Its time to give our real estate market report for February 2013. In this article we’ll talk about what’s been happening in the housing market and what we expect to see in the next few months…. our crystal ball predictions. We will be putting emphasis on the downtown and north central Phoenix regions. If you would like information specific to you part of town, please let us know and we’ll get that to you… our contact info is at the bottom. One other thing… we have a free service called the market snapshot you can subscribe. It sends a monthly report outlining sales and listings near any greater Phoenix address you want to track. Go to our home page and scroll down… you will find the Market Snapshot on the right side.
Our 2013 Real Estate Market Report… Greater Phoenix
You may have seen the news lately about how well the Greater Phoenix real estate market is doing. It’s true. 2012 saw much-welcomed gains that varied by city and neighborhood. The Arcadia neighborhood near the Phoenician Resort may have led the pack with gains above 30% while most of the Greater Phoenix market was in the high teens to low 20% range.
The greatest gains occurred last spring during our “buying season” (February-June). If you read or listen to national media sources you may have thought the gains just happened. For much of the nation this is true but Phoenix is leading the recovery so we’ve been “good” for a while now.
Let’s take a look at several components of the Phoenix area market including:
- Residential Resale… the used home market
- New Build Homes… those wonderful never lived in places
- The Downtown Phoenix Sector… the area Gene Urban focuses much of his attention
The residential resale market is rock and roll these days. Rather than write a long article, let’s bullet point some info.
- The supply of resale homes is dropping much like it did last year. In fact, the numbers are even lower. If you take all the active listings in Phoenix (homes, condos, land, etc.) there were 3778 properties on the market in early February 2012. Today we have only 3168 or 17% less properties than this time last year. If we throw out the condos, land, etc. and look at single family homes, the current number available to the 1.5 million residents of Phoenix is a mere 2240… that is a very low number. To put things in perspective, take a look at the graph to the right.
- If we could graph the demand side of the equation we’d see a lot people have been buying homes since mid 2009. Many were investors wielding buckets of cash and swooping in on the sub $150,000 homes like paparazzi at the Oscars.
- As we move into 2013 we expect to see demand stay high for the residential resale market with a difference; fewer investors and many more traditional home owners buying more expensive digs. In 2012 we saw a shift from homes in the 100K range dominating the market to homes in the $200,000’s. . We expect the trend to sweep upward towards the $300k+ homes. In addition, there is much evidence to suggest the languishing-luxury market has a strong heartbeat again.
- Demand in 2013 will be partially driven by the artificially low mortgage interest rates and the fear they will go up soon. Many think that sub 4% interest rates will be a thing of the past come next fall. The Treasury can’t keep buying MBS’s forever. Thus, the lure of a really low payment is pushing people to take the plunge.
- One last “market demand” factor we’d like to mention is the people who lost their homes in the recent past. Many who short sold their home or went into foreclosure are now eligible to qualify for a loan again. Oooh, no more rental home, they can have their own place again.
- Bottom line… demand is high and expected to get even higher as we push into March , April and May. Don’t be surprised next summer when you read that home values soared over 12% during the spring of 2013.
The new build market is faced with challenges, yet it is growing once more.
New home sales are growing throughout the greater Phoenix market. If you look at the graph to the right you’ll see a squiggly blue like; the line represents new home sales from 2004 forward. BTW: Click on the image to increase its size. It you look carefully you can see the line started moving up in 2012. Home builders are back in business and looking to build a home for you. TV ads are back and signs are up… the only problem is many do not have any homes. What’s the problem?
The new home market problems are many, but not insurmountable:
First is a labor shortage. When the housing market folded up in 2007-2008 many skilled laborer left town. Some because of the immigration laws (duh) and some because there were no jobs. Many who stayed retrained into new careers. The bottom line is there is a skilled labor shortage. In addition to fewer competent workers, the available labor pool is not as cheap as it once was. It is legal though.
Second up on the problem list is land. We hear a lot of land, once owned by the builders, is in the hands of real estate investors. They are happy to sell it back… at a profit. So, land is a bit more expensive.
