How’s the Market? Here is the November 2017 West Valley Market Report. Black Friday deals weren’t the only thing selling last month. Two West Valley cities reporting double digit increases in the amount of homes over last year, Surprise 20.00% increase, Peoria 13.8%, followed by Phoenix 8% and Buckeye 6.7%. Inventory or Home supply levels, continues low, as each month we list and sell almost the same amount of homes.
The following article was presented to ARMLS members on 11/15/17, with tax debates underway and changes likely, I thought it was worth sharing. As it stands the changes look good for Arizona, investors and even renters.
There have been numerous articles written over the past week about the new tax implications. In his daily observations from November 6th, Michael Orr of the Cromford Report shared his take on the tax adjustment.
“The Mortgage Interest Deduction is not as important as many in the housing industry believe. It only comes into play for taxpayers who itemize their deductions and for many people the standard deduction is already larger than the total of their itemized deductions. With the proposed tax changes under re- view in 2017, the standard deduction will increase while many other deductions will be reduced. This will mean the Mortgage Interest Deduction will become irrelevant except to a very small percentage of home owners in Arizona. Only people with incomes well over $200,000 are likely to find it worthwhile to itemize their deductions. Needless to say, this is a lot higher than the typical income level to be found across Greater Phoenix.
“The limit on the size of the mortgage for which mortgage interest can be deducted is proposed to fall from $1,000,000 to $500,000 and property tax deductions will be limited to $10,000. In California these limits may look rather low, but in Arizona there are few people who will be affected. This is because our property taxes are much lower than California and our average mortgage is much smaller too.”
“The net effect of the proposed tax changes will be to lessen the tax advantages of home ownership versus home rental. This could divert some demand away from homes for sale towards homes for rent. Neither type of home is easy to find in affordable form in the Phoenix area right now, though expensive homes are easy to find for both rent and purchase. It also means the tax proposals will be unpopular with real estate agents, who much prefer people to buy rather than rent. This is confirmed by the strong opposition to the tax reforms voiced by the National Association of REALTORS®”
“Another thing that agents will dislike is the new incentive created for high end homeowners not to sell their home. Existing mortgages will have their interest deductibility preserved but any new mortgage will be under the new rules. The national mobility is rather low at the moment, so this tax change will probably reduce mobility further, especially at the high end. On the other hand, people involved in re-modelling and renovating will be pleased about the changes, as owners decide to stay with their existing mortgage and update their home instead.”
“From a builder’s perspective, they too prefer incentives to buy rather than rent, so most are in opposition to the tax proposals. However, it will be high end builders like Toll Brothers and those with a greater exposure to expensive markets on the coast who will be most negatively affected. The Arizona market will feel very minor effects in comparison and the low and mid-range demand for new homes is likely to remain intact.”
“Those involved in rentals will love the changes because rental demand will get a boost. Doubling the standard deduction will give most filers the tax benefit of owning a home without the bother of having to a purchase one. The likely increase to their take-home pay will probably make it easier for tenants to pay their rent on time and agree to the rent increases that landlords love to impose. The tax changes are therefore friendly to landlords and real estate investors.”
Numbers from Maricopa County public records in 2017 echo these sentiments:
90% of the homes purchased in Maricopa County are less than $482,000 77% of all homes purchased had a mortgage
Less than 3% of the homes purchased had a mortgage greater than $500,000
My personal sentiments align with Joseph Callaway in a recent azcentral article, “It has been a long time since we had a buyer say that they were buying a home for the tax deduction on interest,” he said. “If tax reforms bring more prosperity to people, then home ownership and demand will go up.” And I might add, a tax change that negatively impacts California might bring positive economic gains to Arizona.
It should be noted the tax-reform bill hasn’t passed yet, and more changes will come as Congress sifts through the proposal. As is most often the case, it’s difficult to anticipate the true ramifications of changes within the tax code, and at this early stage, we’re only guessing.
Reproduces with permission courtesy of ARMLS® COPYRIGHT 2017
Hows the Real Estate Market in Surprise, AZ? Median home prices have seen double digit increases over last year. Inventory levels remain low and new listings continue low, 2017 should finish strong for homeowners in Surprise. Click below to enlarge a detailed report on all Surprise Subdivisions.
