PHOENIX MARKET UPDATE, Why is inventory low? (Mesa, Glendale: appliances, home sales)

[Jukesgrrl]

Originally Posted by jimj

My next door neighbor listed her 1600 sqft, 2006 built single story that she listed last Wednesday. She had an offer 2 days later and they're now working on counter offers.

What was the list price now versus what she paid? And how close are her offers to her asking price?

[jimj]

Originally Posted by Jukesgrrl

What was the list price now versus what she paid? And how close are her offers to her asking price?

She paid about $114k for it back in 2010 and listed it for $155k as it's move in ready. They came in with a lowball (my opinion) offer of $143k plus they wanted 3% closing.
I know they're in counter mode right now and the people came back to look at it again so I'm guessing they'll come to an agreement.

[vince3vince]

Originally Posted by Captain Bill

If you're referring to 2005-2006, I understand your concern. However, there is a vast difference in what happened then and what is happening now. During that time, speculators were driving the market up, buying houses for the purpose of flipping them within a few months for a profit without doing anything to the house. Mortgages were approved with nothing down, after giving the breathing test.

Inventory began to increase, and sales began to decline, while prices were continuing to increase. Price had to reverse at some point, due to increased supply and declining demand, and when it did, the market over corrected on the way down.

Looking at the chart below, we see that we are back to around 2004 level in pricing. And the steep rise in pricing is for completely different reasons than in 2005-06.

• Inventory is very low: 2.2 months overall supply
• Demand (sales) is high.
• Lending criteria has been, and still is, very tight
• People are buying homes to live in, and about 25% (including institutional investors) are buying to hold and rent long term. And don't expect institutional investors to sell all at once.
• Speculators are long gone
• The population is growing faster than homes are being built for them
• The increased interest rates have not had a negative effect on the market.

When inventory is low and demand is high, prices will naturally increase.

As discussed earlier in this thread, new home builders will have to double their production in order to fill the demand, and for their own bottom line it is not economically feasible at this time for them to increase production.

The time to be concerned is when the trend begins to look like it did in 2005-6, when sales are declining, inventory is increasing, and prices are still declining. People who depend on the media for their housing market information will learn about that after it happens. I'll know when that begins to happen because I subscribe to the best source of Phoenix housing market data that is available. Those who don't subscribe can read Mike Orr's monthly housing report on the WP Carey web site.

When I see that beginning to happen, (not expected anytime soon) then I'll wait for about 6 months more and sell my properties.

Chart below is courtesy of the Cromford Report.

Not everything you said is entirely accurate. That spike in mortgage rates to 5% did cause a slump in home buying and refinancing demand, thus the rate being dropped to around 4.3% a few days ago. And depending on what price range and area a home buyer is in, the asking price of homes I've looked at are well beyond 2004, it's actually ~10-15% less than the 2007 peak.

[Captain Bill]

Originally Posted by vince3vince

Not everything you said is entirely accurate. That spike in mortgage rates to 5% did cause a slump in home buying and refinancing demand, thus the rate being dropped to around 4.3% a few days ago. And depending on what price range and area a home buyer is in, the asking price of homes I've looked at are well beyond 2004, it's actually ~10-15% less than the 2007 peak.

June begins the slow season in this area, and the number of sales always begins to decline. The decline in the number of sales that we're seeing appears to be the result of the slow season, not the interest rate.

• According to the information available to me in the Cromford Report, the contract ratio for normal listings between June 5 and July 5 dropped 12.9% in 2013.
  .
• For the same period in 2012, the contract ratio dropped by 13.2%. As one can see, the seasonal effect was about the same, with a larger decline in contract ratio in 2012.

According to that data, there has not been a significant impact from higher interest rates. Mike Orr believes that, "the drop in affordability is probably being balanced by the rise in a sense of urgency".

The information I post is for the Phoenix market as a whole, using either the average or the median pricing, not specific price ranges, zip codes, or specific houses.

The chart that I showed previously, from the Cromford Report showed the Sales Price to be at 2004 level. That is accurate data.

You are mentioning a few homes where you feel the list price is beyond 2004, which is certainly possible, but to find out for sure, you would have to compare that home price today, with what the same type home was listed for in a given year. The average List price in Phoenix metro today is $177/sf. At the peak 2007 price in March 2007, the average List price was $218/sf. Obviously, there are many homes that sell for prices far below, and far above the average.

Below is another chart, courtesy of the Cromford Report that shows Listing price. The chart only goes back to 2006, but you can see that the average list price per square foot today is far below 2006.

