Our friends at the Cromford Report tell us that we are at the top end of what we would expect in terms of a normal appreciation growth in the market price of homes. See the last post for why that is. Yep! Wholesalers and flippers have been driving up prices.

So, do we need a drastic drop in prices? Nope. What we need is for a move toward balance, at which point there will be plenty of buyers for good looking properties. (more on that in the next post)

So, what does that mean for you?

BUYERS: get your financing in order. As we will discover in tomorrow’s post,  a re-balanced market could happen within a month or so. You are in a great place to start looking. Choose only the best home for you and don’t be afraid to haggle.

SELLERS: If you are on the market now, price accordingly. If you are coming on to the market, do those improvements and make the house really shine. Stand out from the others!

If you are thinking of selling, really polish up that property!

Also, from now until early June is the high season. Sell now if you are going to sell this year!

Call us directly for more insights at 602-456-9388.

If we had water cooler conversations much anymore, we would be hearing about how the market is shifting in Phoenix. We are seeing it in the data, and we are hearing about it anecdotally.

So, here’s a data-driven analysis of what we are seeing right now –why and how you can benefit. There are 11 topics in this series.

So, you know. Just skim until you see what makes your heart go “pitter-patter.”

In short — call us if you need more analysis for your specific situation at 602-456-9388

Active Supply

Our friends at the Cromford Report tell us that we are at the top end of what we would expect in terms of a normal appreciation growth in the price of homes. See the last post for why that is. Yep! Wholesalers and flippers have been driving up prices.

So, do we need a drastic drop in prices? Nope. What we need is for a move toward balance, at which point there will be plenty of buyers for good looking properties. (more on that in the next post)

So, what does that mean for you?

BUYERS: get your financing in order. As we will discover in tomorrow’s post,  a re-balanced market could happen within a month or so. You are in a great place to start looking. Choose only the best home for you and don’t be afraid to haggle.

SELLERS: If you are on the market now, price accordingly. If you are coming on to the market, do those improvements and make the house really shine. Stand out from the others!

If you are thinking of selling, really polish up that property!

Also, from now until early June is the high season. Sell now if you are going to sell this year!

The following is a market update, directly from our friends at the Cromford Report. I’ve been reporting that the seller’s advantage is slipping. Plus, Michelle and I have been seeing anecdotal evidence backs up what you can see below.

While Cromford has some optimism for late February, we suggest that you take an aggressive pricing stance if you are listing your property.

The Cromford Market Index continues to weaken for sellers and we expect a little more negative movement over the next 2 weeks for 2 reasons.

1. Slow contract activity during the first 2 weeks of January led to a larger rise in active listings than last year
2. Low contract numbers in November and January led to a very slow closing rate during January

However, we are more optimistic for sellers than we were in mid January. The second half of January saw contract activity pick up nicely and this has 2 expected results which could show up in the index by mid February:

1. Active listing counts should stop rising and may start to fall back slowly in a normal seasonal pattern  (see chart)
2. Closed listing counts should start to rise as the additional contract signings in January come through escrow

It is not clear if the boost in contract activity will continue into February but a combination of lower interest rates and higher FHA loan limits tends to support that outcome. 

If you want to build the right strategy for buying or selling, call us at 602-456-9388. We can help.

What is the contract ratio?

According to the Cromford Report, it’s down.

That means that the homes that are sold, as a percentage of the total number that are active, has gone down. Fewer houses are selling every month, once on the market.

The specific definition from the Cormford folks: The contract ratio “specifically measures the number of completed sales contracts relative to the supply of active listings. The higher the number the greater the buying activity relative to supply. If this number rises then it is a sign of growing contract activity and a positive signal for sellers. Conversely a falling number is a sign of a weakening market – either supply of active listings is increasing or contract activity is slowing, or both. In a balanced market for normal market segments, the value of the Contract Ratio is usually between 30 and 60. When it lies below 20 the market can be considered “slow” or a “cold market”. Above 60 can be considered a “hot market” and when it moves above 100 we regard this as evidence of a “buying frenzy”.

This chart shows that the contract ratio in January of 2018 was 47% and it is now at 37%. That’s not a small amount. It rose from 2017 to 2018 by 7%, and 3% between 2016 and 2017.

We’ve been predicting a change in the market for about a year, and I think you are about to see it happen.

The Cromford folks are not calling it yet, but they did note that December was particularly slow:

“December was unusual in many ways. The most obvious was the low number of listings going under contract. We can see this from the 18.5% drop in listings under contract compared with the start of the month. Closings were strong for the first 2 weeks of December, slightly higher than in December 2017, but then slumped badly in the second half, ending the month almost 10% down on December 2017. December contained 20 working days in both 2017 and 2018 so we do not need to adjust for the calendar. In every respect, December was a weak month for demand, the weakest December we have seen since 2014 for sales (6,422 in Dec 2014). We have not seen listings under contract this low on January 1 since 2008. Clearly buyers are unenthusiastic about buying homes compared with just a few months ago.”

