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The underpricing could have just as easily been the fault of the listing brokerage - I have a license, but really didn't want to deal with selling one of my rentals & so I called one of the bigger firms in town to see about handing off the sale - the suggested list price was waaaay under the actual market value of the property- I suspect that underpricing & then claiming to "sell houses FAST!" might actually be the business plan for that particular firm. An asset manager in another state would just think they "did a great job marketing the property" & probably even send more business their way.
Sounds like a case of "do it yourself if you want it done right".
I wish the "investor" landlords around us felt the same as you. These &&^$%# people bought houses in bulk and now have put a couple on the market undercutting the comps by $15k. None of these "investors" took care of their properties or really gave a crap about who they rented to as most of the renters were dirtbags. Thankfully most of the dirtbags are gone at this point!
I don't know why these #*^#%& people decided to underprice like they did but they sure stuck the rest of us with their legacy...
If the homes in your area are in the >>$300K range, you have a lot less buyers. In those instances, if you don't want them to sit, you have to price them to sell. In the under $300K price, the market is hot. Those lower priced homes are fetching a lot more $$'s/square foot; especially ramblers.
That said, there are winners and losers. If I was a buyer, I'd be happy bulk investors where undercutting. Forgetting that point for a moment, eventually, they will exit the market and things will stabilize even more. In reality, bulk buyers and people who bought to rent stopped the fall of the PHX RE market. Of course, there will always be trade-offs. So if bulk buyers and people who bought to rent never showed up, the area would not have recovered. Hence, your value is up in comparison if they never showed.
If the homes in your area are in the >>$300K range, you have a lot less buyers. In those instances, if you don't want them to sit, you have to price them to sell. In the under $300K price, the market is hot. Those lower priced homes are fetching a lot more $$'s/square foot; especially ramblers.
That said, there are winners and losers. If I was a buyer, I'd be happy bulk investors where undercutting. Forgetting that point for a moment, eventually, they will exit the market and things will stabilize even more. In reality, bulk buyers and people who bought to rent stopped the fall of the PHX RE market. Of course, there will always be trade-offs. So if bulk buyers and people who bought to rent never showed up, the area would not have recovered. Hence, your value is up in comparison if they never showed.
Houses are under the $250k range and yes, the market is hot so I'm even more confused, and Of COURSE a buyer would be happy...
I just got done reading ever single one of your posts on this thread to learn more about the Phx RE market. I have a single family home in Ahwatukee, market value somewhere in the $300s. I'm contemplating selling it next spring to be close to family in Denver (not my first choice, believe me.)
But, I looked on Zillow lately and they list my area as a "somewhat buyers market". What? And on top of that, I've seen numerous houses like mine in my neighborhood with 4 sale signs on them. (I didn't look at the asking prices.) I understand Phoenix is a transient city, but I'm wondering, why are these people leaving, and where are they going? I've owned my home since 2002 and have seen plenty of people on my street come and go. Makes me somewhat sad.
Here's my big confusion though: Recently Phoenix was ranked as the fastest growing city in the nation (I guess beating out our long-time competitor Houston and DWF.) If all these newcomers are arriving to Phx, why aren't home prices rising more rapidly than they are? They have in Denver and other "hip and cool" cities! Builders here surely can't respond to these housing demands quickly--it takes them YEARS to do that. So what gives?
I'll partially answer my own question. It may have something to do with the incomes of the new arrivals. Maybe Phoenix is attracting a population group with lower skills? (as compared to Denver for example?) I don't know. All I know is our RE appreciation isn't like Denver's or most of CA's. Comments/questions- welcomed!
I just got done reading ever single one of your posts on this thread to learn more about the Phx RE market. I have a single family home in Ahwatukee, market value somewhere in the $300s. I'm contemplating selling it next spring to be close to family in Denver (not my first choice, believe me.)
But, I looked on Zillow lately and they list my area as a "somewhat buyers market". What? And on top of that, I've seen numerous houses like mine in my neighborhood with 4 sale signs on them. (I didn't look at the asking prices.) I understand Phoenix is a transient city, but I'm wondering, why are these people leaving, and where are they going? I've owned my home since 2002 and have seen plenty of people on my street come and go. Makes me somewhat sad.
Here's my big confusion though: Recently Phoenix was ranked as the fastest growing city in the nation (I guess beating out our long-time competitor Houston and DWF.) If all these newcomers are arriving to Phx, why aren't home prices rising more rapidly than they are? They have in Denver and other "hip and cool" cities! Builders here surely can't respond to these housing demands quickly--it takes them YEARS to do that. So what gives?