Despite higher labor and land costs, we expect new home numbers to rise steadily in 2013. New home permit applications are up and demand from home buyers is strong and many are willing to pay higher prices for a brand-spanking-new house. We caution new home buyers to be patient and understand the estimated build times may be exceeded by weeks or even months.
FYI: When Buying A New Home in Greater Phoenix. If you are going to buy a new home, bring your own real estate agent; someone you trust who is a full time pro with experience working with home builders. If you don’t, you will be represented by the builder’s agent… he or she works for the builder; is paid by the builder; maybe wins trips paid for by the builder. Who do you think that sales person really cares about? Whose interest will they defend? I think you get the point. Be smart, bring your own person.
- What’s Happening With Real Estate In Downtown Phoenix?The story in downtown Phoenix is much like the rest of the town… not too many places for sale and a bunch of people wanting what’s out there. Let’s start with a look at the condo market.
Downtown Phoenix has a large number of condos and lenders are still pretty scared about loaning money for condo buying. Most of the time the issue is HOA stability. We all know HOA’s got hit hard during the depression. Some places had less that 50% of the homeowner paying their dues. Without going into the details, many condo developments could not pass the requirements test put forth by Fannie and the Treasury. The result was a thumbs down when one applied for a loan.
In 2013 we believe most condo properties will pass the lender’s means test. HOA’s have been doing a lot of rebuilding during the past 2 years and many are now solvent. If you’ve been on the fence about buying a condo, we believe condos are one of the best buys out there… just make sure the HOA is healthy and pay to have someone review their financials if that isn’t one of your skills.
We probably sound like a broken record on the downtown region. The “Urban” lifestyle is growing a following with heaps of people favoring the idea of walking/biking to work, taking light rail to play, knowing their neighbors, having a community garden and largely living without a car. Add a rapidly growing music/arts scene, astonishingly good restaurants, the benefits of a university, and strong sense of community. Life in downtown Phoenix is pretty rich and special.
Selling A Home or Condo In Downtown Phoenix
Our phones have been going crazy with people asking if we think it is time to sell. This is not a slam dunk question and the answer lies in what is the motivation and what do you hope to gain? Below are a few things we feel about the market that we hope helps people decide what to do.
- Downtown Phoenix homes and condos are going up in value so this spring should net you a fair amount more that last year would have.
- For people who want to sell their property before summer we are advising many to put the place on the market in late-March/early-April. January through early-March sales should push home values up a bit so let a few sales happen that support a higher price for your place. A good agent can help monitor this for you.
- Be mindful that the appraiser will be determining the value for the bank providing the buyer’s loan. If the comparable sales do not support your asking and/or contract price, a low appraisal may throw a monkey wrench into the sale.
- People have pretty high expectations. If they are buying the home to personally occupy they often want it in very good condition and are willing pay for it. Also, appraisers like homes in good condition and show it through higher values in their appraisal reports.
- Think about keeping the property as a rental. Many people have built their wealth by owning rental properties.
- Write down your goals and reasons for selling so you can move forward with direction. Share this info with your real estate team.
- Home buyers, be prepared. Get your loan approval done before you start looking at places. Don’t expect the home or condo to still be on the market when you get your ducks in a row. Be proactive verses reactive.
- Expect there to be multiple offers on the home you want, especially if it is a sweet, well maintained place.
- Cash buyers are often chosen over people with loans because of appraisal concerns.
- If selling your place, make it look as clean and well maintained as possible. See bullet 2.
- We expect single family home prices to rise 12%-15% between January and July 2013. Naturally, this will vary by area.
- Condo values will generally go up too. However, this is often dependent on whether or not a buyer can get a loan and how high the HOA fees are. (Look for our upcoming article on the most affordable condo developments in the downtown region.)
- We could keep going on but you have a life and likely need to get back to it.
If you have questions we have not covered or what some help buying or selling a place, please know we are here for you. Let’s meet over a hot cup of java and talk about the real estate and housing market.
Best to you,
Gene Urban and Ron Urban
The Urban Team at Realty Executives
connecting people to the perfect place for over 20 years