November Market Update 2018

New Listings Up 18% between $250-400K
Q4 is Seasonally Best Time to Buy

November Market Update 2018

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 up- on 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.

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking at buying or selling a home in the Phoenix, Scottsdale or East Valley area and are not sure where to turn, search for homes at ChandlerAreaHomeSearch.comwhere you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more. Visit our blog at NextHome Valleywide for a monthly Phoenix Market Update.

How’s the Market? What’s Ahead for Real Estate

How's the Market?

One of the most common questions we receive is, “How’s the Market?” And while no one can predict the future with certainty, most experts expect to see modest growth in the U.S. housing market for the remainder of this year and next. Inventory will remain tight, mortgage rates will continue to creep up, and affordability will remain a major issue in many parts of the country.

So what does that mean for home buyers and sellers? To answer that question, we take a closer look at some of the top indicators.

CONTINUED GROWTH IN HOUSING MARKET

There’s good news for homebuyers! In many markets across the country, prices have begun to stabilize after a period of rapid appreciation. Nationwide, home sales experienced a slight decline of 1.6 percent in the second quarter, primarily due to higher mortgage rates and housing prices combined with limited inventory.

However, buyers who have been waiting on the sidelines in anticipation of a big price drop may be disappointed. Demand remains strong across the sector and prices continue to rise. The Case-Shiller U.S. National Home Price Index reported a 6.2 percent annual gain in June, a healthy but sustainable rate of appreciation.1

In its latest Outlook Report, Freddie Mac forecasts continued growth in the housing market due to a strong economy and low unemployment rate, which dropped to 3.9 percent in July.2  

“The housing market hit some speed bumps this summer, with many prospective homebuyers slowed by not enough moderately-priced homes for sale and higher home prices and mortgage rates,” according to Sam Khater, Chief Economist at Freddie Mac. “The good news is, the economy and labor market are very healthy right now, and mortgage rates, after surging earlier this year, have stabilized in recent months. These factors should continue to create solid buyer demand, and ultimately an uptick in sales, in most parts of the country in the months ahead.”3

INVENTORY TO REMAIN TIGHT, NEW CONSTRUCTION MAY HELP

Experts predict that demand for housing will continue to outpace available supply, especially in the entry-level price range.

“Today, even as mortgage rates begin to increase and home sales decline in some markets, the most significant challenges facing the housing market stem from insufficient inventory accompanying unsustainable home-price increase,” said National Association of Realtors (NAR) Chief Economist Lawrence Yun in a recent release.

“The answer is to encourage builders to increase supply, and there is a good probability for solid home sales growth once the supply issue is addressed,” said Yun. Additional inventory will also help contain rapid home price growth and open up the market to prospective homebuyers who are consequently—and increasingly—being priced out. In the end, slower price growth is healthier price growth.”4

With so much demand, why aren’t more builders bringing inventory to the market? According to the National Association of Home Builders, a crackdown on immigration and tariffs on imported lumber have made home construction more difficult and expensive. Those factors—combined with the rising cost of land and increased zoning requirements—have put a damper on the industry overall.5

Still, there’s evidence that a modest rise in the rate of new building projects may be on the way. Freddie Mac predicts new housing construction will increase slightly after a stall last quarter.2 And a recent report by Freedonia Focus Reports forecasts an annual increase in housing starts of 2.4 percent through 2022, led by an uptick in single-family homes.6 The boost in inventory should help drive sales growth and relieve some of the pent-up demand in tight markets.

While the current lack of inventory is generally preferred by sellers because it means less competition, a combination of high prices and rising interest rates has narrowed the pool of potential buyers who can afford to enter the market. Sellers should seek out real estate agents who utilize technologically-advanced marketing tactics to reach qualified buyers in their area.

AFFORDABILITY REACHES LOWEST LEVEL IN A DECADE

According to a recent report by Morgan Stanley, Americans are paying the most in monthly mortgage payments relative to their incomes since 2008.7 And prices aren’t expected to come down any time soon.

