Sellers Still Retain Control

Posted on by Russell Shaw

Happy New Year!  We hope that you had a wonderful holiday season.

2018 closed with a bit of a whimper in the valley as buyer demand, after years of unflinching strength, finally wavered.  Demand began to drop in July – rather precipitously by October – before settling in to a gentle landing to end the year.  Despite lessened demand and the dreary national headlines to the contrary, 2019 begins in the valley with sellers still retaining the upper hand.  To summarize the market conditions, no one says it better than Michael Orr of the Cromford Report:

“The reality in Greater Phoenix is that we have shifted from a strong seller’s market with high volumes to a moderate seller’s market with slightly lower volumes. In due course this is likely to adjust appreciation rates from the 8%-10% level to more like 6%-8%. If the CMI** drops below 120 I would change our prediction to 4%-6% but at the moment there is little sign of a fall much below 130. At a CMI of 100 we would expect appreciation. Of course things could change at any point but it would need a new factor coming into play.

The housing market has seen 3 factors put a slight dent in demand:

  1. Mortgage interest rates are at a much higher level than in 2017, though still far below long term averages.
  2. The cost of home ownership has risen faster than rents.
  3. The tax law changes since 2018 have removed many of the tax benefits of owner-occupied housing relative to renting.

We definitely do not have anything approaching a crash or a slump, which would require a large increase in supply. Supply remains weak because many existing homeowners are more reluctant to move. Doing so would require them to give up their existing cheap loan and take out a new more expensive one. They are tending to stay put, which is good news for the likes of Home Depot and home remodeling and redecorating companies.

Other parts of the country are reporting weaker markets at the upper levels, but in Greater Phoenix, the luxury market is looking strong. Supply of higher end homes is down from last year and demand is holding up rather well. Of course the luxury market in Arizona is priced like the mid-range market in many parts of California. Population flows are favoring Arizona too, so it looks as though Phoenix will have one of the leading housing markets over the coming year, even though it is likely to be somewhat less active than 2018.”

So what is the take-away for sellers and buyers in this market?  Despite lessened demand, buyers are still exceeding the chronically low supply leaving most sellers in a gentle seller’s market.  The weakened demand is however contributing to more price reductions and a greater likelihood of sellers paying buyer concessions during contract negotiations.  For buyers, any plan of waiting for lower interest rates and lower prices will likely result in a very long wait. Even balanced markets typically appreciate at the level of inflation – and it is not likely to be in a balanced market in the first quarter of 2019, perhaps not even in the year. Therefore buyers will still be better served shopping in this gentle seller’s market than waiting for a buyer’s market to arrive.

Of course, neighborhoods and price points vary in their supply and demand.  For details on your specific area, please contact us.  We are always here to help!  Thank you for all your support in 2018.  Here’s to a wonderful 2019.

Russell & Wendy Shaw

(Mostly Wendy)

**Cromford Market Index; definition: is a value that provides a short term forecast for the balance of the market. It is derived from the trends in pending, active and sold listings compared with historical data over the previous four years. Values below 100 indicate a buyer’s market, while values above 100 indicate a seller’s market. A value of 100 indicates a balanced market

Supply and Demand Seesaw

Posted on by Russell Shaw

The seesaw of supply and demand is our best barometer of the health of the housing market – so naturally we closely watch it.  We have been in a seller’s market for such an extensive period that like most veteran agents, we are expecting a correction.  A rebalance of the market we hope will come in the form of a gradual increase in supply due to a lessening of demand; ultimately resulting in a balanced market.

In fact some early signals seem to indicate supply is building in most price points.  Here are some numbers from the Cromford Report:

“October marks the 4th month in a row that supply has continued to rise between $200K – $400K, which is good news for many buyers as it provides them with more choice and fewer competing offers.  However, for those buyers with budgets under $200K, this trend in supply doesn’t apply to them and their choices are still extremely limited.. 

