Welcome to my inspirational, motivation and literally historical look at all 35 of Phoenix’s historic neighborhoods.

This post is the first in what I hope will become a 35-video series of videos. These are the neighborhoods that have officially-recognized historic designation.

So, while there are many neighborhoods in Phoenix with beautiful older homes full of character, folks are always asking me about these. So, I figured I’d put some of what I know on videos. This project may take a while, so please come back and check it out again soon.

And, of course, if you are looking to buy or sell in historic, older or unique Phoenix neighborhoods, please contact me at 602-456-9388.

1. Series Intro and the Willo Neighborhood

Howdee all.

This market is in flux and we don’t know exactly when it will shift back to a seller’s market. Smart buyers are taking advantage of this window.

W are seeing listing numbers continue to grow while the Cromford Market Index (the measure of whether and by how much we are in a buyer or seller’s market) continues to fall to the buyer’s advantage. We have not seen the buyers come out and get active. So, there is some downward pressure on home prices. 

We’ve seen drops in home prices in our area. Two of our listings have dropped in price just last week. We don’t know how long this will last, for two reasons.

First, interest rates will rise this year. While they are not expected to rise dramatically, when people see them begin to rise, they will begin to buy homes.

Second, once prices drop to the point the market correction is completed, the buyers will start buying and prices will continue what I expect to be a long upward trend in CenPho.

If you have any questions about buying or selling your home, please contact me at 602-456-9388 or ken@getyourphx.com.

Make it a great week!

Ken

Active Listings in Phoenix Continue to Increase

But the Cromford Index is telling us that this is more of a buyers' market.

Last week, I noted that we are in a buyer’s market. I know this because of the The Cromford Report –outstanding data analysis group here in Phoenix. They’re kind of like the Case-Schiller Index –except for Maricopa County, and, you know, ACCURATE!

Today, I want to give a little refresher for those who may not be familiar with The Cromford Report and explain this index, which is specific for The Cromford Report. The Cromford Report was started by Michael Orr, who’s a mathematician from Oxford, and the director for Real Estate, Theory and Practice at ASU.

This index is an algorithm that Orr put together to let us know whether or not we are in a seller’s market or a buyer’s market compared to the last balanced market, which was in 2001-2002.

This slide shows that we are in a buyer’s market.

Anytime this yellow indicator is above 100, it’s a seller’s market or a seller’s advantage, where demand is outstripping supply. When it’s below 100, it’s a buyer’s market.

That means there are more properties than buyers out there to absorb them. When we’re right in this little yellow area, that’s what we consider balance.

The reason why this indicator is important is it’s the very first thing to move when there’s a shift. The very last thing to respond is sale price. So when this moves, you get about a three month advance notice of a shift in price.

See in 2005-2006 how that index dropped dramatically below that yellow line  –that was LONG BEFORE we saw prices start to drop. See the image below, for an example of that lag in prices and perception.

As long as this is above 100, pressure is on prices to go up. As long as it is below 100, pressure is on prices to go down. When it’s at balance, prices will stabilize.

When this indicator shifted, you had one to six months to get out of your property while the prices were still going up. When prices are trailing the indicator, it’s lagging. Once it crossed over the yellow line, it took six more months for our prices to peak.

So in Phoenix, our prices, our raw sale price, didn’t peak until 2006. We actually a year and a half advance notice.

That’s the power of The Cromford Report.

Next week: You’ve probably seen all of the price appreciation and all the fun that comes along with seller’s market all within the last two and a half years, but this shift is significant because it’s not a crash. That line dropping below the yellow line in 2005. That’s a crash. Where we are right now, is not a crash. It’s an adjustment to the market, and we might see this bounce around this line a little bit as we find our new normal. But next week, I’m going to show with the evidence in The Cromford Report where we are and why.

If you are buying or selling you need to pay attention to see where things will go. Got questions? Give me a call me at 602-456-9388.

It is official: we are in a buyer’s market again. 

The new year came along and the listings have been coming on, but the buyers are not yet active.  

But, I believe they will be soon, and we might be in a rush again. How do I know? Look at the Cromford Index, below.