How’s the Market? Here is the October 2017 West Valley Market Report. Happy Fall Y’all!! Cooler Temps have heated up our Market! Maricopa County had an increase in sales over last year of 4.3% with a median sales price increase of 6.57%. West Valley cities that had the largest increase was Buckeye at 43% increase over last year, Litchfield Park 33.3%, Peoria 6.7%, Goodyear 6.3% and Phoenix 3.9%. All other cities reported slight decreases were Avondale -16%, Surprise -7.3% and Glendale -4.1%.
As you may know we have a property management division within our team, www.AZPropertyManagementGroup.com to help our investment property owners manage their properties and maximize the overall return. There are a few things that commonly pop up as we take on properties that I thought I would discuss here. This is not written to poke fun of anyone, it’s to shed light on the problem areas we are commonly seeing so that you can perhaps make an informed decision on whether you need a property manager to help or not. So here are three very common fails we are seeing…
If you need assistance with property we are happy to help, please let us know.
Hows the Real Estate Market in Surprise? City of Surprise Median Home prices are up 7.14% over last year. Click below to enlarge a detailed report on all Surprise Subdivisions. Feel free to contact us with questions or to get a detailed report on your specific property.
How’s the Market? Here is the September 2017 West Valley Market Report. Inventory levels once again held steady in most west valley cities. A few dropped a couple of percentages while a few went up a tick. Only Surprise and Peoria saw increase values in the Median sales price, all other cities reported a decrease in median home prices. As you can see from August Market report, they were not significant price decreases, but with low inventory supply, we expect to see prices trending up. In case you missed, be sure to check out last weeks blog “Whats Up with this Market” where I shared what our team, and other agents are experiencing in this market.
Now to give an accurate picture when looking at these numbers, you need to keep in mind 30-45 day average closing time for real estate transactions, this means most of the homes that closed in September, actually sold in August. So with that said, another number I pay close attention to is the Pending Sales. Not sure if its a “sign of a shift” or higher than normal temperatures, but the winter visitors and influx of home buyers that usually see in September just weren’t there. Pending Sales in September in just about all west valley cities showed double digits decreases over the same month last year. Avondale -27.6%, Glendale -33.4%, Goodyear -32.5%, Litchfield Park -31.2% Peoria -17.8%, Phoenix -25%, Surprise -30.3%, Maricopa County -28%, the only city to increase sales over last year was Buckeye with 7.5% increase over last year.
Many of you have been following our “How’s the Market?” monthly reports that detail pertinent numbers for the West Valley cities, but I am hoping to enlighten you with even more… “Whats up with this Market!?!” Looking at the numbers doesn’t always tell you what the market is actually experiencing. There is still a “Market of the Moment” and that is something active real estate agents experience by following the patterns in their own experiences and transactions and masterminding with other agents and lenders to figure out these patterns.
So thats exactly what I have been doing, not just following but feeling the market and seeing what other agents are feeling as well. So here are the top 5 things we are experiencing and things you should know if you are thinking of buying or selling.
First lets recap the number trends for the year in the West Valley. One of the most pertinent numbers we look at is the Months of Inventory. This number indicates supply, real estate is still a commodity so supply and demand still have a tremendous effect on the values. Lower supply, greater demand, drives values in a positive direction. Maricopa County has been in extremely low supply of homes on the market. We have held steady with low inventory all year, some cities much lower than others. Now this isn’t because buyers are not buying of sellers are not listing, the past few months, the number remains steadily low, because we seem to sell nearly the same amount of homes each month that were newly listed, while others sit on the market increasing the average days on market.
So that leads me to our first trend we are seeing with the Home Buyers in the market. First of all, there has been a phrase coined by the Lending institutions “Boomer-rang Buyer.” These are the homeowners that lost homes during the real estate market BUST. Many people lost homes either to foreclosure or short sale, and those folks are now through their waiting period and back in the looking for homes. Realty Tract estimates nearly 3.5 million Americans will be eligibles to buy over the next 3 years and we are seeing our fair share in the market already. My best description of this buyer is “Once bitten, twice shy,” they are not willing to over pay, get into a bidding war or willing to settle for less. Therefore, they will wait, and wait and wait, until the right house, at the right price becomes available. So we are not seeing bidding wars like we did in 2003-2006, its just not happening. We are seeing Multiple offers, yes, but 10, 15, 20,0000 over asking price, not happening. This is also due to stricter regulations on the appraisal industry. Government guidelines put in place have help to suppress property values from sky-rocketing, instead we are maintaining steady increasing home values that fall in line with the economy, job wages and affordability, creating stability for the Market and securing the American Dream of Home ownership.