As usual, nothing is quite that simple.  Supply comes from homes already on the market (not yet sold) and new listings being added (or built).  But at the same time the supply seems to be increasing – the first weeks of October showed a dearth of new listings coming to market.  In fact, new listings hit historic lows for any previous October.  The Cromford Report further explains:

We are examining the first week of October in more detail to study how new listing counts dropped unexpectedly. We counted 2,017 new listings in Greater Phoenix during the first full week which is down dramatically from the same week in 2017. The overall decline is 23% year over year and this is the lowest number of new listings we have ever seen for the first week of October. The previous record low was 2,343 in 2014….

For whatever reason, sellers are surprisingly rare this month. Even if we change the measurement week to Oct 3 to Oct 9, the picture does not change – new listings down 25% from 2,520 in 2017 to 1,885 in 2018. This latter total is once again the lowest we have ever recorded for those dates.

What is happening?  We can only speculate about why October has had such a low supply of new sellers.  Certainly consumer sentiment is a factor.  A large stock market “correction” can affect the market.  Politics can of course play a role.  Also, interest rates affect not only buyers but sellers too.  Again, the Cromford Report points out:

Mortgage rates tend to increase when the economy is strong…. People usually worry about higher rates discouraging buyers and while that is a reasonable concern, I am also of the opinion that higher rates discourage sellers, because in most cases they are going to move somewhere else and pay a higher rate too. If they have the option to stay put, they may choose to do so when rates are increasing.

 … Freddie Mac reported an average of 4.63% during September for the 30 year fixed. This is the highest we have seen since May 2011, more than 7 years ago. Of course in 2011 this seemed like a very low rate because we had experienced rates over 6% almost continuously between 1970 and 2008, with occasional short periods in the mid 5s.

Now we have a lot of homeowners with loans bearing rates of 3.5% to 4.25% taken out over the past 7 years. To move to a new home, they will need to pay off that cheap loan and take out another at closer to 5%. This effect is likely to be a drag on the supply of re-sale homes for a long time to come. It is likely to be good news for remodeling companies as many home owners decide to preserve their cheap financing by staying in place and spending their upgrade money on improving and modernizing their existing home instead.

Of course we cannot ignore the demand side of the equation.  A gentle lessening in demand appears to be underway – which ultimately effects supply.  When fewer buyers buy, supply typically begins to rise.  Which piece of the equation will affect 2019?  Will the lessened demand help shift the market towards balance or will sellers be reluctant to sell causing supply to remain scarce?  Either way, we will continue to monitor it and comment on it.

In the meantime, we want to give our heartfelt thanks for our wonderful friends and clients who place so much trust in us.  We are grateful every day.  We wish you all a wonderful holiday season.

Russell & Wendy Shaw

(Mostly Wendy)

Arizona’s Scorpion Threat

Posted on by Russell Shaw

When you live in Phoenix, you’re living in scorpion territory. That’s simply a fact that comes with living in the Arizona desert. During the winter, scorpions are less active and can be found indoors. In the summer, scorpions are actively hunting for food or a mate and can be found inside and outside. Scorpions like to shelter in dark cool places with an air flow, like cracks and crevices inside block fence walls or under palms tree bark.

Living in scorpion territory doesn’t mean you have to live WITH scorpions in your home. If you have scorpions inside your home, contact an experienced scorpion control professional to evaluate the situation and recommend an effective treatment for you.

Arizona’s Scorpion Threat

The Phoenix, Arizona area is in the Sonoran Desert, and scorpions are native to desert environments. If you live in or near Phoenix, chances are you’ll run into scorpions on your property or in your neighborhood sometime. You can refer to recent maps to see where scorpions have been reported in the Phoenix area.

Arizona is home to the Arizona Bark Scorpion, which the most lethal venomous scorpion in the United States.

It can also be found in parts of Nevada, Utah, New Mexico, and Mexico. You can find other scorpion species in Arizona as well, like the desert hairy scorpion. However, other scorpion species in the USA do not pose a medical threat like the Arizona Bark Scorpion.