The index keeps dropping (meaning it is an increasingly strong buyer’s market), yet the active listings keep climbing. Those prices are going to have to come down and/or buyers will have to come on the market in order for those homes to sell.

I know you’ve heard this before, and at the risk of sounding like a used car salesman, I’ll say it: the time to buy is now. 

If you are buying or selling this is the time you need to watch very closely to see which way it will go. Call me at 602-456-9388 with questions. 

Ya’ll know that I’m a big fan of our locally-owned businesses. That’s why I’m a member of Local First Arizona and why I created the Phoestivus Market.

So, I was happy to have the opportunity to represent a very creative dress and accessory maker here in town as she sells her home and workshop. Jennifer Wood and her husband Aaron are relocating and they are listing a beautiful mid-century home that is tailored for the home-based artist or craftsman.

They adapted a 300 square foot work shop so that Jennifer could produce the French-influenced pieces that you can find at Mignonne Handmade. Jennifer makes each piece by hand, using solid brass and gold plating, as well as high quality, hand-dyed silks.

I particularly like the story behind this listing because it speaks to so much of what his happening in Central Phoenix these days. More and more people are rejecting the long commute and they are working from home. Not only that, but they are finding (or re-finding) craft and trade skills that America lost much of over the last few decades.

The combination of local production and skilled trade means that many homes will adapt to the new normal.

In this case, the owners took a basic extra room, guest house situation and made it a very adaptable space, suitable for anybody who has (or is thinking of having) a home business.

Have a look at the listing here. This is a rare example of a Central Phoenix home with a two-car garage. They’ve created a functional and comfortable space in the back for family. The living room is large and great for kids or entertaining.

Last week we talked about the headlines on the state of real estate in Phoenix as reported by the news media. We saw that the problem is, no one can see beyond about 3 to 6 months’ time, which is why organizations often contradict themselves in their predictions. To really nail this issue we’ll look soberly at two final headline topics. To assist me is Tina Tamboer, from the always insightful The Cromford Report.

First up, Affordability:

Look at how fast and ridiculous these headlines occur.

August 13, 2013, Housingwire – “Only 69.3% of homes were deemed affordable.”

That’s actually a very good number. Between 60% and 75% is normal. If it’s much higher than that means that luxury is not selling. You have to have a certain percentage of luxury in your market. Day after day after day, you can see headlines about how horrible that roughly 69% is, but it’s actually a good number. ~ Tina Tamboer, The Cromford Report

August 14, 2013, DS news.com – “Housing Affordability Drops To 4-Year Low Ends Rates, Prices Rise”

To say that housing affordability drops to a four-year low makes a person feel like saying, “Oh my God, ‘We’re in a bubble.’ But when you look at it, we were in such crazy affordability. When 87% of all homes that sell are affordable to a family making the median income, that’s really high. That just means that there isn’t any luxury selling; that that $500,000-$900,000 market is dead. There was no jumbo financing available for anyone to buy that doesn’t conform to a conventional loan. So, as the jumbo financing came back in is when you see that luxury market start taking market share and then you see your affordability rate go down. People think it’s bad, but it just means that luxury is coming back.  ~ Tina Tamboer, The Cromford Report

August 16, 2013, Wealth Daily – “One Homes Aren’t Affordable.”

August 18, 2013, USA Today – “Housing Affordability Falls With Rising Prices”

August 26, 2013, NBC news – “Home Prices Across the US Defy Gravity.”

September 17, 2013, The Week – “Is Housing Affordability Going Down The Drain?”

Look at that one month spread between mid-August and September 17. The headlines have affordability just dropping down until they declare it’s going down the drain. Such dramatics. Seriously? Give me a break.

Here’s an example of conflicting headlines. Even on the same day. This is about interest rates.

October 1, 2013, US Finance Post – “Mortgage Rates Rise For The First Time In Three Weeks, October 1.”

October 1, 2013, Zillow – “30-Year Fixed Mortgage Rate Continued Downward Spiral.”

October 2, 2013, Mortgage News Daily – “Mortgage Rates Paralyzed By Uncertainty.”

So how’s the consumer supposed to gather their information online? Do you believe everything you read? If you see on the Internet it must be true, right? It’s hard to figure out what the truth is, among so much drama and so many differing opinions. Unless you’re knee-deep in this stuff every day it can become very difficult to figure out whether you should buy or not.