[Captain Bill]

Originally Posted by jimj

Please feel free to email me when and if that time comes!!!!

After I sell, I'll be happy to let you know.

[Zippyman]

I wonder if (due to the lack of sellers), we're seeing something similar to "after hours" trading in the stock market.. sellers asking "unreasonable" prices (and sometimes getting lucky), and buyers expecting unreasonably low prices (and sometimes winning)..

we would need at least three times the product to have "true" price discovery (a six-month supply).. so in the meantime, pricing is all over the place.. (and being limited in upward travel by appraisals).. which exacerbates the supply issue..

[Captain Bill]

Originally Posted by Zippyman

I wonder if (due to the lack of sellers), we're seeing something similar to "after hours" trading in the stock market.. sellers asking "unreasonable" prices (and sometimes getting lucky), and buyers expecting unreasonably low prices (and sometimes winning)..

we would need at least three times the product to have "true" price discovery (a six-month supply).. so in the meantime, pricing is all over the place.. (and being limited in upward travel by appraisals).. which exacerbates the supply issue..

From my point of view, I don't think so. When a house is far over priced, buyers won't even look at it. Many agents are doing a good job of educating their buyers on what's happening in the market, and will suggest their buyers make an offer immediately on a house they like, if it is priced right. Most good agents know which houses will sell quickly with multiple offers.

I'm seeing appraisals on the transactions I'm involved in come in at the purchase price. Appraisers are no longer using short sales as comps for normal sales, and they are factoring in the price increase per month if they use a comp that's three months old. If they don't find comps to match the price in the community, they will go outside the community and find them now.

Buyers who expect unreasonable low prices will lose their Realtor very fast if they insist on lowballing. Today, on a house priced at the market, sellers are insulted if the offer is even 5% below list price, because they're expecting list price, or higher, offers. Sellers don't want to negotiate today. They want list price or higher. Many will put their home on the market on Friday, and state on the mls that they will not look at offers until Monday evening.

[Zippyman]

Originally Posted by Captain Bill

Buyers who expect unreasonable low prices will lose their Realtor very fast if they insist on lowballing. Today, on a house priced at the market, sellers are insulted if the offer is even 5% below list price, because they're expecting list price, or higher, offers. Sellers don't want to negotiate today. They want list price or higher. Many will put their home on the market on Friday, and state on the mls that they will not look at offers until Monday evening.

I agree with what you've stated, but I think that it kinda proves my point - selling your house in a single day with multiple offers isn't "normal", and you really don't know what the true market value is, unless it has been fully exposed to the market - just like a short-sale listed on MLS and marked "pending" three minutes later isn't really a reflection of value, a house listed on Friday and offer accepted on Saturday isnt really "market" value either.. the fact that there might not *be* another house for sale in "xyz development" causes some buyers to overbid in a frenzy. It's nice if your a seller, but if your neighbors realized you were getting 10% under peak pricing, you would likely have some competition - and it only takes a couple of homes every six months to set the value of all the homes in a neighborhood.

[jimj]

Originally Posted by Captain Bill

From my point of view, I don't think so. When a house is far over priced, buyers won't even look at it. Many agents are doing a good job of educating their buyers on what's happening in the market, and will suggest their buyers make an offer immediately on a house they like, if it is priced right. Most good agents know which houses will sell quickly with multiple offers.

I'm seeing appraisals on the transactions I'm involved in come in at the purchase price. Appraisers are no longer using short sales as comps for normal sales, and they are factoring in the price increase per month if they use a comp that's three months old. If they don't find comps to match the price in the community, they will go outside the community and find them now.

Buyers who expect unreasonable low prices will lose their Realtor very fast if they insist on lowballing. Today, on a house priced at the market, sellers are insulted if the offer is even 5% below list price, because they're expecting list price, or higher, offers. Sellers don't want to negotiate today. They want list price or higher. Many will put their home on the market on Friday, and state on the mls that they will not look at offers until Monday evening.

With the conversations I've been having with agents lately it seems that they're being pretty forceful with clients about pricing houses correctly and not overprice for the area and then doing the laddered price drop thing hoping to suck someone in.
The houses around us tend to list within $5k of recent sales and that seems to be holding pretty good.

[MotleyCrew]

Watching the house next door to our Vistancia home, same floorplan. The owner's want to sell and have it priced way too high in my humble opinion. I would hope they could get what they are asking but they have lowered the price twice in one month. People get excited when markets shift and also get greedy as well. Not sure the price dropping is sucking them in on this one.