You can recognize an Arizona bark scorpion by the following:

  • Length – From head to stinger, a mature Arizona bark scorpion has a slender body that measures 2.7 to 3.1 inches;
  • 2 dark eyes on top of its head, and 3 eyes on each side of the head;
  • Eight legs;
  • Color. Arizona Bark Scorpions are tan in color. However, they can be yellow or even almost orange when they molt. Though these scorpions typically do not have markings, you could find one with stripes along its body and tail;
  • The Arizona Bark Scorpions has a “subaculear tooth”, or a small bump on the tail that juts out beneath its stinger.
  • The easiest way to identify an Arizona Bark Scorpions is by watching it! These scorpions lay their tails down parallel with the surface they are on when they’re at rest. Other scorpions keep tails up over their bodies.

When you come into contact with a scorpion, and you’re not sure which species you’re facing, exercise caution and treat it like it is venomous.  Arizona bark scorpions are nocturnal and capable of climbing textured surfaces, so be aware that you can find them on walls, ceilings, in trees and high on shelves and furniture. This includes brick walls, stucco walls, wood paneling, and drywall. Scorpions can also survive underwater for hours, so it is possible to find one alive in your swimming pool, sink, bathtub, or toilet. Arizona bark scorpions tend to gather in groups (especially during cooler months) so when you see one, others may not be too far away.

Prevent Scorpion Infestations in your Home

Arizona Bark Scorpions are attracted to cooler, moist areas that have sufficient airflow. Specialized scorpion control treatments treat all cracks and crevices around your home and yard to eliminate scorpions inside and prevent further infestations. Another way you can reduce your chance of scorpion infestations around your home is to seal up any holes or cracks in your foundation, sidewalks, block wall fences, and exterior walls. You should also repair and replace old door sweeps and weather stripping around windows and doors.

Arizona Bark Scorpions eat crickets, cockroaches and other insects. You can help prevent infestations of pests to help discourage a scorpion infestation. After all, scorpions are predators that follow food sources.

A few places where you might find Arizona bark scorpions inside your home include:

  • Under Cabinets;
  • Running across the floor;
  • Between floors and baseboards;
  • Inside Sinks and Bathtubs where they get trapped;
  • In Shoes and clothing where they go for quick shelter;
  • Hanging from the wall or ceiling; and
  • Inside any cracks and crevices especially concrete cracks and crevices!

How & When to Hunt Scorpions

The Arizona bark scorpion survives 12 months out of the year. Usually, scorpion season begins when the temperature hits about 70 degrees Fahrenheit, which is usually in the early spring. This is when scorpions become most active.

You can hunt scorpions around your home. Generally, you’ll find them in the dark and just before sunrise with a black light – flashlight. New moon and cloudy nights tend to be the best for hunting scorpions because they’re the darkest.

When you’re searching for scorpions in your home, don’t forget to look up high. As we mentioned, Arizona bark scorpions climb. Shine your flashlight high on walls and ceilings, down by the concrete foundations, and on block wall fences. Instead of using a regular flashlight, use a black light.

Arizona Bark Scorpions glow under black light and look almost fluorescent. Pick scorpions off walls, ceilings, block wall fences, branches, and out of debris piles with needle nose pliers. Place them carefully in jars and screw the lids shut. Using a glass jar to collect scorpions prevent scorpions from climbing out because they can’t climb the smooth glass surface. When you are hunting scorpions, wear thick gloves to prevent stings.

If you do not feel comfortable killing the scorpions yourself or your infestation is too large for you to handle on your own, call a professional pest control company to handle the job. An experienced scorpion control professional will not just kill scorpions on contact, but they prevent scorpion infestations in the future.

Residential Pest Control for Scorpions

Scorpions aren’t like other kinds of pests. They can’t be controlled with general pest control like other types of bugs. Scorpions need to be treated with specialized products formulated to be effective specifically on scorpions.  There are several over the counter “scorpion killer” products at home improvement stores but don’t be fooled, this may be best left to the professionals. Over the counter products only kill scorpions when they are sprayed directly. They DO NOT keep killing or repelling scorpions after they dry.

Scorpion populations need to be managed with compounds specifically formulated for scorpions. Unlike other pests, which can be managed with less potent compounds, scorpion control involves potent compounds mixed with extended exposure agents. This is because scorpions tend to hide out in nooks and crannies throughout homes and yards. Effective scorpion control keeps killing scorpions even after treatments have dried and keeps working for about a month.