So, what should you do if you are thinking of listing? Price aggressively!

If you are thinking of buying, now is when you may have a little more leverage. You won’t be able to come in with an offer 10% under list price, but you might be able to negotiate some other concessions.

Call us at 602-456-9388 and we can help you build the right strategy.

I’m sure you’re thinking, “Sewer Line Insurance?! What next? Insurance for my pet halibut called Eric?”

Well, this is actually serious business, especially if you live in an older home. Before PVC sewer pipes, sewer lines from people’s houses were made of iron or clay. Trees, especially those nasty oleanders, love to dig right in to a pipe where there is a little leak and break them open.

There was even a study I heard of on one of my favorite podcasts, Radio Lab, in which tree roots were able to detect and grow toward pipes that were not even leaking. Such as to say, they could detect the presence of water from behind the wall of the pipe.

Crazy, huh? But I digress.

Older sewer lines will eventually need to be replaced. It’s better to replace them if you have insurance. Well, technically, it’s a warranty. But you get it.

So, a few years ago, the City of Phoenix got together with a company called Sewer Line Warranties of America to provide warranties for Phoenix residents. Have a look at the Q&A website at the city.

Basically, you will be covered from the plane of your home (not under the home) to where the sewer line connects to the city’s line. On an average house, replacing that line could cost you $3,000. If you have a larger yard, just keep adding dollars!

So, the annual warranty, will cost you about $75. I have it on my house. I had it on my old house. We encourage our clients to get it, even if their house is not that old.

And, just as importantly, we strongly encourage clients to scope the pipe of any home that is older, has a lot of trees in the yard or where the drains are a little slow during inspection.

It’s definitely worth it.

Well, we go in to 2019 for our January Market Update with a little uncertainty about the market. Anecdotally, agents that I’ve spoken with have not seen the numbers of buyers coming to their doors that they would have liked. I have opined in the past that this may be a result of jitters over the election and the stock market.

But, January is a new month in a new year. So, we are all watching what happens. Thus, we check in with our friends at the Cromford Report:

“December was unusual in many ways. The most obvious was the low number of listings going under contract. We can see this from the 18.5% drop in listings under contract compared with the start of the month. Closings were strong for the first 2 weeks of December, slightly higher than in December 2017, but then slumped badly in the second half, ending the month almost 10% down on December 2017. December contained 20 working days in both 2017 and 2018 so we do not need to adjust for the calendar. In every respect, December was a weak month for demand, the weakest December we have seen since 2014 for sales (6,422 in Dec 2014). We have not seen listings under contract this low on January 1 since 2008. Clearly buyers are unenthusiastic about buying homes compared with just a few months ago.

Sellers are not showing much enthusiasm either, coming up with fewer new listings than last year. However the number of active listings is on an upward trend due to fewer of them going under contract than usual.

We have the Cromford® Supply Index at 66.3 at the start of 2019 telling us that we are missing about a third of the supply of active listings we would normally expect in a balanced market. The Cromford® Demand Index stands at 87.7, the lowest level since 2014 and implying we have about 12% less demand than we would expect in a balanced market. The combination of very low supply and low demand gives us a Cromford® Market Index of 132.3 with sellers having the edge. However the Contract Ratio of only 36.3 (45.4 last year at this time) tells us that we have a cooler market than usual.

Prices are still moving upwards but the annual appreciation rate has stopped rising and is now heading downward. It remains well above the general inflation rate, however. The monthly average price per sq. ft. is up 5.3% from a year ago while monthly median sales price is up 5.9%.

The market will be watching closely to see how many new contracts are signed in January. This will give us a reasonable idea of whether buyer enthusiasm is still waning or is starting to recover. Market distress is extremely low and most home owners have plenty of equity. The only real problem is a shortage of committed home buyers.”

So, what does this mean for you? Well, if you are a buyer, don’t wait for many months to buy, only to find out that higher interest rates have eaten away your buying power. If you are thinking of selling, let’s talk strategy.

Give us a call at 602-456-9388. Depending on when you purchased, you might want to wait, or you might want to get right in to the market.

The Cromford Index shows who has the advantage and by how much. Seller advantage has been slipping since May.

We are fairly certain that the seller’s advantage in the market is slipping right now.

See this blog post from last month about the seller’s market and the Cromford Index for more information about.

It does not necessarily mean that houses will drop in price drastically. Frankly, we won’t know how permanent this change is until the end of January. It is very possible that buyers are staying away because they were watching the elections, the dropping stock market and the President’s trade wars.

