no hassle listing blog

After years of the most brutal buyer’s market the Valley has ever endured, sellers are now enjoying the pendulum swing favoring them.   Values are continuing to edge upwards and sellers are frequently receiving multiple contracts – often within days of offering their home for sale.  With the real estate market so clearly favoring the seller, it would be easy to assume that sellers are bullet proof.  Unfortunately this market, like all past strong seller markets, is still fraught with potentially costly seller mistakes. Our hope is by sharing some of these we can protect a seller or two from making the most common mistakes.

Zestimates or other automated valuation systems.  While Zillow has done a fabulous job of marketing their automated online valuation system, what they haven’t done a fabulous job of is being accurate with that valuation.  Too often would-be sellers jump on to their site (or the multitude of sites that are similar) to determine “their home’s value”.  Sadly, these systems are no substitute for an appraisal or (even better) the full blown exposure of the home on the open market.  Ultimately, a home is worth what an arm’s length buyer will pay.  In a market that is generating competition for homes, prices can escalate beyond what any automated value system or appraisal says the home is worth.  Valuation systems use preset computer metrics to estimate the value.  It is difficult to ever foresee a time when they will be accurate, as determining home values is something of an art.  Values are composed of market conditions, the property’s location, features, pricing, accessibility, market exposure (i.e. marketing), and negotiation.  There is simply no substitute for someone with real estate expertise actually viewing the property.

Appraisals.  Speaking of values, let’s talk about the weakness of appraisals.  Appraisals are an “opinion of value for lending purposes”.  That is what it is, an opinion of value.  This is so true that homes that obtain more than one appraisal often receive entirely different numbers.  It isn’t that appraisers aren’t attempting to do good work, it is that they are always using rear view mirrors in looking for value.  Appraisers are required to use sales in the last 3-4 months (it used to be in the last 6-12 months!)  The highest likelihood of an appraisal being accurate, is where the homes are homogenous and supply and demand is in equal balance (a four to six month of supply of homes) for an extensive period of time. Balanced markets in the valley have not been common.  In a declining market (such as we saw in 2007-2011) appraisals often came in higher than true market value.  This is due to the fact that the very definition of a declining market is one where a home today is selling for less than yesterday. Conversely, a rising market has tomorrow selling higher than today.  This is the current problem for sellers – appraisals are often coming in lower than buyers have offered to pay.  Without addressing these appraisal issues upfront, sellers can find their value being slashed.

Choosing your agent (friends and family)  Too often sellers use the first agent they talk to (so the primary hiring criteria is someone simply being there).  Additionally, sellers may pick an inexperienced agent.  This does not mean the agent hasn’t “been in real estate for years” but simply they lack experience.  Did you know the average agent does approximately 6-8 home sales a year?  Compare that to someone doing over 400 sales a year and you can see experience cannot be measured by the year.  Another error can be using friends and family.  It can be difficult for sellers and their family to have the conversations that are necessary to really sell a home.  Comments on pricing, proper staging, and commissions can result in frayed relationships. Again, finding the agent with both knowledge and marketing power can produce results that outperform an average agent by thousands of dollars, not to mention save relationships.

“Saving the commission” At the risk of sounding self-serving, sellers can sometimes be “pound wise and penny foolish”.  What we mean is that sellers often worry excessively about saving the commission while missing entirely the benefits that commission is really paying for.  If it doesn’t matter who sells your home then sellers would always be better served just selling it themselves or paying the part-time agent a small amount to write up the deal.  This is not the case however.  If an agent cannot produce results above what a seller can do, you simply have the wrong agent.  A quality agent can not only counsel sellers on how to prepare the home for market (avoiding the first costly mistake, a badly presented home) but expose the home to the maximum amount of buyers.  Competition for a home (demand) is the single most important factor in generating the most money for the home.

As this is a subject near and dear to our hearts, we have plenty more to say on the subject!  Hopefully, we have given you a thought or two about protecting your home value.  As always, we are here to help and serve you!

With 2013 well underway, we continue to observe the clear signs of recovery.  Like most transitions, this one is not without its challenges, but the upward trajectory seems clear to anyone observing facts rather than emotions.  However, there is a lag from the time facts become available until public sentiment broadly accepts those facts.  Remember that the next time you see an article explaining how the valley’s market is worsening or that loan defaults are on the rise.  It simply isn’t true.  Since 2004, an ongoing challenge has been to separate market fact from fiction.  With that in mind, we return to the subject of market statistics.  As always, our numbers come from the incomparable Michael Orr of the Cromford Report.