“We believe that the current supply and demand environment will continue to push home prices higher, just at a decelerating pace,” said John Egan, Morgan Stanley’s Co-Head of U.S. Housing Strategy.

Fortunately, economists aren’t concerned about affordability levels triggering another housing crisis, as lending standards are much higher today than they were during the run-up before the recession. According to credit reporting agency TransUnion, the share of homeowners who made mortgage payments more than 60-days past due fell in the second quarter to 1.7 percent, the lowest level since the market crash.7

NAR Chief Economist Lawrence Yun agreed with this assessment in a recent statement. “Over the past 10 years, prudent policy reforms and consumer protections have strengthened lending standards and eliminated loose credit, as evidenced by the higher than normal credit scores of those who are able to obtain a mortgage and near record-low defaults and foreclosures, which contributed to the last recession.”4

MORTGAGE RATES EXPECTED TO CONTINUE RISING

The Federal Reserve has taken measures to help keep the housing market—and the overall economy—from overheating. It has raised interest rates twice this year so far, causing mortgage rates to surge in the first half of the year.

Economists predict that the rise in mortgage rates will continue at a more gradual rate through this year and next. The U.S. weekly average mortgage rate rose from 3.99 percent in the first week of January to as high as 4.66 percent in May. Freddy Mac forecasts an average rate of 4.6 percent for 2018 and 5.1 percent in 2019.2

The good news is, mortgage rates still remain near historic lows and a whopping 14 points below the recorded high of 18.63 percent in the early 1980s.8 Buyers who have been on the fence may want to act soon to lock in an affordable interest rate … before rates climb higher.

“Some consumers may be thinking that because mortgage rates are higher than they were a year ago, maybe I should just wait until rates fall down again,” said NAR’s Chief Economist Lawrence Yun in a recent speech. “Well, they will be waiting forever.”9

WHAT DOES IT ALL MEAN FOR ME?

If you’ve been waiting to buy a home, you may want to act now. A shortage of available homes on the market means prices are likely to keep going up. And a lack of affordable rental inventory means rents are expected to rise, as well.

If you buy now, you will benefit from appreciating property values while locking in an historically-low interest rate on your mortgage. Waiting to buy could mean paying more for your home as prices increase and paying higher interest on your mortgage as rates continue to rise.

And if you’re in the market to sell your home, there’s no need to wait any longer. Prices have begun to stabilize, and rising interest rates could decrease the number of available buyers for your home. Act now to take advantage of this strong seller’s market.

LET’S GET MOVING

While national real estate numbers and predictions can provide a “big picture” outlook, all real estate is local. As local market experts, we can guide you through the ins and outs of our market and the issues most likely to impact sales and home values in your particular neighborhood.

If you have specific questions or would like more information about where we see real estate headed in our area, let us know! We’re here to help you navigate this changing real estate landscape.

Sources:

  1. S&P Dow Jones Indices Press Release –
    https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/766551_cshomeprice-release-0828.pdf?force_download=true
  2. Freddie Mac Outlook Report –
    http://www.freddiemac.com/research/forecast/20180827_strong_economic_growth.html
  3. DSNews –
    https://dsnews.com/daily-dose/08-28-2018/freddie-weighs-in-on-housing-market
  4. PR Newswire –
    https://www.prnewswire.com/news-releases/realtors-chief-economist-reflects-on-past-recession-whats-ahead-for-housing-300702632.html
  5. CNN Money –
    https://www.keyt.com/lifestyle/where-is-the-us-housing-market-headed-4-things-you-need-to-know/787471572
  6. PR Newswire –
    https://www.prnewswire.com/news-releases/us-housing-starts-to-rise-2-4-yearly-to-2022–300711989.html
  7. Business Insider –
    https://www.businessinsider.com/housing-affordability-slowing-market-sales-2018-8
  8. Value Penguin –
    https://www.valuepenguin.com/mortgages/historical-mortgage-rates
  9. Times Free Press –                                                            https://www.timesfreepress.com/news/business/aroundregion/story/2018/aug/14/despite-prospects-higher-mortgage-rateshousin/476979/

