Nov 16, 2023 Looking at the Charts
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The valley's average price per square foot is dropping in most cities, except for Paradise Valley and Scottsdale, upheld by their thriving luxury markets. The Cromford market index is declining across the valley, marking four of the top 17 cities as buyer-friendly. All cities are feeling pressure from this index downturn. The median sales price chart reflects a steady market over recent months. There are ample opportunities for both buyers and sellers, demanding innovative approaches. For personalized neighborhood insights, don't hesitate to connect. Wishing you a fantastic Thanksgiving!
It's very similar to the 1980s
/Many news articles draw parallels between today's housing market and the 2008 crisis. However, I believe a recent Fortune article accurately compares our current situation to the 1980s housing market.
In 1979, Paul Volcker faced high inflation and increased interest rates up to 18%. During the subsequent two years, home sales declined, yet home prices slightly increased. We are currently observing a similar trend in today's market. For more insights, check out the article. If you have concerns about your neighborhood or home, feel free to reach out. Happy reading!
Are Home Prices Falling?
/The current real estate landscape in the Valley suggests that home prices are unlikely to decrease any time soon. Our county stands as one of the fastest-growing regions in the entire United States, yet there's a notable decline in permits for new home constructions. As the population continues to grow, along with the demand for housing, prices are on an upward trajectory. While some may oversimplify weak demand as a sign of lower prices, it actually results in slower sales. However, the crucial factor affecting prices is the supply, which remains significantly below the standard level. To achieve market equilibrium, we would need the supply to nearly double.
Many potential homebuyers with the means to make a purchase are holding out for the perfect circumstances—perfect home, perfect timing, perfect price, and perfect mortgage rate. However, a considerable number of individuals regret not buying a few years ago, assuming waiting would lead to cost savings. Experience shows waiting rarely yields financial benefits.
At present, prices are stable, demand is somewhat reduced, and inventory is gradually expanding. For those considering entering the market now, the median home price in the Valley is $440,000, a $40,000 reduction from its peak in May 2022. With a 10% down payment and a 7.25% interest rate, the monthly principal and interest payment equate to approximately $2,701.
Owning a home offers the possibility of refinancing and lowering monthly payments if interest rates decline. If rates remain steady or rise, being a homeowner would prove a wise decision. Additionally, it's noteworthy that many lenders are currently offering free refinancing should rates decrease.
Suppose you opt to wait for interest rates to drop to 6%. However, it's uncertain when or if this will happen. Assuming a conservative 5% appreciation in the next year, delaying your purchase would lead to an additional cost of $22,000 for the house. This increased cost affects your mortgage and accumulates thousands in additional interest payments over time (assuming a refinance).
Delaying your decision by a year might save you around $2,500 when interest rates drop to 6%. Nevertheless, your home cost and mortgage will rise by nearly ten times that amount. It's prudent to prioritize the bigger picture over small savings.
As the saying goes in the lending world, "marry the house, date the rate." Home values generally appreciate over time. While it's undoubtedly an investment at the moment, one should consider how much more costly it may become in a year, two years, or three years. It's time to commit and embrace your next home.
Homes for sale Increase
/The housing inventory in Greater Phoenix has recently seen an uptick, a trend typically observed closer to the Holidays, but this year it has arrived earlier. While we're still experiencing historically low levels of available homes, both buyers and sellers should take note of this shift.
Sellers, it's crucial to ensure your property is competitively priced and presents well both in person and online.
For buyers, now might be an opportune time to make offers on homes that have been on the market for a while, potentially securing an attractive deal.
Each neighborhood has its own unique dynamics. If you'd like more information about your current neighborhood or one you're interested in, feel free to reach out. I'm always here to assist! 🏡 #PhoenixRealEstate #HousingMarketTrends
Mortgage Interest Deduction
/While many professionals tout appreciation as the main benefit of homeownership, higher mortgage rates bring another tool into the equation that hasn’t been promoted in well over a decade.
Changes in the tax laws and low interest rates have made the mortgage interest tax deduction irrelevant to many homeowners. This itemized deduction allows homeowners to subtract mortgage interest from their taxable income, lowering the amount of taxes they owe.