The answer is knowing what to pay attention to more than who and educating yourself.

That’s really the key.

That’s where the data comes in to help you on your individual level. For example, it’s true the data shows that payments today are similar to those in 2008. But it also shows that they’re similar now to 2003 levels. It’s just above $1000 a month. At the peak of 2005, you would’ve paid $1900 a month for a 2000 square ft. home, paying $375,000. Today, that same home is just over $250,000 and your payment is just over $1000 a month; which is just where it was in 2003. So actually, now we are at 2005 prices and 2003 payments. ~ Tina Tamboer

All the media talks about is that affordability is the lowest it’s been since 2008. They just didn’t go back far enough. If you go back farther, that’s where you see that we’re not in a bubble. We are not in a bad situation.

This chasm is what a bad situation really looks like:

The point of this graph is the comparison between where we were in mid-2006 and where we are now at the tail end of 2013. We’re not seeing anything very alarming. We’re coming back down to normal (blue rectangle) after a period of extremely unusual affordability.

If you want to buy or sell, and you want the truth in the headlines you’re reading, please give me a call at 602-456-9388 or email me at ken@getyourphx.com.

In my October Market Briefing, The Cromford Report’s resident expert, Tina Tamboer, talked about about the Phoenix housing recovery not being expected until 2015 “Memory Lane predictions”.

These are a combination of predictions that never happened or that were completely wrong. An example is the Phoenix housing recovery prediction you’ll see from this how much things change as we move forward in time. The January 31, 2011 prediction. According to ABC 15 coverage of the Phoenix housing conference, the 2009 recovery was predicted in 2012; in 2010, they predicted recovery in 2014; and then in 2011, they change it again to 2015.

Listen to all of these predictions that never came true.

Zillo.com said that housing prices were going to appreciate 6.5%, but it turned out to be well over 26%. On August 6, 2012 Case Shiller predicted that Phoenix area home prices would decline year over year in Phoenix but they didn’t change that to a decrease of 9.5% by the first quarter of 2013, followed by a no change, flap Priceline between the first quarter of 2013 in the first quarter of 2014. Not only did neither of those come true, in fact, Phoenix ended up being the number one city in Case Shiller’s own index in 2013. So not only did the first prediction not come true, but the second prediction of no change between 2013 and 2014, we’ve actually seen prices continue to increase with no stabilization of pricing occurring so far this year.

On May 8, 2012 Phoenix business Journal predicted that Phoenix home prices would fall 11% that year. None of these came true. The only one that came true was on May 3, 2012, when CNN money predicted that buying a home won’t get much cheaper. This is the only thing that was anywhere near correct. Super general and not helpful in the slightest.

Let’s look at some news quotes from years past regarding shadow inventory.

It was widely reported in 2011 that shadow inventory would take close to four years to clear. Just over a year later, MSN real estate, said, “Remember the Looming Shadow Inventory? Never mind.”

This next one is really hilarious: Forbes reported in April of this year that not only are we in a bubble, but also, we have shadow inventory. Never mind that these are two mutually exclusive things. You cannot have a bubble and shadow inventory at the same time. One drives prices down. The other is artificial appreciation. These are two completely different extremes.

Doubletalk, Bubble Talk.

All of these analysts are basically fighting amongst themselves:

CNBC – 30 April 2013, “Boost in Home Prices Doesn’t Equal Bubble”

CNBC – 1 May 2013, “Why the Fast Rise in Home Prices Doesn’t Equal a Bubble.”

Yahoo News – 29 May 2013, “Real Estate Euphoria: Is America in a New Housing Bubble?”

The Economist – 7 June 2013, “No US Housing Bubble.”

NuWire Investor – 12 June 2013, “Reports Show No Phoenix Housing Bubble.”

CNBC – 22 June 2013, “Housing Market: from Recovery to Bubble. Already?”

CNBC – 10 September 2013, “CNBC: We’re in Another Housing Bubble.”

Housingwire – 23 September 2013, “Experts: We Are Not in a Housing Bubble.”

