April 2019 Market Update

Mortgage Payments Drop $50 per Month on a Median Priced Home
Listings Under Contract Up 19% in 5 Weeks!

2019-04 Infographic

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For Buyers:

Buyers got a break last month as 30-year mortgage rates dropped significantly from an average of 4.41% to 4.08%, which is the lowest they have been since January 2018. On a $267,000 home (the median sales price in Greater Phoenix) the drop equated to nearly $50 per month in savings on principle and interest, which was enough to get many buyers off the couch and looking for homes. This rate drop combined with an increased conventional loan limit up to $484K and a 32% increase in weekly seller price reductions meant that price ranges between $200K all the way up to $800K saw a combined 19% increase in contracts written over the last 5 weeks. Contract activity is expected to increase at this time of year anyway due to seasonality, but last year over the same 5 weeks it only increased 8.6%. For buyers who are still waiting for prices to begin declining, their wait just got longer.

For Sellers:

The drop in mortgage rates could not have come at a better time for sellers. Up until 6 weeks  ago the negotiating advantage sellers have been enjoying for years in Greater Phoenix had weakened to the point where the market was on track to enter balance within a matter of months and price appreciation would have begun to slow even more. However by April 4th the average 30-year mortgage rate (as reported by Freddie Mac) had dropped to a 15-month low. This spurred buyer activity and resulted in Listings Under Contract, which were 10.2% below 2018 last month, to sharply increase and surpass 2018’s April count by 0.8%. Currently sales volume is down 9.6% from last April, however when these contracts close escrow over the next 4-6 weeks May and June should fare much better. Don’t get too excited though, the seller market is still much weaker than last year. Affordability and demand were helped by this interest rate drop but could quickly be negated as prices continue to rise. Sellers still need to be mindful of their asking price to get under contract before buyer activity seasonally begins to decline between May and the end of the year.

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area and are not sure where to turn we can help! Search for homes at ChandlerAreaHomeSearch.com where 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.

True Market Value?

March 2019 - MVP - Social Media Image

What is True Market Value?

It’s easy to look up how much money you have in your savings account or the real-time value of your stock investments. But determining the dollar value of a home is trickier.

As a seller, knowing your home’s worth helps you price it correctly when you put it up for sale. If you price it too high, it may sit on the market. But price it too low and you may be losing out on a good chunk of money (nobody wants that!). For buyers, it’s important to know a home’s worth before you make an offer. You want your offer to be competitive, but you don’t want to overpay for the property.

Even if you’re not a buyer or seller right now, as a current homeowner you might just be curious about the value of your home. Keeping track of your home’s worth year over year helps you understand the trends in your market. So when you are ready to sell, you can take advantage of a good window of opportunity.

The good news is, a professional real estate agent—who understands the nuances of your particular area and neighborhood—can determine the true market value of your property … and at no cost to you!

THE THREE TYPES OF HOME VALUES

When you start the process of buying or selling a home, you’ll frequently hear the words appraised value, assessed value, and true market value. It’s important to know the difference between each one so you can make better, informed decisions.

Appraised Value

A professional appraiser is in charge of determining the appraised value of a home. These appraisals are typically required by a lender when a buyer is financing the property. And while the lender is the one requiring this information, the appraiser does not work for the lender.1 However, the appraiser is preparing the appraised value for the benefit of the lender.

The appraised value protects the lender’s interest and assures that they are not over-extending on the loan for the property. For example, imagine a seller lists a home for $400,000. They reach a deal with the buyer to sell the home for $375,000. However, if an appraiser evaluates the property and determines that the appraised value is actually $350,000, then the lender will not lend for an amount higher than that appraised value of $350,000.2  In these scenarios it is critically important to be working with a professional agent who understands how to properly handle this dicey situation.

When determining appraised value, an appraiser will compare the property to similar homes in the neighborhood, and they’ll evaluate factors such as location, square footage, appliances, upgrades, improvements, and the interior and exterior of the home.  It is important to note two factors about appraised value:

  1. Appraised value is a theoretical model and appraisers are limited in their ability to fully account for market conditions  which means that in a rapidly moving market–either up or down–an appraised value can be completely at odds with the True Market Value.
  2. Every appraisal is prepared by a human being, and appraised value can vary widely by the choices made by that individual, including comparables and adjustments made–or not made.

Assessed Value

The assessed value of a home is determined by your local municipal property assessor. This value matters when your county calculates property taxes each year. The lower your assessed value, the less property tax you’ll pay.3

To come up with this value, your assessor will evaluate what comparable homes in the neighborhood have sold for, the size of your home, age, overall condition, and any improvements or upgrades that have been made. However, most assessors don’t have full access to your home, so their information is limited.