This deduction hasn’t been a selling point for many years because annual interest payments from a mortgage have often been lower the annual standard deduction for most households.
For example, five years ago, 2018, the basic standard deduction was $12,000 for singles Interest rates were hovering around 4.6% and a median priced home was selling for $265,000. With 10% down, a monthly mortgage payment would have been around $1,237 a month. Over the course of the year, the buyer would be paying around $11,200 in interest making the standard deduction a better deal. In 2023 the standard tax deductions are $13,850 for a single filer. The median home price today in the Valley is $435,000. With 10% down, and today’s interest rate of around 7%, those numbers look a little different, making the use of the mortgage interest deduction much more attractive.
And, in addition to the tax savings, buyers build equity in their property. Of course, a person paying rent today has no tax savings, no equity growth, and nothing left but memories when they move out of their rental. So, Buyers should always talk to a qualified, professional tax accountant for personalized, detailed tax advice. And to learn more about the opportunities in today’s real estate market, they can call me John Schloz with HomeSmart
Real Estate Fraud
/Real estate fraud is real, here is what you need to know.
Real estate fraud is when an outside party either files a fraudulent deed or sells a property that they don't own.
This is most commonly done to free and clear properties that are vacant homes, rental homes and vacant land.
How do you prevent this from happening to you?
Sign up for Title Alert with the Maricopa Assessor’s office. The link is below. https://recorder.maricopa.gov/maricopatitlealert/ this will notify you if something has changed with your title.
Have an MLS search set on your property to be notified if the property becomes listed for sale. Contact your real estate agent or me to get that set up. I am happy to set that up for you. If you have questions on your specific situation, let’s connect.
Your Trusted Advisor
/Do you know the value of having a Trusted Advisor, a knowledgeable realtor on your side when it comes time to buy or sell a house?
In an era where information is readily available, you might question the need for a real estate professional. In this month’s market update, the value of hiring a REALTOR. Or better yet, the value of hiring me - John Schloz with HomeSmart
Real estate transactions can be complex and involve a multitude of legal, financial, and logistical aspects. I possess knowledge of the local market, property values, and current trends and I
keep my fingers on the pulse of the ever-changing real estate landscape and can provide you with accurate and up-to-date information. I’m a member of TRUSTED ADVISOR UNIVERSITY,
a group of REALTORS® that meet monthly to review current market conditions and keep up with current market statistics. We utilize the Cromford Report, Maricopa County’s only in-depth real estate market analysis tool. Less than 1% of licensed Valley REALTORS® make use of this service.
I’m also your advocate. I have a fiduciary duty to protect your best interests throughout the transaction. It’s not only the law, it’s in our code of ethics. I’m a skilled negotiator and I know how to navigate the negotiation process, ensuring that you get the best deal possible. Whether it’s handling counteroffers, contingencies, and other potential roadblocks that may arise, I work to safeguard your interests and ensure a smooth transaction.
Another crucial benefit is my network of other professionals. My network of lenders, inspectors, contractors, and other industry professionals can prove to be a valuable resource when you need those services, whether related to your real estate transaction or not.
Moreover, I’ll offer invaluable guidance and support throughout the entire home buying or selling process. For sellers, I help in preparing your home for sale, I’ll provide tips and insights to enhance its market appeal, and together we’ll create a pricing strategy to help you achieve your goals.
For buyers, I help you navigate the sea of available properties and help to identify potential red flags, ensuring that you make a sound investment with terms that work for you.
The value of a knowledgeable realtor cannot be overstated. There is lots of information online that is just not true about today’s market. With my commitment to staying informed as a member of Trusted Advisor University, you have a powerful advocate, protecting your interests every step of the way.
For accurate market data, and peace of mind, you have a trusted advisor who’s just one call away - and that’s me - John Schloz with HomeSmart
April's Numbers tell the future
/Many potential home buyers and sellers are asking whether now is a good time to make a move. In this month’s market update, we look at market indicators that might help us predict the future
This is John Schloz with Homesmart and this month’s market update.
Of course, it is impossible to predict the future but we can make certain assessments about today’s market and draw some conclusions about what’s to come. Leading indicators help reflect future performance of the market. Trailing indicators show what has already happened.
