready to move quickly.
2) The Cromford Index tells whether we are in a buyer’s market or a seller’s market, and to what degree. The dividing line is 100. So, we are squarely in a buyers’ market, but not as far in to that category as we were in 2008-09. However, this may be just a condition through the summer.