The most credible source would be The Economist. NuWire is pretty good. CNBC is just trying to get eyes on their articles. It’s interesting to see how CNBC has changed their headlines between April and September. “We’re a bubble.” “We’re not in a bubble.” “Oh my God, where in a bubble.” “False alarm. No bubble.”

If we look at headlines from 2012 and 2013, regarding jobs and employment, you’ll find the same confusion confliction.

It just shows that we have a lot of confusing, conflicting headlines in the news media.

As a consumer who is not an expert in all of the different indicators, you don’t really know what to think regarding prices and appreciation. All of that can create insecurity in a buyer. Buyers don’t like uncertainty, so headlines like that can create a lot of skepticism. In truth, skepticism is a healthy thing. It keeps our prices from going too crazy.

The whole purpose of showing you these predictions is for you to see that people who do that much predicting this far in advance really don’t know what they’re talking about. The Crawford Report, however, gives what Tina Tamboer calls “headlights”:

If you feel like you’re driving at night in the real estate market, the Crawford Report just gives you some headlights to know if there’s a curve in the road up ahead. We don’t know what the weather is like in your destination. You can do some pretty good predictions on short-term level, but once you get past 3 to 6 months from now, you become a lot less accurate.”

Next week:
Affordability & Interest Rates Headlines recap and what The Cromford Report headlights show in the realistic next 3 to 6 months.

If you want to buy or sell, and you want my headlight view for the next 3 – 6 months in your desired location, please give me a call at 602-456-9388 or email me at ken@getyourphx.com.

The “Debt to Income Ratio” for FHA and even conventional loans is about to get harder to reach and you need to know about this.

First, debt to income ratio is the ratio of debt you are allowed to take on (total debt) as a portion of your income. Your home loan is one part of this debt –also to include credit cards, other loans and car payments, etc.

If your overall household borrowing is at more than 43% when Friday, January 10th, 2014 comes, new lending rules established by the CFPB (Consumer Financial Protection Bureau) exactly one year prior (Jan. 10, 2013) will limit you from taking out a mortgage or refinancing an existing one.

This is HUGE.

How much harder will it be? About 14% harder for getting an FHA loan and about 2% harder for getting a conventional loan.

Right now, FHA borrowers can have a debt to income ratio of 57%. That will go to 43% in January.

Conventional borrowers can have a debt to income ratio of 45%. That will go to 43%, as well.

Let me say it again: This is a HUGE change.

Enter my good friend and frequent contributor to my quarterly Market Briefings, Jeannie Bolger, Sr. Loan Officer (Nova Home Loans, Phoenix):

“I would suggest homebuyers who are looking to enter the home buying market should get pre-approved NOW to see where they will fall in the qualifying ratio “Bucket”.  If their current qualifying ratios are 47% they are going to want to be pre-approved (not pre-qualified) prior to Jan. 10^th, 2014, otherwise they may be limiting the sales price of home they will qualify for.”

A Little Background
The Ability-to-Repay rule made it so that most new mortgages must comply with basic requirements that protect consumers from taking on loans they aren’t able to repay. Lenders are assumed to have complied with the Ability-to-Repay rule if they issue loans that meet certain requirements (including prohibitions or limitations on the risky features that harmed consumers in the recent mortgage crisis). Find the right lender, someone who knows what can and can’t be done with a given file, and you’ll give yourself a huge leg up.

Although the decision was made this past January, the adjustments to the rule weren’t known by the public until May 13th of this year, when it was first reported in a press release by CFPB. US News & World Report commented on the coming change on August 30th.

As I mentioned in my last post in this series about the illusions of real estate sites like zillow.com,  trulia.com, and realtor.com, websites like these do not have as many search description fields compared to the extensive search capabilities of our MLS.

               First, let’s talk about how buyers are affected

In MLS, a property could be ‘active’, ‘UBC’ (excepting backup offers), ‘pending’, ‘closed’, ‘expired’, ‘canceled’. The three websites mentioned previously, only show ‘active’, ‘pending’, or ‘closed’. To show how significant it is to be missing something like the indication of UBC, this typically indicates that the property is accepting back up offers on a short sale, which means you might inquire about  seeing the home.