Work with a Scorpion Pest Control Pro

When you have scorpions in your home and property, work with a scorpion pest control professional who can eliminate the problem and prevent future infestations. Contact Responsible Pest Control today to set up your initial consultation, and start effective scorpion pest control for your home.

Sinatra and Thelma

Posted on by Russell Shaw

Sinatra is a tuxedo cat and he is handsome, fluffy, snuggly and very social.  He is a mature gentleman with a birthdate of 12/23/2012.  Sinatra prefers wet food over dry and he will come running when a treat bag rattles.  His treat of choice is Temptations, and he has been known to send volunteers out to the store when the shelter runs low.  Sinatra also has a way with the feline ladies.  Thelma is his tabby, long-haired girlfriend.  If you are looking for two cats, Thelma is also available and her birthday is 5/26/16.  Sinatra loves to be up high, so if you have cat trees or shelves, Sinatra will make himself right at home!  Home Fur Good open Thursday, Friday and Saturday from 11am – 4pm and is located at 10220 N. 32nd Street in Phoenix.  Home Fur Good can also be reached by phone at 602-971-1134 or by emailing Info@homefurgood.org.  You can also check out the website at HomeFurGood.org.

Is the Housing Market Losing its Steam?

Posted on by Russell Shaw

Recently national housing statistics have made headlines regarding the diminishing demand of homebuyers.  This is understandably unsettling to homeowners in the valley who recall all too well the housing crises where supply and demand went topsy turvey.  As interesting as it may be to listen to national housing statistics, they are generally antidotal.  Even in the midst of the housing crisis of the “Great Recession” there were markets that saw little downturn – proving that real estate markets are local. Is the valley in the midst of dwindling demand?  The short answer – a slight abating of demand is possibly underway.  Is it so great to affect pricing or cause any significant impact to our market?  No.  This is due to the largely chronic lack of supply.  Perhaps some numbers can better put this in perspective.

Demand The first thing to understand is the seasonality component of real estate – i.e. different times of the year perform differently.  Headlines can rather easily claim “buyer demand is down” simply by comparing April’s numbers to September’s numbers. Buyer activity reaches its peak in April and then increasingly slows through the rest of the year.  To have meaningful comparisons year over year numbers should be examined.  One key measurement of buyer demand is contracts.  We can then see for instance, that contracts have dropped 26% from the April peak this year, compared to a 20% drop in 2017 over the same time period.  That can lead us to the conclusion that a slight weakening in demand may be underway.  Slight being the keynote concept.

Supply Like demand, supply also follows a seasonal pattern.  Listings typically hit their low point in August and then rise until Thanksgiving (with a large exodus of cancelling listings at the end of the year).  In 2018 we hit the low point a bit early – July – and supply has been drifting upwards since.  But before we hit the alarm button, the overall numbers put this in perspective.  Here is an interesting analysis made in June of this year by the Cromford Report :

The total number of active listings … is 19,736 today for all areas & types across the ARMLS database. This is just slightly above June 15, 2011 when we saw 19,696. We have to go all the way back to October 2005 to find another 15th date (19,715) with lower active listings.

Active listing counts have been on a declining trend since April 2014 when we hit a short term peak of 30, 506. We would consider somewhere between 30,000 and 35,000 to be sufficient for a balanced market. The all-time record high for a 15th date is 58,195 in November 2007.

Between 30,000-35,000 active listings would be considered a balanced market.  As of this writing the active listing count is at 19,860 – not even close to a balanced market (and remember, that even balanced markets do not cause price drops – they just stop or slow appreciation).

Of course, different areas and types of properties are reacting differently on supply levels.  As Cromford comments:

There are some areas that have seen a dramatic rise, often from abnormally low levels. Florence is probably the best example. At the end of June we had just 100 active listings without a contract, but since then the count has shot up 38%. The trend does not affect mobile homes, but single-family listings have jumped from 71 to 111, an increase of 56% in just 8 weeks. A similar but smaller event has occurred in Casa Grande and Coolidge. The only areas outside of Pinal County with a jump like this (albeit more moderate) are Litchfield Park and Surprise.