Supply of homes for sale  The supply of new resale listings coming on the market remains constrained. The total current supply of homes for sale is 8.7% lower than last year.  The primary cause for the reduction in inventory is due to the rapidly disappearing distress product. The traditional seller is simply not coming to the market in sufficient volume to replace this loss.  The yearly change in mix of the type of homes for sale is dramatic. Lender owned listings (REOs) are down 15.3%, but short sales show the most dramatic shift – down 46.4%.  While the traditional seller is up from a year ago with an increase of 19.1%, you can quickly see it is not enough to fill the large loss of the distressed properties.

Certain areas and prices are showing a scarcity of supply more than others.  In particular the areas that have lost inventory of homes for sale from last year and are showing the tightest supply –  are Tempe, Glendale, Chandler, Peoria, Avondale, and Gilbert.  Conversely, supply is still adequate in luxury home areas such as Carefree, Rio Verde, Paradise Valley and Gold Canyon.

As to price ranges that are constricting, supply is very tight below $225,000.  Between $225,000 and $500,000 supply is low but stable.  Above $500,000, supply is recovering and in the top ranges over $2,000,000 supply is plentiful and now increasing.

Sales  Sales remain weaker than last year, largely due to the small supply of bank owned and short sale homes available.   The number of short sales and lender owned properties were both down by 47% from last year.  Investor purchases are at the lowest number since September 2011 and now comprise only 25.3% of the sales in Maricopa County (compare that to at one point hovering in the range of 50%).

Before one grabs the Kleenex box though, it would be wise to remember that while 2013 sales are down from 2012 and 2011, they are higher than any year from 2006-2010.  So it is far from a dire situation as they remain “above normal”.  With pricing still below replacement cost and interest rates hovering at record low levels – this market has a lot to offer buyers.

Prices  While price per square foot is typically our best indicator of short-term pricing trends, it is quite interesting to note long-term trends through median pricing (the point where half the sales fall above the price, half below).  Currently our median pricing is up from a year ago by 31%. The median price is now $160,000 vs. $122,000 last year.  We expect to see strong upward pressure on prices through the summer.

New Homes  For buyers frustrated with finding a home, new homes offer only a small respite.  While production has increased, they are not even at a third of the production levels they were at 15 years ago!  Increasing labor costs and the time needed to put that labor team in place, combined with the fear of repeating the drubbing they took back in 2006, production remains too low to fill the demand for needed homes.

As we have mentioned so many times, supply and demand ultimately provide a tug of war on prices.  While supply continues to remain lower than demand, we expect prices to rise accordingly.  Rising prices bring out the sidelined sellers who have been waiting to sell.  In short, this too shall pass.  In the meantime, we will do our best to share with you the results of this battle.  As always, we appreciate the loyalty of our clients.  We are here to serve you.

Russell & Wendy Shaw

(mostly Wendy)

Now that the holiday haze has cleared (and we hope you had a very happy season) our thoughts turn to the brand new year. Since 2007, it has seemed that the new year rarely promised any news better than the year before. Real estate became the slow march through a mine field where the best thing to report was that survival had been accomplished once again. We are happy to report we are more optimistic than in years past that whatever the year brings, one way or another the valley is faring better than most of the country in our recovery. That is very good news indeed.

As we previously reported, supply and demand are the name of the game and sometime in mid-summer of 2012 supply began to slowly build after a very busy buying frenzy in the first part of the year. Now as we begin 2013, supply has increased dramatically in some areas while simply building up in others. How quickly a market can turn. Some of the outlying communities (the drive until you qualify communities of 2005) have seen a very sharp rise in homes for sale accompanied by a very sharp drop in demand. For example, in the town of Maricopa – supply is about 4 times higher than mid-2012 and demand has dropped in half. In short – Maricopa is currently a strong buyer’s market. Other interior areas are seeing rises in inventory as well, although less dramatic ones, which means a balanced market has occurred or soon will through most areas. Builders are contributing to new supply after years of little to no building which is aiding in this shift as well. Demand is dropping largely due to investors losing their appetite. So while 2012 was a seller’s market, we expect to see 2013 be a balanced market tipping into a buyer’s market.
One interesting change to the market is that many sales are not occurring through MLS. Builder sales, trustee sales, pocket listings (non-MLS sales) and private sales are composing anywhere from 20-30% of the sales NOT reported in the MLS.

Short sales – a significant component of the market for the last few years, have dropped dramatically – in fact they are down at a level not seen since February 2011. REO’s are staying in low levels and we hope to see them down to such tiny levels by the end of 2013 that we feel no need to discuss them again. The repeated warnings of huge looming levels of “shadow inventory” has been proven to be a case of crying wolf.