Sales price is one trailing indicator and is the last measure that indicates something has already shifted in the market. Sales prices indicates behavior and actions that happened 30 to 60 days ago. We have seen Sales price per square foot increase every month in 2023, up 6.4% since December. So what happened?
Listings under contract is another indicator . Volatile interest rates have sidelined many buyers and for nearly 12 months, we’ve seen the fewest numbers of buyers in escrow at any time since 2009. This might indicate, and does indicate, a very slow market. Buyer activity is down 18% from where it should be this time of year. If we had a normal level of inventory, this would be a very strong indicator of a buyer’s market.
However, when we compare buyer activity with seller activity, we get a different story. Currently, we have the third fewest active listings over the last 18 years - and that is despite massive population growth in the valley. Current seller activity is a whopping 42% below normal. There are not enough new listings coming into the MLS to replace those that are going under contract.
Adding to the lack of inventory, single-family home permits dropped by 74% between March and December last year, so builders are not adding significant supply at the moment. iBuyers, like OpenDoor and OfferPad have seen their supply go from 12% of of the market to just 3-4% today, and that’s continuing to decline. Foreclosures are still at record low levels with little evidence to support a significant rise.
And with many homeowners holding a mortgage at or below 3% interest rates, they have little incentive to sell and move to a 6 or 7% mortgage rate. There appears to be little relief of inventory shortage in the near future.
Low buyer activity, paired with even lower seller activity, points to more upward pressure on prices in the Valley. As supply continues to decrease, seller concessions are decreasing, prices are increasing, and seller positions are strengthening. And, Maricopa county was the fastest growing county in the United States again in 2022. All indicators point to increasing prices in the foreseeable future. Which makes this an ideal window for buyers to get into the market before prices become even more unaffordable.
And though sellers may lament having to help buyers buy down their interest rates, they may be afforded the same benefit when they choose to make a move.
Fortunately, all indicators point to your advantage at having an agent who can help you navigate this wild market. And that’s me. When it’s time to make that move, please give me a call - I am John Schloz with HomeSmart.
Case Shiller Index Explained
/Several articles came out this week sighting the Case Shiller Index that was released February 27th 2023. Remember the data used in the monthly study is based on a 3 month moving average ending 2 months ago. The data is accurate but more accurate on telling us what was happening 4 and half months ago.
For the latest market insights for your neighborhood just reach out and we will get it to you. Have a great day.
3 Reasons to Buy a Home
/The recent National Housing Survey by FannieMae found 82% of respondents believe it’s a bad time to purchase a home. In today's market update, I aim to dispel this belief.
Three reasons why now is actually a good time to buy. If interest rates continue to rise, there is a cost to waiting. And if you buy now, many lenders are offering programs to allow you to refinance with little to no cost when interest rates drop.
Secondly, given the continued growth of the valley and lack of inventory, we can expect prices to shift up again in the near future.
Finally, we may be at the bottom of the market, which is always a good time to buy. Demand is higher than supply, which will put upward pressure on prices. Demand is below normal and so are active listings.
Goldman Sachs Predicts Doom
/This week let's talk about the Goldman Sachs article that predicts the Phoenix Home Values will decline 25% in 2023. Here is the link to the article: https://www.abc15.com/news/region-phoenix-metro/phoenix-could-see-2008-like-plummet-in-housing-prices-goldman-sachs-report-says
I feel Goldman Sachs has missed the mark. Here is why. The contract ratio of homes under contract versus those for sale has been increasing the past 4 weeks and we are at our highest level since September.
Weekly mortgage demand jumps 7% as interest rates drop to lowest level since September. https://www.cnbc.com/2023/01/25/mortgage-demand-jumps-as-interest-rates-drop.html
The count of listings under contract has increased by 22% over the last 2 weeks. showing buyers are quickly coming back into the market.
Traditionally in Greater Phoenix the number of homes for sale significantly increases in January, this year the homes inventory of homes for sale is decreasing. Home Builder permits are down as well.
The Cromford Market Index (seasonally adjusted) shows 11 of the 17 largest cities in the Valley moved into seller market territory and all 17 cites made positive gains for sellers.