October Market Update 2018

Seller Concessions Spike on Listings Sold Between $200K-$250K
Price Reductions up 27% on Active Listings Between $250K-$400K

October Market Update

For Buyers:

October marks the 4th month in a row that supply has continued to rise between $200K – $400K, which is good news for many buyers as it provides them with more choice and fewer competing offers. However, for those buyers with budgets under $200K, this trend in supply doesn’t apply to them and their choices are still extremely limited. Last January, inventory under $200K made up 18% of all active listings.  Within that price range, single family homes made up 50%, condos and townhomes 30%, and mobile homes 20%. As of this month, inventory under $200K only makes up 12% of actives and has declined 36% since January. Single family homes make up 45%, condos and townhomes 36%, and mobile homes 19%. This drop in supply equates to 591 fewer single family homes, 198 fewer condos and townhomes, and 229 fewer mobile homes available for sale under $200K since the beginning of 2018.

For Sellers:

When supply rises, sellers react in a number of ways to compete with one another for the existing buyer pool. One option is a price reduction on their active listing prior to contract. This does not necessarily result in a decline in sale price, only a decline in sellers’ expectations for appreciation. Sales price trends may still continue to rise, but perhaps only at 5% instead of 8%, for example. Another option is to agree to a concession, such as paying a portion of closing costs or a home warranty; and finally to agree to a much lower sale price than what they were asking. Typically sellers agree to the first two options before submitting to a “low ball” contract, which is why sales price trends are the last measures to respond to a shift in supply and demand.  With that being said, weekly price reductions this month between $250K$400K are up 27% compared to last year, while price reductions between $200K-$250K are only up 1.7%.  However, seller concessions on sales between $200K-$250K reached 41% so far this month compared to last quarter’s measure of 36%.  Only 21% of sales between $250K$400K recorded a seller concession.  Which leads us to conclude that sellers below $250K are agreeing to more concessions than price reductions; while sellers over $250K are submitting to more price reductions. Despite this slight weakening in sellers’ advantage, Greater Phoenix is not close to a balanced or buyer’s market so expect overall prices to continue rising over the next 3-6 months.

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking at buying or selling a home in the Phoenix, Scottsdale or East Valley area and are not sure where to turn, search for homes at ChandlerAreaHomeSearch.comwhere you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more. Visit our blog at NextHome Valleywide for a monthly Phoenix Market Update.

Homeowner’s Insurance Guide: Are You Covered?

Homeowners Insurance guide

No one likes to think about disasters. Severe weather, fire, theft—or even a seemingly small issue like a broken pipe—can wreak havoc on your home and result in thousands of dollars in damages. Fortunately, a good homeowners insurance policy can offer you peace of mind that you and your family will be financially protected if disaster strikes.

A homeowners insurance policy covers your home—as well as the belongings in it—in case of theft, accidental damage, or certain natural disasters. In fact, most financial institutions require that you purchase homeowners insurance before they issue a mortgage. While coverage varies, most policies also help to protect you from liability should someone outside your household become injured on your property. And that liability coverage is often extended to include damage you (or anyone living in your household) may do to someone else’s property.1

With all the protection offered, it’s equally important to understand what a home insurance policy does NOT cover. For example, homeowners insurance won’t pay to repair malfunctioning systems and appliances within your home. And terms vary, but standard policies typically exclude coverage related to floods, earthquakes, slow leaks, power failure, neglect, aging, faulty repairs or construction materials, and acts of war.2

Most Standard Policies Cover:

  • Structure
  • Roof
  • Windows
  • Furniture/Personal Belongings
  • Liability for Non-Residents Injured on Property
  • Liability for Damage or Injury Caused by You or Your Pets
Most Standard Policies DON’T Cover:

  • Malfunctioning Systems & Appliances
  • Floods
  • Earthquakes
  • Slow Leaks
  • Power Failures
  • Neglect or Aging
  • Faulty Repairs
  • Acts of War


NARROWING THE COVERAGE GAP

So how do you minimize your risk when so many potential issues are excluded from a standard homeowners policy? Many insurers offer supplemental coverage options that can be tacked on to a basic policy. We explore this further in the section below on “7 Tips for Purchasing Homeowners Insurance.”