The local real estate future still hinges, as all areas do, on the overall economy, consumer confidence and the national fiscal challenges. What impact that will have is anyone’s guess. No matter, we still feel reasonably optimistic that the first half of 2013 should be a healthy one. And for that, we are grateful.

As always, we will do our best to keep you informed on the market shifts and trends. Believe me, we find it just as mesmerizing as most of our readers do.

As the year comes to a close, some interesting facts have appeared. First, we now have had one solid year of positive appreciation in the monthly average sales price per square foot on homes sold through MLS. It turned negative in August of 2010 and then turned positive again on November 30th 2011 which continued through 2012. Now, one year later, we’ve seen appreciation of around 28% – with the bulk of the gains occurring in the first half of 2012.
Normal sales continue to replace distress sales – even in the last 30 days moving from 60.8% to 65.1%. Wow, we haven’t seen that level of “normal” sales in five years! REOs dropped slightly to 13%. Short sales dropped more significantly from 26% to 22%.
What will 2013 bring? Markets can shift quickly as the last few years have shown. At this time it would appear that the rising prices will continue to lure sellers back in to the market increasing supply, investors are likely to continue to diminish as higher prices curb their appetite decreasing demand further, and we may find ourselves back in a buyer’s market in 2013. Stay tuned!

The rapid shifts of this year’s market has certainly kept the real estate community on its toes.  As we enter the final quarter for the year the market still continues on its jerky recovery path.  The adage that local markets shift quickly and national markets slowly, has never seemed more true than in 2012.  We began the year much as we ended 2011 – with the prices finally edging up gently and the market bottom established.   By March of 2012 the market acceleration went in to overdrive – supply dropped rapidly and demand escalated wildly upward.  This brought long dreamed of price appreciation at a rather breathtaking rate and the market strongly swung to the seller’s side while handing buyers nothing but frustration.  FHA buyers got pushed to the sidelines and cash became the only game in town with over 40% of the buyers purchasing with cash.  Then the summer slowdown occurred and inventory began to creep up as some sidelined sellers came back into the market encouraged by pricing shifts just as some buyers exited thanks to these same shifts.

That brings us to the 3^rd quarter of 2012.  The market has quieted since the spring feeding frenzy – supply has crept upwards while demand has slowed.  The drop off in demand is largely due to seasonal buying patterns, higher pricing, as well as the lowered supply (i.e. buyers can’t find a home – too few choices – or can’t compete against multiple offers – such as the FHA buyer).  In essence, the market is balancing a bit.  Does this mean that price appreciation is over?  Or did we just form another “real estate bubble”?  In short, no.  While there is no magic crystal ball to consult on pricing, it is true that in most parts of the valley housing prices are still below the cost of the construction.  Ultimately, at whatever pace, the pricing will still need to adjust above the hard costs of building.  So we expect to see some additional upward price movement – the only question is at what pace.

However, there still seems to be little that the facts can do to stop the negative reporting or negative consumer sentiment that crops up periodically about the Valley’s housing market.  We much prefer to place our belief in facts.  In light of that, here are some facts from the Cromford Report that you may find of interest:

• The average cumulative days on market for monthly sales (all areas & types) is  down to 70.  The last time we were this  low was July 27,2006 – over six years ago!   The highest point was exactly twice this at 140 days on February 9,  2008.
• 8.8% of Arizona  first home loans are either delinquent by 30 days or more or already in  foreclosure.  This is lower than the 11.2% reported for the country.   However the annual changes were more significant.  Arizona saw a 23.3% decline in  non-current first home loans between June 2011 and June 2012.  This is the fastest decline of any state  in the nation.
• Greater Phoenix  REO (foreclosures) sales dropped below 14% of the monthly total in August – the first time this has occurred since January 4, 2008.  At their peak on February 11, 2009 they  constituted 71.1% of monthly sales.   Although it will take some time for them to disappear completely,  REO’s are no longer a major factor in the market.  Contrary to popular myth, there are not  a lot of foreclosed homes in lenders’ possession, so we don’t expect this  REO supply to increase.
• Here are the  numbers for August 1, 2012 relative to August 1, 2011.  For all areas and types in MLS reports  the following:

Active listings – 20,085 vs. 27,787 last year (down 28%)

Pending listings – 10,412 vs. 11,491 last year (down 9%)

Monthly sales – 7112 vs. 8663 last year (down 18%)

Monthly average sales price per sq. ft. $98.54 vs. $79.86 (up 23%)

No financial market moves smoothly upward or downward, there are little fits and starts along the way.  This market is no exception.   We are in a recovery – how long and how high and how fast are the only unanswered questions.  As always, we will strive to get you posted as our market continues its crawl out.