For Buyers: Seasonally the 4th Quarter is the best time to be a buyer and this year is no exception. Typically, buyer contract activity is at its strongest from March through May and weakest between November and January. Buyers who were out-bid by competing offers last Spring will have a different experience now. October saw 18% more new listings hit the market between $250K-$400K compared to last October while buyer contracts are about the same within the same price range. There was only a 1% increase in new listings in the lower price range between $200K-$250K but a 12% drop in buyer contracts which caused overall supply to rise another 11%. The market is still a seller’s market, but more seller competition for fewer buyers translates into more price reductions and seller concessions until the Spring “Buyer Season” is upon us once again.
For Sellers: The market may be softening between $200K-$400K (which accounts for over 56% of MLS sales), but that doesn’t mean sellers are getting a raw deal. Monthly average sale prices per square foot in this price range have appreciated 5% since October last year and nearly 19% in last 5 years. Under $200K, the appreciation rate is 9.5% in the past year and 44% in 5 years. $400K-$800K has appreciated 6% in the last year and 14% in 5 years and the annual average sale price per square foot* over $800K has appreciated 3% in the last year and 10.5% in 5 years. What’s happening underneath that contract price, however, is an increased cost to sell at “top dollar”. That cost can take the shape of longer days on market with multiple price reductions, repairs, needed upgrades to the home prior to list and closing cost assistance. *Annual averages are used in the higher price ranges to mitigate the sharp price fluctuations that affect this market.
Many prospective homebuyers face a big hurdle: the down payment. But coming up with that initial investment doesn’t have to be a roadblock even if saving is difficult. These four options could make homeownership a reality sooner rather than later:
1.Pulling from an IRA: You, your spouse, parents or grandparents could withdraw up to $10,000 from a traditional IRA to put toward a home. Although it’s categorized as a first-time homebuyer exemption, anyone who hasn’t owned a principal residence in the past two years may qualify. Note: Some differences exist when withdrawing from a Roth IRA.
2. Receiving a gift: If you have family members willing to help you out, you can get what’s called “gift money” for your down payment. The amount of gift money you can use depends on the loan type. And you’ll likely need signed documents stating that the money is indeed a gift, not a loan or anything earning interest.
3. Co-buying: Another option is to buy a home with a family member or friend. It’ll allow you to split the down payment and the mortgage payment. But co-buying does come with an important decision: how the title will be held.
4. Renting to own: Leasing-to-own is another possible route to homeownership, one that typically requires a smaller down payment called option money. Additionally, a portion of your monthly rent payment can go toward your purchase of the property. Pay special attention to the written agreement. Reach out if you want to make sure your lease-to-own agreement is mortgage-ready.
There are also low down payment options like HomeReady, HomeOne, Home Possible and FHA loans, as well as down payment assistance programs and grants. Want to learn more, or know someone who’s looking to buy a home? Get in touch today.
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$320,000 3/2 1,936 SF
2440 E BLANCHE DR. Phoenix, AZ 85032
$389,900 3/3 1,963 SF
30927 N 25TH DR. Phoenix, AZ 85085
$424,999 3/2 2,803 SF 1986 E GLACIER PL. Chandler, AZ 85249
Interest rates climb and metro Phoenix home prices dip
Interest rates are up, and home prices are down a bit in metro Phoenix.
The combination hasn’t made it easier for buyers or sellers. But housing analysts aren’t alarmed or predicting any big drops in home prices in the Valley.
Other parts of the U.S., including several more expensive cities, are seeing bigger dips in prices than metro Phoenix has so far.
The median home price in the Phoenix area is down about 2.8 percent from the record high in July.
“The housing market is going back to a more normal balance now,” said Tina Tamboer, senior housing analyst with the Cromford Report. “We won’t see a big price drop in the Phoenix area, but prices could go flat for a while. That’s not necessarily a bad thing.”
The average rate on a 30-year mortgage is up almost a percentage point from a year ago.
The rate is now hovering around 4.83 percent, according to mortgage giant Freddie Mac. That adds about $150 to a monthly payment for a $250,000 loan.
Home sales so far this year are down about 6 percent, compared to 2017.
In January, Tom Ruff of The Information Market/ARMLS, said strong demand from buyers for a short supply of homes priced below $400,000 coupled with higher interest rates could slow prices and sales in metro Phoenix this year.
He said that’s what we are likely seeing now. And other housing markets are seeing it too, some even more so.
Where home prices are falling
According to the National Association of Realtor’s third quarter report, here are the U.S. cities with the biggest recent price declines.
Denver: 3 percent.
Austin: 4 percent.
Chicago: 4 percent
Washington DC-area: 4 percent.
Seattle: 5 percent.
San Francisco: 8 percent.
San Jose: 8 percent.
Nashville: 9 percent.
Phoenix home prices were flat for the third quarter, according to this national report.
Better for buyers
The shortage of homes priced below $400,000 has sparked bidding wars on Valley houses in that price range over the past year.
Investors paying cash outbid many first-time buyers, making the market even more competitive.
Matthew Coates of Chandler-based Revelation Real Estate said the recent slowing due partly to interest rates means there’s “going to be a slight tick downward in what price sellers are willing to accept.”
Tamboer said some Valley sellers are asking too much for their homes and are going to have to readjust their expectations because prices aren’t climbing like they were six months ago.
Valley real-estate agent Diane Brennan of Coldwell Banker said she is currently working with a few buyers who feel good about the market now and are either moving up or investing.
No bust scenario
Some buyers are hoping for prices to drop more so they can find bargains.
Real estate agents are hearing from buyers who want to wait because they think Valley home prices will plummet like they did in 2009-11.
But those agents and all housing experts agree there’s not another bust headed for metro Phoenix anytime soon.
Metro Phoenix prices skyrocketed 50 percent during 2005-06 and then plummeted by even more than that during the crash.
Home prices in metro Phoenix have climbed steadily between 6 and 11 percent since 2011, but it’s been no boom.
And Ruff said he thinks the Valley’s median home price could tick back up to $268,000 by the end of the year.