June Real Estate Minute

Average sales price all of Phoenix Metro Area (directly from MLS):

March 2013      $222,310
April 2013        $227,836
May 2013         $238,975

This increase represents a 7% increase in sales price in just the past 60+ days.  If buyers are not seeing a 7% increase in their salaries then they are not keeping up with the market increases which will result in decreased buying power over time.

The projected increase over the next 6 months is another 5-10%+ for the Phoenix area.  What that means for us is that you should probably be seeing homes that are now selling around the $240,000 price point selling for $250-275K depending on what areas the houses are.  In the southeast Gilbert area, these zip codes are very active and the market there is hot.  Prices will be trending higher as there is a great deal of new construction there too, mostly starting higher than $300,000.

The other interesting statistic is that in the Phoenix market as a whole we are averaging across all price ranges around 97-98% of list.  This includes multi-million dollar homes as well so that is a good barometer of how the market is acting.  In the zip code 85296 again, the average list to sales price ratio for May 2013 was right at 100% according to MLS.  For homes that had a sales price less than the average however, these homes were seeing list to sales price ratios higher than 100% in many cases, meaning that well priced homes are going for higher than list by up to 5%  due to the super high demand in the geographic area and the ultra low inventory.

What does all this mean for you?  If you are looking to buy a home in this hot market, the #1 real estate market in the U.S. for this entire year so far, you need to be super aggressive with your price, be willing to accept seller terms and in most cases be willing to pay for things that in a balanced market you may not have to or could be negotiated.

One final real estate point, since the market is appreciating at a steady pace, appraisals are in some cases not meeting the agreed upon sales prices.  Buyers and sellers alike know this when entering a contract and if the appraised price is within 1-2% of sales price, in most cases the buyers are accepting and absorbing the difference just to get the house closed.  The appraisal contingency waiver on deals is here and is steadily becoming the norm on many deals.

Finally- RATES…. Rates have been inching up as the Fed adjusts it policies toward the secondary mortgage market.  Average rates have been creeping up and have been hovering around 4%.  There are some rates lower, each lender and program are different (ie. Some lenders roll in costs to the rate, some have you paying more upfront, etc).  About 2 months ago however, rates were averaging 3.5%.  What does this 1/2% rate increase mean to you in conjunction with the average sales price increase?  See the example below:

March 2013- Average 30 yr fixed at 3.5%, Average sales price from MLS $222,000, 30 year Principal and Interest Payment with 20% down= $797.50

May 2013- Average 30 yr fixed at 4%, Average sales price from MLS $239,000, 30 year Principal and Interest Payment with 20% down= $858.57

That is a $60 per month increase or $720 per year.  Rates look like they will be rising to 4-4.25 over the next few months as well based on what most lenders are saying.  If prices rise another $5000 even in the next 30-60 days that actually has you spending over $100 more a month than what you were spending just 60 days ago.  That could mean the difference between getting qualified at $230,000 or getting $215-220K which reduces your overall buying power and may mean more sacrifice for what you want.  Conclusion- What are you waiting for????

As many of my buyer clients are doing now…. They realize that they may not be getting the home of their dreams, but it is much better than renting and they are using this opportunity to gain equity in their investment.  If the average home rises 10-15% over 12 months in value or 10-20% in just 12-24 months, that is a larger gain than any investment that they have their money in.  In other words, if you invest $50K into a home today and the price of that $230,000 home goes up to $250,000 in 12-24 months, that is $20,000 they realized in their investment.  They are willing to look at this home purchase as an investment and not a long term purchase home, knowing that average homeowners only keep their homes for about 5 years.

If there is anything that my team or I can do for you, do not hesitate to call, email or contact me today!  This has been your June Real Estate Minute from The outFRONT Group at Keller Williams Realty and E.J. McKinney.  Look for us on YouTube in the near future!

No bubble trouble: Trends show East Valley, Phoenix avoiding real estate repeat

For those of us in the Phoenix metro area wondering how long this upswing in the real estate market can continue, the answer is simple… We are still on a upward correction path following the downswing in the economy and the upswing we see in home prices and values here in Phoenix are not a bubble.  We are correcting our market from the large losses seen after the massive real estate meltdown felt after 2007.  For more on this story check out this great article:

No bubble trouble: Trends show East Valley, Phoenix avoiding real estate repeat