Real Estate Tips | Andrew Robb RE/MAX Fine Properties Real Estate Tips | Andrew Robb RE/MAX Fine Properties

Phoenix Real Estate Report

phoenix real estate market update
1. How fast are homes selling? Average number of days on market is 35 (down 19 days from last year)
2. How many homes are for sale? We currently have 4,577 properties for sale (down 69.3% from last year)
3. What is the average sales price? Homes around the valley are selling for $470,289 (up 24.3% from last year)

March’s supply was down 2.5% from March 2020 (with 11,066 homes listed for sale last month) and March’s demand was up 17.4% from March 2020 (with 10,404 homes sold last month). Average home values increased over 24% in the last year and we presently have only 0.85 month of inventory, which is down from 1.68 months at this time last year. Under 3 months supply means a seller’s market, between 3 and 5 months means a balanced market, and over 5 months means a buyer’s market. The fact we are staying below 1 month of inventory is record-breaking!

What is going on? We need to look no further than hysterically low inventories, where active listings are 69.3% lower compared to 2020. The term absorption rate is a metric used to evaluate the rate at which available homes are sold during a given time. It is calculated by dividing the number of homes sold by the total number of available homes. By historical standards, an absorption rate greater than 20% is a seller’s market, while an absorption rate below 15% is a buyer’s market. We currently have an absorption rate of 272.5%. When we look at the gross dollar sales volume for the first quarter, the numbers are staggering. In Q1 2021 we reported a gross dollar sales volume of $11.2 billion. This gross dollar sales volume surpassed the record-setting pace of last year by 36% and beat 2005 by 77%.

Is this 2005 all over again? The reason we reference 2005 is because it was a year characterized by extremely low inventories, high sales volume and rapid price appreciation. 2005 still reports the highest yearly sales volume in history and ended with a 39% gain in the median sales price, hence the reasons many analysts today point to 2005 in their analysis. However, while low inventory levels and rapid appreciation are similar, the market today has many differences. In 2005 we were adding many more homes to our housing supply through new construction. According to county assessor records 91,871 homes and condos were built between 2004 and 2005. Over the last two years, the assessor reported 31,829 new homes built. There were nearly 3x as many new homes added to the housing inventory in 2005 compared to today. In 2005 there were very loose loan underwriting standards. NINJA was a slang term for a loan extended to a borrower with little or no attempt by the lender to verify the applicant’s ability to repay. It stood for no income, no job, no assets. Today the underwriting process includes verifying the applicant’s identity, checking stability and amount of income, verifying employment, reviewing tax returns, examining financial statements, checking credit score and perusing credit reports to make sure they can afford the loan, as well as adhering to strict underwriting guidelines. Interest rates today are 3.13% according to Freddie Mac, in March of 2005 rates were 5.93%.

What can we expect? Real estate markets are cyclical, and this cycle will end too, but I do not see our current market following the disastrous path of 2005. 2021 is a byproduct of market dynamics, while 2005 was a result of speculation without restraint. The most frequently asked question is, “When will the market shift?” My only response is “no time soon”. In the short term, I just do not see where the additional supply needed to balance our market will come from. There is a common belief that once the COVID-19 Mortgage Forbearance is lifted the housing market will see a flood of homes become available. With Mortgage Forbearance just extended (again), millions of homeowners with federally guaranteed mortgages have the option to extend their forbearance an additional six months, and the federal foreclosure moratorium deadline has been pushed back to June 30, 2021. The first signs of a market shift will be subtle. Listing agents will begin seeing fewer offers. They will still sell the home quickly, but they will see the number of offers decline. The real indication of a market shift will show in the supply vs demand charts, but the current extremes can not and will not change dramatically overnight. So I will keep monitoring the data searching for those subtle changes. In the meantime, if you were shocked by our quarterly numbers, wait until you see our semi-animal numbers!

Data from ARMLS® COPYRIGHT 2021.

Freon Phase-Out

end of freonYou probably recognize R22 by its common name: Freon. This refrigerant has been used in households for over 60 years to allow our air conditioners to cool our homes. During the 1970s, scientists discovered a link between hydro-chlorofluorocarbons (HCFCs) and depletion of the Earth’s ozone layer. With this link began the phase out of R22, an HCFC product, in 2010. R22 is an HCFC refrigerant that use gases to produce cool air by compressing warm air sources into liquid through HVAC coils. Freon has been an industry standard in refrigerants since the 1950s due to its efficiency.

How will this affect homeowners?
Although production of R22 will cease, there is expected to be plenty available and approved for use through December 31, 2029. Between 2020 and 2029, servicing systems with R22 will rely solely on recycled or stockpiled quantities. Homeowners are not required to stop using R22 air conditioners, nor are they required to replace existing equipment. However, homeowners should keep in mind that as supplies of R22 becomes limited over time, they may experience an increase in prices.

Phaseout dates to know:
Under the Clean Air Act of 1990, the U.S. began to outline a phase out for the use of R22 that would unfold slowly over the course of 20 years.
January 1, 2020 – there will be a ban on production and import of R22. Service of product will rely on stockpile.
January 1, 2030 – there will be a ban on remaining stockpile and import of all HCFCs.