The Answer -So what is the take away of all this?  If demand is showing early signs of lessening, and some areas are seeing increasing supply – when is the tipping point?  The answer is contained in the supply numbers.  Again, to quote  Cromford :

 Fluctuations in demand are unlikely to have much impact on the market until we see an increasing trend in listing counts. This was the first sign of a slowdown in April 2005 and will be the first sign of a slowdown if and when we get one in the future. It came suddenly and unexpectedly in April 2005 and it may do the same at any time. However, nobody paid any attention in 2005 and I am assuming we are all older and wiser now. Any unusual activity in the listing counts will show up in the daily Tableau charts which we create and study each and every day.

We too watch the listing counts.  When we see shifts, you will hear it from us.  Until then, do not believe the headlines.  As always, we are here to help you with any questions or concerns specific to your home or neighborhood.

Russell & Wendy Shaw

(Mostly Wendy)

Kobuk

Posted on by Russell Shaw

Five year old Kobuk is ruggedly handsome with an aloof independent side.  He has been with Home Fur Good since January after being discovered at county.  Kobuk is listed as an English Sheepdog mix weighing in at 68 pounds.  Kobuk is people selective, however, once you enter his circle of trust, he will be the bestest friend you could ever have.  Kobuk likes to lean on his people for their attention and affection.  He loves toys, especially those he steals away from other dogs.  Kobuk has a very playful side, but with the stress and activity of the shelter he does not let his guard down often enough to show it to everyone.  With time and a little patience Kobuk will show you his inner puppy ready to romp and goof around.  You can visit Kobuk, Thursday, Friday and Saturday at Home Fur Good, located at 10220 N 32nd Street in Phoenix.  You can contact the shelter at info@homefurgood.org or by calling 602-971-1334.

Is it like 2006 all over again?

Posted on by Russell Shaw

Given the strong recovery the Phoenix housing market has posted, it is understandable that comparisons are still being drawn to 2006 (the peak of our housing market).  We have commented in the past that we are not in a “bubble”.  But a recent commentary by the Cromford Report on pricing really caught our eye.  It is not surprising to us that the press routinely shares erroneous housing market information often using statistics to make a poorly examined point.  Homeowners would be well advised to have a skeptic’s heart when accepting the media’s research.  As British Prime Minister Benjamin Disraeli so famously said (and Mark Twain popularized) “There are three kinds of lies:  lies, damned lies, and statistics.”  The latest premise is that housing prices have exceeded the prices set in the 2006 market. Uh… not exactly.  As no one says it better than our guru Michael Orr of the Cromford Report, here are his comments (with only bolding by us for emphasis) that explain the facts about the housing numbers:

“The local press has been headlining that sales prices for homes in Maricopa County have hit an all-time high. This is a very misleading statement that I take strong issue with. Although the median sales price has recovered to 2006 levels, the conclusion that sales prices in general are higher than June 2006 is completely wrong.

There are very few homes that would sell in 2018 for more than they would have sold for in 2006. The vast majority of homes in the valley have not recovered the value they had in 2006 and are still quite a long way from doing so. If home sellers believe they can sell their home for more than it was worth in June 2006, they are going to be bitterly disappointed, unless they live in the heart of Arcadia or a few isolated parts of South or Central Scottsdale. These media stories make life hard for agents trying to set reasonable asking prices when taking new listings.

The first problem is that the stories in the media are comparing the monthly median sales price for May 2018 with that for June 2006. The homes that sold in May 2018 are a very different collection from the homes that sold in June 2006, so this is an apples to oranges comparison. Let us compare the two sets of homes:

  1. June 2006
    • number of affidavits describing the property as a single-family home = 10,715
    • median sales price = $280,000
    • percentage of homes that were new builds = 28%
    • average sales price = $357,067
    • average home size = 1,840
  2. May 2018
    • number of affidavits describing the property as a single-family home = 9,987
    • median sales price = $285,000
    • percentage of homes that were new builds = 14%
    • average sales price = $354,727
    • average home size = 2,007

We can see that the sales mix is very different between June 2006 and May 2018. In June 2006 we had twice as many new homes as in May 2018 and the average homes size in 2018 is over 9% larger than in 2006. The average price per sq. ft. is much lower in 2018 than 2006.