I'll partially answer my own question. It may have something to do with the incomes of the new arrivals. Maybe Phoenix is attracting a population group with lower skills? (as compared to Denver for example?) I don't know. All I know is our RE appreciation isn't like Denver's or most of CA's. Comments/questions- welcomed!
There are a lot of factors as to why prices aren't rising that quickly (though I would argue that price appreciation is still pretty healthy overall and will be for another couple years). There factors are:
- incomes of the newcomers (some are retirees coming for specifically for the lower COL than where they came from), some are families moving from places like California who've been priced out of that market and feel like they MIGHT someday have a chance to own a home here, or will at least be able to afford a much better apartment than where they came from
- decrease in homeownership and number of rentals - the homeownership rate has decline to a bit above 63% now nationwide, a drop of around 6% from the over 69% homeownership rate when it peaked 12 years ago in 2005. There was a multi-family housing boom for several years after the crash, incloding here in Phoenix (still going on actually, although apartment deliveries are finally just now starting to slow a bit)
- changes in demographics - boomers are hitting retirement age and many are either downsizing due to lower incomes or they just don't want to deal with the maintenance of owning a home - many millennials (a generation actually bigger than the boomers) have delayed homeownership either because they came of age during a bad economy and have been unable to save money for a down payment or because they have delayed marriage and starting a family longer than previous generations. Also, in the new economy jobs are not often as stable as they used to be. A more transient workforce does not always want to commit to setting down roots, by which purchasing a home has always been a symbol of that.
- price appreciation and rising interest rates decreasing affordability - prices have already risen substantially in Phoenix. Homes have doubled in value (or more!) in some places since 2010. Also, now interest rates are finally rising again. Wage growth has not kept pace with the rising prices, so while homes below a certain price range (especially below $300k) are still HIGHLY in demand because they are within reach to many people, homes above a certain price threshold will sit much longer simply because there are fewer people who can qualify to purchase them.
All of that said, demand is still overall strong RELATIVE TO SUPPLY. That's because there is still pent up demand due to a combination of low resale home supply (active listings on MLS are the lowest they've been in 5 years), and there were very very few homes built from 2008 until now. In fact, builders are still not building enough homes to meet the current demand, so overall market lot supply is shrinking, which will continue to push prices further up until either demand shrinks or they are finally able to deliver enough to the market to meet the amount of demand. I still think that's a couple years away.
There are a lot of factors as to why prices aren't rising that quickly (though I would argue that price appreciation is still pretty healthy overall and will be for another couple years). There factors are:
- incomes of the newcomers (some are retirees coming for specifically for the lower COL than where they came from), some are families moving from places like California who've been priced out of that market and feel like they MIGHT someday have a chance to own a home here, or will at least be able to afford a much better apartment than where they came from
- decrease in homeownership and number of rentals - the homeownership rate has decline to a bit above 63% now nationwide, a drop of around 6% from the over 69% homeownership rate when it peaked 12 years ago in 2005. There was a multi-family housing boom for several years after the crash, incloding here in Phoenix (still going on actually, although apartment deliveries are finally just now starting to slow a bit)
- changes in demographics - boomers are hitting retirement age and many are either downsizing due to lower incomes or they just don't want to deal with the maintenance of owning a home - many millennials (a generation actually bigger than the boomers) have delayed homeownership either because they came of age during a bad economy and have been unable to save money for a down payment or because they have delayed marriage and starting a family longer than previous generations. Also, in the new economy jobs are not often as stable as they used to be. A more transient workforce does not always want to commit to setting down roots, by which purchasing a home has always been a symbol of that.
- price appreciation and rising interest rates decreasing affordability - prices have already risen substantially in Phoenix. Homes have doubled in value (or more!) in some places since 2010. Also, now interest rates are finally rising again. Wage growth has not kept pace with the rising prices, so while homes below a certain price range (especially below $300k) are still HIGHLY in demand because they are within reach to many people, homes above a certain price threshold will sit much longer simply because there are fewer people who can qualify to purchase them.