What can homeowners do now?
The phase-out of R22 has been lengthy to allow homeowners to replace their air conditioner as they naturally age, and replace them with new energy-efficient equipment that uses EPA-approved
refrigerants, such as R410A which is a non-ozone-depleting refrigerant alternative refrigerant. It is flourine-based and contains no chlorine. R410A is also noncorrosive, nonflammable, and neutral to the environment. It is manufactured and sold under many names such as, PURON®, GENTRON AZ-20®, and SUVA®.

Purchasing a home warranty plan for the property is likely the most cost effective way to deal with the R22 Freon phase-out and conversion to R410a that we are facing. It can save you thousands when entire systems need to be replaced.

Refinance FHA loan to Conventional loan

FHA refinance to conventionalI often have past clients who purchased their home in Phoenix with an FHA loan ask me about the current estimated value of their home because they are considering refinancing an FHA loan into a conventional loan. Why should you also look into this? To save money every month!

Homeowners who purchased a house using an FHA loan most likely put 3.5% of the purchase price as a down payment. In order to make the lender comfortable with a reduced down payment, this buyer was required to carry mortgage insurance for the life of the FHA loan. How much does mortgage insurance cost? It’s calculated as a function of the size of the loan and the borrower’s credit score (FICO) but typically runs about $200 per month for an FHA loan of $275,000 with a FICO of 700. The monthly mortgage insurance premium declines as the loan balance is paid down, but still amounts to $30,000 for the life of the FHA mortgage in this example!

To qualify for a conventional loan, borrowers must put down 20% of the purchase price of the home. If they go the FHA route of 3.5% down, they will need to contact their lender when they believe they have now built up 20% or more equity in the home. How do you build 20% or more equity? By either paying down the loan balance so the loan to value ratio is less than 80% (it started out at 96.5% in FHA scenario) and/or by having the home value increase. With Phoenix home values up substantially in recent years, if you purchased your home with an FHA loan, odds are you are in a great situation to refinance out of your FHA loan into a conventional loan.

I urge you to contact your lender to inquire about making this change to save thousands of dollars. If you are unsure of your home’s current value to assist in determining if your loan to value ratio is below 80%, request your no-cost and no-obligation Phoenix home value estimate from me. I do not need to visit your home and you will receive your report from me within 24 hours to present to your lender to see if you qualify for an FHA refinance.

Calculating Phoenix Home Value

Calculate Phoenix Home ValueEstimating the value of a Phoenix home is a science more than it is an art. Factors like average days on market, availability of other competing homes for sale and seasonal demand fluctuations should all be taken into consideration – but more so when determining the pricing strategy for your home, not calculating its market value.

Phoenix home value is calculated using a fairly strict set of criteria, including using:
– similar size homes (generally not more than +/- 15% in square footage difference)
– similar age homes (generally not more than +/- 10 years difference)
– similar neighborhoods or subdivisions (appraisers typically will not cross a major road or highway to find comps)

Phoenix home value is impacted by differences in:
– quality of home construction
– quality of improvements made
– size of lot
– lot views and/or privacy
– number of garage parking spaces
– number of bathrooms
– having a pool and/or spa
– having a fireplace

Once an opinion of fair value has been reached, how do you determine pricing strategy?

Within each neighborhood there are typically 3 price ranges:
– high (homes that bring the most $/sqft)
– low (homes that bring the least $/sqft)
– mid (homes that fall between high and low)

Most value ranges vary by more than $10/sqft so it is important to select the appropriate price range for the home and then to correctly position the home within the appropriate range. Having your home well positioned within the correct range doubles your chances of getting the home sold. Keep in mind that selling a home is both a price war and a beauty contest.

As you have probably realized by now, figuring out a home’s realistic market value and proper pricing strategy goes way beyond finding out what a neighbor sold their house for and multiplying that $/SQFT ratio by the total SQFT of living space in your house. Submit your property details if you would like me to provide you with a no cost, no obligation, value estimate for your Phoenix home.

Opendoor Reviews Offerpad Reviews

Opendoor reviews Offerpad reviewsLooking for Opendoor reviews or Offerpad reviews on Yelp? Good luck.

On February 11, 2019 Inman News reported that Yelp made finding these reviews almost impossible, by removing them from Yelp’s online search tool and from Google search results. The review pages are still accessible with direct links so consumers can still read old reviews and post new reviews – you just can’t search for the review pages any more since Yelp has stopped them from turning up in searches. When the review pages became unsearchable, Opendoor had a 3.0 star rating from over 180 reviews, while Offerpad had a 1.0 star rating from only 1 review. Interestingly, Opendoor has received financial backing from Yelp’s CEO as well as two former Yelp board members though they state the Yelp policy change has nothing to do with this relationship.

Why are reviews so important to a business? Consider when you make a small purchase decision, such as buying a new toaster or going out to eat. How often do you read reviews before making your choice? Let’s be honest, most of us hardly doing anything today with a little research first, which includes reading customer reviews and looking up star ratings. Would you buy a toaster with a rating of 3.0 stars in their reviews? Would you eat at a restaurant that only gets 3.0 stars from hundreds of patrons? And we’re talking about spending less than $100 in each of these situations. Consider then that selling a home is one of the biggest and most important financial transactions of many people’s lives. So if you won’t eat at a Chinese buffet with a questionable 3-star rating, would you sell your home with a company that gets the same rating?

Here is a link, which is also fully searchable on Google, to my rating and reviews from Zillow: Andrew Robb reviews.

Andrew Robb - RE/MAX Fine Properties, 21020 N Pima Rd, Scottsdale AZ 85255