A second problem is that affidavits of value are woefully inaccurate about property types. Hundreds of townhomes and condos are mis-classified as single-family properties every month. Therefore any numbers quoted for single-family homes in May are likely to be wrong until the affidavits have been checked and corrected, which takes several weeks.

In general, median sales prices are often misused and should NEVER be the basis for comparing the values of homes or comparing new home prices with re-sale prices.

A much more reasonable measurement is average price per sq. ft. which, though not perfect, adjusts for the difference in the average home size. In June 2006 the average price per sq. ft. of single-family homes sold in Maricopa County through the MLS was $193.65 while the average for May 2018 was $170.02.

We therefore estimate that the average single-family home in Maricopa County has a 14% rise in price to achieve before it reaches its value in June 2006. Individual homes will obviously vary quite a bit.

While the median sales price has recovered to the level of June 2006, the value of the average home has certainly not achieved this. Do not let your clients be misled.”

So we accept his missive to not let our clients be misled and hope this article helps to that end.  The 14% mentioned above is an average and every neighborhood has its own “number”.   As always, we are happy to answer any of your concerns or questions about your specific neighborhood.

Russell & Wendy Shaw

(Mostly Wendy)

The Magic Triangle: Supply, Demand, and Price

Posted on by Russell Shaw

Probably the hardest thing about routinely writing on the subject of the local real estate market is that it really doesn’t change overnight – thankfully – despite erroneous comparisons to the stock market.  Short term trends in real estate are relatively predictable – largely because supply is not highly volatile. By contrast, demand has the potential to be far more volatile – anyone remember Desert Storm?  Demand went to zero overnight and then returned in two weeks once it was clear this was really not a war but a “military action”.  Despite the dearth of provocative headlines, it is still worthwhile to take a look at the market now that we have reached the half-way mark.  Especially since market activity seasonally peaks in May, and gradually declines as we approach the end of the year.

Supply

So where do we stand on supply?  The short answer is supply is very low, although not all areas and price points are affected equally.  Even though supply is the more stable of the two market factors, in May it made a rapid shift in the under 200K range.  As Tina Tamboer of the Cromford Report notes:

“Supply under $200K has continued to drop rapidly, but the $175K-$200K range has accelerated its decline over the past month far more dramatically than any other price range. After being consistently 30-35% below last year, the active supply level dropped a whopping 18% in a 3-week period putting the current count for this group 44% below last year.”

Gulp.  That is one heck of a supply shift.  Looking at Greater Phoenix, overall inventory is running at about half of what would be considered normal.  Not surprisingly, the lowest priced areas have the weakest supply – with only a few exceptions.  The Cromford Report did an interesting study of the most constricted supply mid- May:

“Here are the 10 ZIP codes with the lowest days of inventory as of May 16:

Phoenix 85035 – 17

El Mirage 85335 – 18

Mesa 85202 – 21

Phoenix 85033 – 22

Mesa 85203 – 23

Gilbert 85296 – 24

Youngtown 85363 – 24

Phoenix 85037 – 24

Phoenix 85009 – 25

Mesa 85210 – 25

25 is an extremely low reading for days of inventory. All of the above are in West Phoenix, West Mesa or the El Mirage / Youngtown area, with the exception of 85296, which is rather more expensive”…..

“For supply, it is the range below $500,000 that was most affected with months of supply down from 2.1 to just 1.5 and a 31% drop in active listings. The range between $500,000 and $1 million was down 16% in active listings pushing our months of supply lower from 5.7 to 4.1. Over $1 million there was a drop in supply, but only by 5%. There is currently just under a year of supply over $1 million.”

Although a year’s supply over the million dollar mark may sound hugely excessive (especially through the lens of the under 500K price range) we well remember years where that price point had 7 years of inventory!  So this price point has shifted dramatically.  But as mentioned in the zip code study above, not all areas are experiencing the same shortage of supply.  Anthem for example, in December was experiencing a lack of supply and seller’s held the power – only to see now, 6 months later, a fully balanced market.

