If you have tried to purchase a house over the past two months, or have read the paper, you know about the craziness in the real estate marketplace.
Listings are selling within a day, multiple offers are being submitted, and there is a bit of panic among buyers. All of a sudden, it feels like 2005 and 2006 again. Just a few months ago, it still seemed like a buyer’s market. Now, things are quickly shifting to favor sellers. What happened?
1. As I have been saying in my column since the fall, inventory has continued to drop. Demand has actually exceeded supply for six months, but it has taken until now for the emotion of the marketplace to shift.
2. Why is inventory so low? The real estate market bottomed out this fall. Since then, market prices have started to inch up. However, prices have not yet increased enough for most people to put their homes on the market. Many potential sellers are just staying put, making their payments, and waiting until they can get more money for their homes. This is going to change in the next six months.
3. Investors are in love with the Phoenix real estate market. Prices are at historic lows in this area of the country, and investors still view Phoenix as a region poised for growth. Investors also are aggressive in their pursuit of property, and are willing to take properties as is, close quickly and, most importantly, they are paying cash. While investors were the reason for the market decline the last go around, this time, they have some skin in the game, with more than half of the investors paying cash for properties. Even if they aren’t paying cash, lenders are requiring investors to put at least 20 percent down.
4. The bulk of new home construction is away from the city centers. Because so much was built during the last boom, most of the available land for new home construction is on the outskirts. With gas prices increasing, buyers are not as likely to purchase a home that requires a long commute. Consequently, new homes are not absorbing the demand as they did a few years ago. The cost of building also has increased. So, it is harder for builders to offer the values they did seven years ago.
5. There is pent up demand. For six years, many people have been stuck in their homes. I have clients who have gotten transferred, divorced, wanted to upsize or downsize, but none of them could move the way the market had stagnated. In many cases, now is the moment for which they have been waiting. Other of my clients did short sales three to five years ago, and now they are starting to be able to get financing again. They are ready to take advantage of the historically low interest rates.
So, at the beginning of the year, I wrote that it is time to get your home ready to sell. Well, I hope you have been moving along on your plan. Let’s get your home on the market, and find you a great deal before the great deals are gone! Things are changing quickly in the market.
John Karadsheh is a licensed REALTOR® with Coldwell Banker Trails And Paths Premier Properties. He also is an Associate Broker, an Accredited Buyers Representative and a Certified Residential Specialist. In addition, Ranking Arizona Magazine ranked him the No. 2 Residential Real Estate Agent in Arizona. You can contact John with any of your real estate questions. Call him at (602) 615-0843, or go to his Web site at www.BuyAndSellAZ.com.