To further back the above mentioned, is the first time home buyer. We have lots of loan programs, grant money and affordable financing programs available for first time home buyers. We are seeing a lot of first time home buyers. Perhaps not as many as we could use, we will discuss this later, but the typical first time home buyer in todays market, was greatly impacting by the real estate housing crash too. They either saw their parents loose their home, someone in their family or an immediate friend. They are very aware of the repercussions of paying too much for a home and to me, they are some of the most conservative first time home buyers we have ever seen enter the market. They seem to stick more to a budget of that feel the are comfortable paying even though the lender may have qualified them for more.
Next trend we see is what I call the “contingency train,” which is where a sale of a home is contingent upon the sale of that buyers home. This is very common in todays market. In fact, just on our team this month we saw this contingency train go 3-4 houses deep. Which was why I said we need first time home buyers in the market place more than ever. We are currently working a transaction that depicts the real estate cycle of life beautifully. First time home buyer purchases a 1400sq ft home using county Bond program for down payment assistance. Those folks selling that have now out grown that home are moving to a much larger home, using the equity to put 20% down on a 3000sq ft home for their growing family. The current sellers of that home are now empty nesters and looking to down size, the use their 20% down equity to move to a smaller home 1800sq ft and enjoy their retirement years. These are trickier transactions for the agents involved, but we track all the homes through out the escrow process and aline up the closings and everyone moves in and continues the American Dream.
PRICE IT RIGHT
Third trend, and you may have already figured where this is headed, PRICE IT RIGHT. We are seeing overpriced homes come on the market everyday. By over priced, I mean the home is so far out of comps, it wont even appraise. Its obvious that the sellers have read the news “Sellers Market LOW Inventory” and flashed back to 2005 when homes were jumping 10-30-50K for each new listing. Well these homes are sitting and we see price reduction after price reduction, and many eventually just cancel or expire. Watching the market month after month, so many homes are selling in the first week or two of being listed, we list and sell almost the same amount each month, yet average days on market in Maricopa is 67 days. I ran several searches and in any given city in the West Valley, a quarter of the homes in that area had been listed over 90 days. The new listing sell quickly are averaging out those days on market. So if you want to sell, Price it Right.
STAGE TO SELL
Fourth, and this goes hand in hand with the aforementioned, Stage to Sell. In todays market staging has never been more important. In fact, my favorite part of listing a home is staging it to sell. I have always staged our properties, using the homeowners items, this was always a complimentary service I offered to my sellers. However in todays market it has been such a pivotal part of selling, I recently obtained my ASP® Accredited Staging Professional to further my knowledge and be able to help clients whom want to complete more in depth staging and remodeling projects. We are definitely seeing a large return on investment when a home is staged to sell. We are seeing a tremendous decrease in sold price on homes that were not staged to sell. Here are a couple samples:
MARKET GOING TO TANK
Last but not least the fifth thing I am hearing quite often from buyers, “Well I think the market is going to tank again, and thats what I am waiting for!” I am not sure what is driving this thought in the consumers head, but nothing in the data, Arizona economic state or the Federal Reserve reports would lead this to be true. The real estate market collapsed, basically for many reasons, but to put it in a nut shell, we had to low of regulations with home loans, putting a surplus of buyers in the market, cause the demand to increase and the values started skyrocketing, even passing up inflation. The bubble that was created needed to burst, the economic balance in our country was way out of balance. As previously mentioned, now that we have a more structured appraisal industry, and home loans require more than “breathing on a mirror” and pick a number any number and tells us how much you make, the market is much more secure and stable now. Market trends are right back on track with were we should have been on a normal 30 year trajectory, had we not have had that BLURP in the market. Market values are steadily increasing, so todays home prices will be much less than next years home prices.
If you have questions or if we can help you buy or sell please contact us.
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