Demand

Demand is up 7% overall from last year – but just like supply – different price ranges have been affected disproportionately.  Surprisingly the largest jump in demand came from the high end of the market (homes over $1 million).  Sales in that range jumped 32% – juxtapose that to the under 500K market which saw a 5% drop in the quarterly sales due simply to inadequate supply to fill demand.  When supply is low enough to constrict sales, it is very hard to see subtle shifts in demand. If the number of buyers standing in line for a home drops from 10 to 3, how does one staticize that?  The Cromford Report religiously tracks supply and demand – and noted in April that a slight weakening of demand surfaced:

“Of course, with supply remaining very low, it is difficult to detect weaker demand in the real world. Only a careful day by day study of the numbers reveal the weakening trend. The trend has not lasted long so far, but if it continues for a few months then it could become more significant. It could then show up as fewer homes under contract and lower closings. We are not sounding an alarm here, just keeping a close watch on data signals …”

Price

As long as demand exceeds supply, prices will continue to rise.  This inevitably results in alarmists saying we are in a “bubble” once again.  The best answer to fear is facts.  Take a look at the monthly average price per square foot compiled by the Cromford Report.

You will note that if you eliminate the wild swings both up and down, we are in a reasonable appreciation range – and the trend line looks nothing like the parabolic curve of the 2005 market.

At some point – rising prices (and possibly rising interest rates) will dampen demand, as it is supposed to do. Reduced demand will allow supply to climb and then the market will balance.  Does that mean prices will then drop?  No, balanced markets tend to see price rises within the range of inflation.  The inflation rate for 2017 was 2.1% and 2018 is averaging 2.5% Remember too; price is a trailing indicator – often lagging 3- 6 months behind the market.  For those readers who are understandably jittery given the pricing plummet of 2008, take heart.  While we do anticipate a balanced market on the horizon – that could be a year or two out and it will take more than a balanced market to see marked price changes.

In the meantime, we will watch the trends and keep you informed.  Slow moving ships are easy to watch.

 

Russell & Wendy (mostly Wendy)

This two-year-old, gorgeous, long haired, fluffy cat is Thelma

Posted on by Russell Shaw

She has been with Home Fur Good for over a year and it is time for her to find a home of her own.  Thelma is independent, she prefers to watch humans just beyond reach until she gets to know them.  She came to the shelter with her two siblings, Tanman and Louise.  Yes, all three of them are still looking for homes.  Thelma is very cat social, she is most comfortable when she has feline buddies to pal around with.  The perfect home for Thelma will have existing cats for her to play and lounge about with.  If you are really looking to make Thelma happy, you could adopt her and her siblings.  Home Fur Good is located at 10220 N. 32nd Street in Phoenix.  The shelter is open Thursday, Friday and Saturday from 11-4.  You can call HFG at 602-971-1334.  Visit the website at www.homefurgood.org.

Sellers Continue to Hang on to the Power

Posted on by Russell Shaw

While some areas of the nation are at long last reporting a slowing of sales, the valley’s market is continuing to power forward both in rising sales and appreciation.  Real estate has always been area specific, so while national trends are interesting, they are not particularly meaningful when interpreting a local market.  New listings to MLS in the first quarter of 2018 for Maricopa and Pinal County under 400K are logging the lowest numbers for a first quarter since the Cromford Report began tracking in 2001.  Not surprisingly given the low supply, appreciation is higher than it’s been in the last several years.  To quote the Cromford Report:

“The annual $/SF for all areas & types is 7.3% above this time last year. The increase last year was 5.2%, with 5.5% the year before that while 2015 gave us 5.3%. Back in 2014 we were still experiencing the coiled-spring effect and $/SF had jumped 17.7%.”

Given the amount of market strength most sellers have (particularly under 400K), it would seem improbable that sellers are still managing to give away thousands, right?  Well history has a terrible habit of repeating itself – so just like in the past (anyone remember 2005?) – overheated seller markets don’t just cause trouble for buyers.  Yes, seller markets can still cause problems for sellers.