All of that said, demand is still overall strong RELATIVE TO SUPPLY. That's because there is still pent up demand due to a combination of low resale home supply (active listings on MLS are the lowest they've been in 5 years), and there were very very few homes built from 2008 until now. In fact, builders are still not building enough homes to meet the current demand, so overall market lot supply is shrinking, which will continue to push prices further up until either demand shrinks or they are finally able to deliver enough to the market to meet the amount of demand. I still think that's a couple years away.
This was perhaps the BEST synopsis I have seen regarding the current situation in the Valley. Great job!!
Let me ask you a question. In your opinion, in active retirement communities (the Sun City developments and the like) is appreciation in the near future more limited due to the limited amount of eligible buyers and residents eligible at 55 plus, etc. and would appreciation be slower in these areas?)
This was perhaps the BEST synopsis I have seen regarding the current situation in the Valley. Great job!!
Let me ask you a question. In your opinion, in active retirement communities (the Sun City developments and the like) is appreciation in the near future more limited due to the limited amount of eligible buyers and residents eligible at 55 plus, etc. and would appreciation be slower in these areas?)
It's a totally different market segment so while you have a more limited pool of potential buyers, you also have a more limited supply of communities that target those buyers. I'd say if anything those areas are poised to do well due to demographics (more boomers reaching that age when they would like to actively "retire"). While at the individual community level absorptions per community may not be as high as, say 10-12 years ago that is more a factor of their being increased competition (more builders that have jumped into the active adult segment). It used to just be Del Webb and Robson locally. Now there is also AV, Shea Trilogy, Farnsworth, K Hovnanian's Four Seasons, and others (i.e. multiple builders at Victory at Verrado) to have to compete with. I think the increase in demand has overcome the additional supply enough in this market to where you are still seeing solid appreciation in the AA segment, though - at least on par with how the traditional single family segment is doing. The peformance of the stock market over the past 8 years has certainly helped that, as well, considering how many retirees had 401ks or other retirement plans invested in stock/mutual fund vehicles.
It's a totally different market segment so while you have a more limited pool of potential buyers, you also have a more limited supply of communities that target those buyers. I'd say if anything those areas are poised to do well due to demographics (more boomers reaching that age when they would like to actively "retire"). While at the individual community level absorptions per community may not be as high as, say 10-12 years ago that is more a factor of their being increased competition (more builders that have jumped into the active adult segment). It used to just be Del Webb and Robson locally. Now there is also AV, Shea Trilogy, Farnsworth, K Hovnanian's Four Seasons, and others (i.e. multiple builders at Victory at Verrado) to have to compete with. I think the increase in demand has overcome the additional supply enough in this market to where you are still seeing solid appreciation in the AA segment, though - at least on par with how the traditional single family segment is doing. The peformance of the stock market over the past 8 years has certainly helped that, as well, considering how many retirees had 401ks or other retirement plans invested in stock/mutual fund vehicles.
Thanks for the analysis. You know your stuff. Maybe you've been following some of my posts (or maybe not ...lol..) but I'm going to rent a condo in the Valley this winter , but then may be looking to buy at some point after so this info is very valuable.
Thanks for the analysis. You know your stuff. Maybe you've been following some of my posts (or maybe not ...lol..) but I'm going to rent a condo in the Valley this winter , but then may be looking to buy at some point after so this info is very valuable.
Thanks. It's kind of my job to know this stuff (and this info I'm giving out on here for free my clients usually pay a lot of money for ). That said, welcome to the Valley. I'd caution you not to wait TOO long to buy if you're going to do so. The sooner the better because the appreciation is going to start to ramp down pretty soon as we approach the limits of this cycle. If you buy by summer of next year I think you'll still be okay.
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None of these "investors" took care of their properties or really gave a crap about who they rented to as most of the renters were dirtbags. Thankfully most of the dirtbags are gone at this point!
Forgetting that point for a moment, eventually, they will exit the market and things will stabilize even more. In reality, bulk buyers and people who bought to rent stopped the fall of the PHX RE market. Of course, there will always be trade-offs. So if bulk buyers and people who bought to rent never showed up, the area would not have recovered. Hence, your value is up in comparison if they never showed.
Maybe you've been following some of my posts (or maybe not ...lol..) but I'm going to rent a condo in the Valley this winter , but then may be looking to buy at some point after so this info is very valuable.
). That said, welcome to the Valley. I'd caution you not to wait TOO long to buy if you're going to do so. The sooner the better because the appreciation is going to start to ramp down pretty soon as we approach the limits of this cycle. If you buy by summer of next year I think you'll still be okay. 