Some homeowners also choose to purchase a home warranty, which covers many of the systems and appliances in your home that are NOT covered by homeowners insurance. Home warranties are separate from homeowners insurance, so if interested you’ll need to seek out a policy through a dedicated provider.

While terms vary, a home warranty will often pay to repair or replace components of your HVAC, electrical, plumbing, and some appliances that fail due to age or typical wear and tear. Unlike homeowners insurance, home warranties aren’t required by mortgage companies. But many homeowners like the added financial protection and peace of mind that home warranties provide.3

Keep in mind, if you do purchase a home warranty, you will still be responsible for paying a service fee, or deductible, every time you use it. And you will be limited to using service providers who are contracted through your home warranty company.

7 TIPS FOR PURCHASING HOMEOWNERS INSURANCE

Whether you’re shopping for a new policy on your first home or you’re considering switching providers on an existing policy, it’s important to do your research beforehand. Not all insurance policies—or providers—are created equal. A little due diligence can save you time, money, and hassle in the long run.

1. Prioritize Service and Value

When choosing an insurance provider, ask around for recommendations. Check with neighbors, friends, and family members, particularly those who have filed an insurance claim in the past. Find out if they had a positive or negative experience. Read online reviews. Ask your real estate agent for a referral to a reputable insurance broker who can help you compare your options.

Don’t just choose the cheapest policy. Instead, search for one that offers excellent client service and provides the best coverage for the cost.

2. Choose the Right Level of Coverage

Your policy limits should be high enough to cover the cost of rebuilding your home. Don’t make the common mistake of insuring your home for the price you paid for it. The cost to rebuild could be higher or lower, depending on the value of your land, your home’s unique features, market factors, new building codes, and local construction costs.4

Also, consider whether you need a higher level of liability insurance to protect your assets. If your investments and savings exceed the liability limits in your policy, you may need to purchase an excess liability or umbrella policy.

Ultimately, you should make sure your coverage is adequate to mitigate your losses—but don’t pay for excess insurance you don’t need.

3. Inquire About Additional Coverage

Ask your insurance agent about additional coverage options that can help close any gaps you have in your policy.

For example, if you’re in a flood or earthquake-prone area, experts strongly recommend that you add those coverages to your policy. In fact, flooding is the most frequently occurring natural hazard, and a significant percentage of insurance payouts are for homes outside “flood zones,” or areas known to be at risk of flooding. So even if your home is not technically located in a flood zone, you may want to add flood coverage to your policy, just in case.5

Expensive jewelry, furs, collectibles, or artwork may not be fully insured by a standard policy. Ask about raising your limits for any items of particular value, or check with a specialty insurer about a separate policy for such items.

4. Decide on “Replacement Cost” or “Actual Cash Value”

Insurers can use a variety of methods to determine how much they will pay to reimburse you for a loss, but the two most common are “replacement cost” or “actual cash value.”

If your seven-year-old sofa is damaged in a fire, replacement cost coverage will pay you the cost to purchase a new, comparable sofa at today’s prices. Actual cash value coverage will pay you for the depreciated value of the sofa you lost—so what you would pay to buy a seven-year-old sofa rather than a new one.6

While a replacement cost coverage policy will result in a bigger payoff if you suffer a loss, it will probably require a larger annual premium. Compare both options to find out which is the better fit for you.

5. Consider a Higher Deductible

A deductible is the amount of money you are responsible for paying on a loss before your insurance company will pay a claim. Opting for a higher deductible can reduce your premiums.

Note that in some cases, your insurance policy may have a separate or higher deductible for certain kinds of claims, such as those caused by floods, windstorms, hail, or earthquakes.