Here are a few of the top mistakes we currently see sellers making:

 

  1. Thinking that having one buyer is a success story. As sellers and agents so often say “we just need one buyer” – and of course there is some truth in that. But one of the perks of a seller’s market is the potential of multiple offers.  Too many sellers (and their agents who should know better) take the very first offer that they receive.  That may be a great strategy in a buyer’s market. The premise “your first offer is often your best” – is based on the fact that long days on the market create the perception the property is over-priced or has condition issues making it harder to defend value to buyers.    By contrast, in a strong seller’s market taking the first offer eliminates the option of multiple offers.  From our years of experience, creating the opportunity for multiple offers is how we really maximize your profits.  Agents who don’t do this (which sadly is the majority) or “for sale by owners” who find one buyer are likely giving up thousands of dollars.

 

  1. Thinking the new business models of online offers or investors are paying “fair market’ value. It is interesting to us, given that we have seen about every business model in our 40 years of practicing real estate, that this business model of online offers is getting a lot of hype. Admittedly they have tapped in to the public’s desire for Amazon type selling.  But at the end of the day, they are investors who don’t represent the homeowner.  Their pitch says things like “commissions are too high” while charging “customer experience fees” averaging 12% – far more than any commission.  Or they say “this is a competitive offer” while eliminating any competition – costing sellers 10-30% in unrealized net dollars.  Also, while telling sellers there is no need for them to go on the market, these same investors always put their homes on the market when they resell them.  Shouldn’t that be a dead giveaway as to how to get top dollar? It would be far more accurate if they said “we are investors who want to buy your home for less than it is worth and then re-sell it for a profit”. But then, that wouldn’t look like a sexy new business model would it?  Take away the online component, and this is the same old investor model that has existed since we began our careers.

 

  1. Thinking that preparing your home for sale is a long and expensive process. Most sellers overthink and over prepare for the home sale process. The truth is that many homes can be sold in their current condition.  We sold a house that had the garage caved in and was tagged by the city as unlivable until repaired.  We had multiple offers, sold it in 4 days, obtained over list price, and the seller made no repairs.

 

  1. Thinking that you have to show your home 24/7. Depending on the price range, we have had “weekend only” sellers or even “one weekend only” sellers. This is a supply and demand equation.  The higher the demand and the lower the supply, the smaller the window for showings required to sell. Many sellers can allow one full weekend of showings, review the multiple offers on Monday and be under contract by Tuesday.

 

  1. Thinking that all agents are the same. Oh heck, we’ve taught you better than that, haven’t we? One of the pitfalls of a strong seller’s market is the amount of inexperienced agents it attracts.  Even the “experienced” agent does around 6-10 deals a year.  If you subscribe to Malcolm Gladwell’s theory of 10,000 hours of experience are needed to get expert at something, most agents will be retired before they hit 10,000 hours.  In the last year alone we helped over 300 sellers sell.

 

  1. Failing to be aware of market value. The problem with either improving or declining markets is that history is not repeating itself. Therefore using only past sales will not tell you where the market is now.  In evaluating pricing, we examine the supply/demand ratio in your neighborhood which determines value.  Even then the market can move more quickly than can be seen.  Demand can be very volatile while supply is not. That is why exposing the home to the most buyers possible secures the highest price – it accommodates demand volatility.

 

  1. Thinking that commissions are where the most money is saved or lost. Shakespeare said “A rose by any other name would smell as sweet”. Perhaps, not the best analogy when discussing the second most dreaded word in the English language “commissions” (the first being “taxes”).  The truth is that the seller is going to pay someone to sell their home.  Sellers will either pay by hiring a professional, paying “seller experience fees” to an instant offer company, or selling to an investor who “charges nothing” but takes a minimum of 10-30% off the price. Rather than quoting Shakespeare, perhaps the better quote is “there is no free lunch”.  With that said, are we still an advocate for a flexible commission structure?  Sure – we too love to save money.  Just don’t give away way more than the cost of a commission in an attempt to avoid commissions.  Instead make sure you are paying for the best representation money can buy.

Thank you for allowing us to share our thoughts on what pains us the most – watching sellers give away their hard earned equity.  As always, we are here to serve you.

Russell & Wendy Shaw

(mostly Wendy)