Another great example is with the Multi-Listing Service, which has a time of more descriptions about what is in the property: for example, is a block construction or wood construction, does the home have any energy efficiency features, and if so, which ones?

               How sellers are affected

If you’re a buyer and you look Zillow.com to see what an estimate is of the value of your home, you won’t find an actual “estimate”, but in fact a word like “Zestimate”. This could be that they can’t call what they do an actual “estimate” legally, just like “Froot Loops” can’t say they have fruit in them.  Functionally, they just don’t have access to the MLS data the way we do and so their estimates of home prices must be constructed from other, less accurate sources. 

For instance, if you go to the County Assessor and see what they estimate as the assessed value of your home, that is not the same as the estimated price or market value. Their assessed valuation, in fact, is designed to be way off of what the market actually is. They are prevented by law from increasing their estimate of your home value too fast so that your taxes (which are based on that value) are not raised too quickly. So a lot of where these websites are getting their estimates of your home is informed largely by, if not based on, the local County Assessor’s office.

In fact, there is a page on the Zillow.com website that describes their estimates and actually says,

“[Our estimate] is not an appraisal”

“Our data sources may be incomplete or incorrect; also, we have not physically inspected a specific home.”

I’d give you the link, but there’s a lot of hobly-gobly-now-you-see-the-truth-now-you-don’t nonsense in the writing that’s hypnotic and designed to get you to ignore the man behind the curtain who’s actually short, timid, and uncertain of much of anything. Need more proof? Check out their ‘Data Coverage and Zestimate Accuracy Table’, where you’ll learn that 86.4% of their Zestimates in the Phoenix area are as much as 20% off the actual sales price.

Let me say that again: 86.4% of their Zestimates in the Phoenix area are as much as 20% off the actual sales price.

This is one of the reasons you want to use a professional agent with access to the MLS. Well, like ME for instance!

If you want to buy or sell, and care about how you are affected as a seller or buyer, please give me a call at 602-456-9388 or email me at ken@getyourphx.com.

 

 

 

They say their information comes from MLS, so what’s wrong with using Zillow.com, Trulia.com, and Realtor.com?

The answer: LOTS!

True. Their data does come from MLS.

BUT…

(and that’s a big ‘ole ‘but’, indeed)

1) It’s delayed

2) Their search results is severely limited compared to MLS.

About that delay, delay, delay…

When you’re a realtor, you’re required to make changes in your listing within a 24-hour to 48-hour period after something has changed with your listing . Say the property goes from ‘active’ to ‘listing’, ‘listing’ to ‘closed’, or what was the final closing price?, and for all that kind of stuff, the realtor must update the MLS listing.

Here’s how it works for websites/companies like those listed above:

That information I just mentioned gets sent to all the companies who have subscribed to the MLS; companies like the three we’ve listed above. They pay all of the different local realtor associations around the country (for example, to the Phoenix Association of Realtors MLS) a subscription fee to get access to the MLS. BUT… it’s significantly delayed. You see, all of the MLS information that gets sent out from MLS goes through an “IDX Repeater”. That information goes out 24 to 48 hours after MLS has been updated.

You may not see that the house you think is ‘active’, is actually ‘pending’. This is the first way in which websites like Zillow, Realtor, and Trulia are inaccurate.

I’ve talked to agents who said that Zillo.com shows a house as ‘active’, when in fact, it hasn’t been active in six months. So when these companies  pay all this money to local MLS services to get this data for the roughly 6000 houses that close every month, the data is late. Way late. Later in effect than perhaps 24-48 hours sounds.

Realtors have a fiduciary responsibility to our clients.

Realtors can’t give up all of the information from the MLS to these other companies because  it could put our clients at risk in some cases. Some information pertains to gaining access to the home or information that could influence a price if known broadly. That’s why there has to be a delay. That’s the first reason the information coming from those kinds of websites is inaccurate.

Next week we’ll talk about the second reason the information is inaccurate: Search capabilities. I’ll give you specific examples of how your search results affect you as a buyer or seller. Like simply delaying information for a couple days, there’s much more to ‘search’ than what these sites are telling you.

If you want to buy or sell, and care about getting your information the second it’s a fact, please give me a call at 602-456-9388 or email me at ken@getyourphx.com.