While a higher deductible can save you money on your premiums, opt for one that is still affordable given your current financial situation.

6. Try Bundling Your Coverage

Combining your home, automobile, and other policies under one insurer can often result in a significant discount. And some insurers offer additional benefits, such as a single deductible if property insured by multiple policies is damaged. For instance, if a fire destroys your home and your car, you may only have to pay the higher of the two deductibles. Bundling can also make payment and renewal of your policies more convenient.7

However, bundling isn’t always the best or least expensive option. In some cases, you may find better coverage options, service, and/or pricing if you split your policies between multiple insurers. So be sure to consider all of your options before making a final decision.

7. Reassess Your Policy Each Year

Even if you’ve done all your due diligence before purchasing a homeowners insurance policy, don’t set your annual renewal on autopilot. Instead, when it comes time to renew, take some time to consider factors that have changed over the past year.

For example, have you made any home improvements that would require you to raise your coverage limits? Have you made any security or safety improvements that qualify you for a discount on your premiums?8

Has there been a shift in market conditions that would make it more or less expensive to rebuild your home now? If so, you may need to adjust your coverage levels accordingly.

If you’ve made any changes to how you use your home, you may need to adjust your policy, as well. For example, if you’ve started a home-based business or occasionally rent out your home on a home-sharing site, you may not be fully covered by your existing policy.9

Finally, consider any changes to your financial situation that may require increased liability coverage limits. If you’ve grown your investments or inherited property, it may be time to purchase additional coverage to protect your expanding asset base.

MINIMIZE RISK, MAXIMIZE VALUE

Now that you understand the basics of homeowners insurance, you should be ready to start shopping for a policy that best fits your needs and budget. Your goal should be to minimize your risk while maximizing the value your policy provides.

While you never want to leave yourself without a safety net should disaster strike, you also don’t want to overpay for insurance you don’t need (and will hopefully rarely use). Aim to strike a balance that will provide you with adequate protection at an affordable price.

NEED MORE GUIDANCE? WE CAN HELP

If you’re in the market to purchase homeowners insurance or a home warranty, give us a call! We get a lot of feedback from clients on the best (and worst) providers and are happy to share what we know.

We can also put you in touch with a trusted insurance professional who can answer your questions and help you find the best policy to meet your needs.

Sources:

  1. Insurance Information Institute –
    https://www.iii.org/article/what-covered-standard-homeowners-policy
  2. Insure.com –
    https://www.insure.com/home-insurance/exclusions.html
  3. American Home Shield –
    https://www.ahs.com/home-matters/cost-savers/whats-the-difference-homeowners-insurance-vs-home-warranty
  4. Insurance Information Institute –
    https://www.iii.org/article/how-much-homeowners-insurance-do-you-need
  5. Realtor.com –
    https://www.realtor.com/advice/buy/buying-home-insurance
  6. Texas Department of Insurance –
    http://www.helpinsure.com/home/documents/acvvsreplace.pdf
  7. Insure.com –
    https://www.insure.com/home-insurance-faq/bundle-insurance-policies.html
  8. National Association of Insurance Commissioners –
    https://www.insureuonline.org/consumer_homeowners_ten_tips.htm
  9. HomeAway –
    https://help.homeaway.com/articles/Do-I-need-a-special-vacation-rental-insurance-policy-for-my-property

 

September Market Update 2018

September Market Update courtesy of Craig and Stacey Akers at NextHome Valleywide.  Contact 480-621-6828 or info@nexthomevalleywide.com for a Seller Solution book that will give you selling tips, pricing, and comparable home sales in your area.


Supply Continues to Rise in Middle

Overall Market Remains Sellers Market

September Market Update 2018

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.

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking at buying or selling a home in the Phoenix, Scottsdale or East Valley area and are not sure where to turn, search for homes at ChandlerAreaHomeSearch.comwhere you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more. Visit our blog at NextHome Valleywide for a monthly Phoenix Market Update.