Sherrie’s September Real Estate Stats

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For Buyers:

Overall supply is down 9.6% compared to last September.  At first glance that’s nothing new.  However, for those of you who pay close attention to our monthly infographic (I know you’re out there), you have no doubt noticed that last May supply was down 15.5%, June supply was down 12.2%, July was down 11.1% and August was down 9.9% from last August.   What this means for buyers is that the Greater Phoenix market is still in short supply, but it’s subtly becoming less bad.  Most significantly, supply continues to increase between $200K-$400K.  Last month we reported an 8.1% increase in listings between $200K-$250K since May, that is now 9.7%.  Between $250K-$300K, supply has risen 15% in only 8 weeks.  Between $300K-$400K, supply has slowly risen 10% since January.  All other price ranges are either declining in supply or following their normal seasonal trends.  This is great news for buyers; more choice in the marketplace means less negotiating pressure. However, don’t expect sale prices to plummet anytime soon. The first price to respond to a supply shift isn’t a sale price, it’s a list price in the form of a price reduction.

For Sellers:

Despite the increase in supply between $200K-$250K, there hasn’t been a correlating increase in weekly list price reductions from sellers yet.  However, that is not the case for the market between $250K-$300K where weekly list price reductions have risen 46% in the past 8 weeks and weekly reductions between $300K-$400K have risen 61% since January.  This isn’t an indicator that sellers are becoming desperate. Make no mistake, there are very few desperate sellers in this marketplace. There are, however, many optimistic sellers who may be taming their expectations. Average annual price appreciation per square foot remains between 3.5% – 5.0% for sales between $200K-$400K, so it’s still a seller’s market despite recent developments.  Expect prices to continue increasing at least through the remainder of 2018.
Commentary written by Tina Tamboer, Senior Real Estate Analyst with The Cromford Report ©2017 Cromford Associates LLC and Tamboer Consulting LLC
 
 

Top 3 Myths About Today’s Real Estate Market



There are many conflicting headlines when it comes to describing today’s real estate market. Some are making comparisons to the market we experienced 10 years ago and are starting to believe that we may be doomed to repeat ourselves. Others are just plain wrong when it comes to what it takes to qualify for a mortgage.

Today, we want to try and clear the air by shedding some light on what’s causing some of these headlines, as well as what’s truly going on.

Myth #1: We Are Headed for Another Housing Bubble

Home prices have appreciated year-over-year for the last 76 straight months. Many areas of the country are at or near their peak prices achieved before the last housing bubble burst. This has many worried that we are headed towards another housing bubble.

Reality: The biggest challenge facing today’s real estate market is a lack of homes for sale! Demand is strong, as many renters have come off the fence and are searching for their dream homes.

Historically, a normal market requires a 6-month supply of inventory in order for prices to rise with the rate of inflation. According to the National Association of Realtors (NAR) there is currently a 4.3-month supply of inventory.

The US housing market hasn’t had 6-months inventory since August 2012! The concept of supply and demand is what is driving home prices up!

Myth #2: The Rumored Recession Will Lead to Another Housing Market Crash

Economists and analysts know that the country has experienced economic growth for almost a decade. When this happens, they also know that a recession can’t be too far off. But what is a recession?

Merriam-Webster defines a recession as “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two consecutive quarters.”

Reality: Recession DOES NOT equal housing crisis. Many people associate these two terms with one another because the last time we had a recession it was caused by a housing crisis. According to the Federal Reserve, over the last 40 years, there have been six recessions. In each of the previous five recessions, home values appreciated.

Myth #3: There is an Affordability Crisis Looming

Rising home prices have many concerned that the average family will no longer be able to afford the most precious piece of the American Dream – their own home.

There are many different affordability indexes supported by different organizations that all measure different data. For this reason, there is a lot of confusion about what “affordable” actually means.

The monthly cost of a home is determined by the home’s price and the interest rate on the mortgage used to purchase it. According to Freddie Mac, interest rates have risen from 3.95% in January to 4.59% just last week.

Reality: As we mentioned earlier, home prices have appreciated year-over-year for the last 76 months, largely driven by high demand and low supply.

According to a recent study by Zillow, the percentage of median income necessary to buy a home in today’s market (17.1%) is well below the mark reached in 1985 – 2000 (21%), as well as the mark reached in 2006 (25.4)! Interest rates would have to increase to 6% before buying a home would be less affordable than historical norms.

The starter-home market has appreciated at higher levels (9.4% year-over-year) than any other market. One reason for this is the fact that many of the first-time buyers who have flocked to the starter-home market are being met with high competition. For some hopeful buyers, it may take more than a good offer to stand out from the crowd!

Bottom Line

There is a lot of confusion in today’s real estate market. If your future plans include buying or selling, make sure you have a trusted advisor and market expert by your side to help guide you to the best decision for you and your family.

 

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Arizona economic growth likely to accelerate, new report says

 


Economic conditions have improved “dramatically” in recent months for Arizona and the nation, and state-growth projections have been revised upward, according to a new report produced by the Governor’s Office. 

But the prospect of rising interest rates and inflation could dampen the outlook a year or two down the road.

“All major indicators now suggest a significant improvement in the rate of economic growth since approximately the end of 2017,” wrote Glenn Farley, chief economist for the Governor’s Office of Strategic Planning and Budgeting in a commentary released Wednesday.

“After averaging just 2.2 percent per year since the end of the recession, current indicators suggest an imminent return to real Gross Domestic Product growth rates of over 3 percent,” he continued.

That would mark a return to more normal growth following several years of subpar expansion following the recession.

The latest reading for the nation shows the economy grew 4.1 percent in the second quarter, and top White House officials, including Treasury Secretary Steven Mnuchin, have said the strong results could continue for at least a couple more years.

 

Also, leading or predictive national economic indicators monitored by the Conference Board, a research group, strengthened in July.

Arizona has lagged the nation in some respects, such as with an unemployment rate that’s still above the U.S. average.

Third-quarter forecasts

Farley cited a recent estimate by the Federal Reserve Bank of Atlanta that U.S. economic growth in the current quarter could hit 4.3 percent.

Meanwhile, the Congressional Budget Office and IHS Global Insight project growth of at least 3 percent both this year and in 2019, fueled in part by federal income-tax cuts enacted late last year.

“Rising personal incomes and wages — strengthened by a tightening labor market, faster economic growth and moderate inflation — are supporting a resurgent consumer, which in turn is fueling robust growth in state tax revenues,” Farley wrote.

A preliminary assessment last month by the Joint Legislative Budget Committee indicates Arizona government revenue hit a record $10.1 billion during the fiscal year ending June 30, up 7 percent over the prior year and eclipsing the prior record of $9.6 billion in fiscal 2007.

Caution ahead

While prospects for the next 12 to 18 months are strong, the Governor’s Office of Strategic Planning and Budgeting is more cautious for the economy after that, noting that the current expansion cycle is relatively lengthy at roughly nine years old.

Potentially higher inflation and interest rates “could eventually offset favorable job and income prospects, leading to (an interest-rate) tightening that could slow both the economic expansion and the growth in tax revenue,” he wrote.

Russ Wiles, Arizona Republic

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