However, because there is still a shortage of homes in CenPho, I don’t think any price drop will be too drastic –certainly not as much as it could be in the suburbs.

I’ve predicted a drop of between 5% and 7% over 2019, if the market drops at all.

However, if you are waiting to purchase because you’ve been hearing rumors of an over-heated market, you might want to consider this important point: you may lose any savings from a lower market when interest rates go up. See this article that I wrote a couple years ago on the issue.

And to be sure, the Federal Reserve is making strong noises that it will raise interest rates throughout 2019.

In short, if you purchase a $300,000 home today at 4.5% interest and 5% down, your P&I will be about $1,444, depending on the lender. If that home were listed at 5% less next summer ($285,000) but interest rates go up to 5.5% with 5% down, your P&I will be about $1,537! 

So, if you are waiting, you could end up paying more. If you get in now and make an aggressive offer while sellers are feeling the slow market you could save money and avoid the higher interest rates.

I happen to know a couple realtors who are really good at negotiating offers, by the way. Call us at 602-456-9388. 

Source: AZ Central

This article in the Arizona Republic illustrates a point that I’ve been meaning to write about for a while: the true value of a home warranty.

Even though we almost always negotiate a one-year home warranty plan in to a contract when our clients purchase a home, we do have a healthy skepticism toward them.

Let me start with my own story. When I owned my first home, my air conditioning went out in the middle of the summer. I needed to get it addressed, and in a hurry. I called my home warranty company to get them to send a person out. For whatever reason, they could not get to me for a couple days. So, I called a repairman to help diagnose the problem.

Around that time, they got back to me. When they found out that I already had somebody out, they told me that they could not repair it. I guess anybody but their guy puts a hex on the equipment. Basically, my warranty was worthless in relation to the A/C.

From that point on, until I bought my next home, I self-warranteed. In other words, I tried to put away every year the amount I would other-wise spend on a home warranty. If the warranty costs $500/year, I put that away in an save investment account. I figured that, if an A/C lasts 12 years, then I will have saved most of the cost of a new A/C.

The three biggest costs that arise from maintenance of a home include roof, plumbing and A/C. Warrantees may not cover roofs. They may not cover lots of things. So, I figured I’d be better off saving on my own. Have a look at the article for some good tips and things to know about the home warranty, and what to look out for.

So, why do we write in a one-year home warranty for our clients? Simple, if we can get the seller to pay for it and you get the benefit of some protection for you, why not? Always read the policy, even if you got it as part of the contract.

However, unless you don’t have the ability to save money as I described, or if some part of the home you purchase is already really old and failing, you might be able to take care of it yourself.

Like many things, it comes down to taking the time to read the fine print. We always suggest that you do.

For more tips about home buying, contact us at 602-456-9388.

The Early September Market Update from the Cromford Report shows a continued shortage in the market, especially in homes under $250,000, as compared to last year.

Starting with the basic ARMLS numbers for September 1, 2018 and comparing them with September 1, 2017 for all areas & types:

• Active Listings (excluding UCB): 16,222 versus 17,486 last year – down 7.2% – but up 3.4% from 15,686 last month
• Active Listings (including UCB): 19,831 versus 21,355 last year – down 7.1% – but up 2.1% compared with 19,415 last month
• Under Contract Listings (including Pending, CCBS & UCB): 8,871 versus 9,871 last year – down 10.1% – and down 5.5% from 9,384 last month
• Monthly Sales: 8,230 versus 8,252 last year – down 0.3% – and down 3.7% from 8,548 last month
• Monthly Average Sales Price per Sq. Ft.: $161.10 versus $149.47 last year – up 7.8% – and up 0.2% from $160.76 last month
• Monthly Median Sales Price: $262,000 versus $245,000 last year – up 6.5% – but down 1.1% from $265,000 last month

The supply of active listings without a contract rose 3.4% during the month of August, while total active listings increased by 2.1%. These are bigger increases than we saw in August 2017 so there has been a slight improvement in supply even though it remains very low by normal standards.

The count of under contract listings continues to weaken relative to the last 3 years and indicates a gradual reduction in demand. Demand at the low-end of the market cannot be satisfied as the number of available homes below $250,000 is far too low. With supply moving up a little and demand down a little, it is not a surprise to see the Cromford® Market Index lower than last month. It still remains at a significantly elevated level relative to normal, however, and so we are in a strong seller’s market.

Pricing is behaving normally for a seller’s market with 3Q average and median prices lower than 2Q. We still expect 4Q to hit the high point for the year as any weakness in demand is compensated for by long-term shortages in supply.

If you are looking for more analysis of the market, please call us at 602-456-9388.