Assessments are done annually to determine how much property tax you owe. Many counties use a multiplier (typically between 60%-80%) to calculate the final assessed value. So, if the assessor determines that the value of the home is $300,000, but the county uses a 70% multiplier, the assessed value of the home would be $210,000 for tax purposes.4

If your assessed value isn’t as high as you envisioned, don’t sweat it. Many homeowners appeal their assessment in favor of a lower valuation so that they can save money on property taxes. If you’re interested in appealing your property tax assessment, let us know. We offer complimentary assistance and would be happy to help you build your case.

True Market Value

True Market Value is established by market forces and is completely independent of either appraised or assessed value. It basically refers to the value that a willing, qualified and educated buyer is willing to pay for the property. A good real estate agent is an expert in determining True Market Value because they have hands-on experience buying and selling properties. They understand the mindsets of buyers in your market and know what they’ll pay for a property given its unique combination of location, upgrades, condition, etc.

As a seller, knowing your True Market Value is important because it helps you choose how much to list your property for. It can also help you decide if you want to make any improvements to your home before putting it on the market. Your agent can help you figure out which updates and upgrades will have the biggest impact on your True Market Value.

WHAT’S THE DEAL WITH ONLINE CALCULATORS?

When figuring out your home’s value, you will want to take a look at popular real estate sites like Zillow, Redfin, and Trulia. Or you can use our own online estimator here:

NEXTHOME VALLEYWIDE ONLINE HOME VALUE ESTIMATOR

When you use an online calculator to determine your home’s value on these sites, it is important to remember that it is just an estimate. These sites all have their own algorithms for coming up with their estimates. For example, Zillow comes up with their “Zestimates” by calculating “public and user-submitted data, taking into account special features, location, and market conditions.” 5

Online estimates can be a great starting point for opening up the conversation about your home’s True Market Value. But even Zillow recommends that you use a real estate agent for coming up with the actual market value of your home. The site says that once you get your “Zestimate,” you should still get “a comparative market analysis from a real estate agent.”

Having a professional agent involved in this process is essential because they understand the market better than a computer ever could. They’re showing property in your area every single day, and they know the particular preferences of buyers and sellers in the area. Young professionals, large families, empty nesters, and other groups are all looking for different things in a home. A local agent has most likely worked with all of them, so they understand what every segment in your market is specifically looking for.

HOW AN AGENT FINDS YOUR HOME’S TRUE MARKET VALUE

So, how does an actual real estate agent determine True Market Value? They’ll start by doing a comparative market analysis (CMA). This means they’ll compare your home’s features to similar properties in your area. For the CMA, the agent looks at the below factors to influence their assessment of your home’s worth:6

  • Neighborhood sales – Your agent will look at similar, recently sold homes in your neighborhood to see what they sold for and what they have in common with your house.
  • The exterior – What does your home look like from the outside? Your agent will factor in curb appeal, the style of the house, the front and backyard, and anything else that impacts how the house looks to everyone walking and driving by.
  • The interior – This is everything inside the walls of the house. Square footage, number of bedrooms and bathrooms, appliances, and more all influence the overall market value.
  • Age of the home – Whether you have a newer or older home affects the number your agent comes up with as part of their assessment.
  • Style of the home – The style of your home is important because buyers in different markets have different tastes. If buyers prefer ranch-style homes and you have one, then your home may sell for a premium (aka more money!).
  • Market trends – Because a local agent has so much experience in your market, they have their finger on the pulse of your area’s trends and know what buyers are willing to pay for a property like yours.
  • Location, location, location – This one’s probably the most obvious. Your agent will think about how popular the area is, how safe it is, and what schools are like.

It is part science and part art and a computer algorithm simply can’t take all of these factors into account when calculating the value of your home. The reality is, nothing beats the accuracy of a professional agent when it comes to determining a home’s True Market Value.

YOUR AGENT IS THERE EVERY STEP OF THE WAY

Determining a home’s true market value is a real estate agent’s forte. If you’re a seller, your agent will help you find your home’s market value so you can list it at the right price.

For buyers, your agent will help you determine the value so you can come up with a fair offer. Your agent can also set up a personalized home search on the Multiple Listing Service (MLS) for you so you’ll receive emails of listings that meet your criteria. This will help you see what’s out there in your city and how properties are being priced.

Get a Complimentary Report With Your Home’s True Market Value

Curious about your home’s True Market Value? Call, email, or text us to request a free, no-obligation Broker Price Opinion (BPO) to find out exactly how much your home is worth in today’s market.

Sources:

  1. Chicago Tribune – https://www.chicagotribune.com/suburbs/chi-ugc-article-what-is-the-difference-between-market-value-a-2013-09-30-story.html
  2. SFGATE – https://homeguides.sfgate.com/market-value-vs-appraised-value-1206.html
  3. ValuePenguin – https://www.valuepenguin.com/mortgages/what-is-the-assessed-value-of-a-house
  4. Movoto – https://www.movoto.com/blog/homeownership/assessed-value-vs-market-value/
  5. Zillow – https://www.zillow.com/how-much-is-my-home-worth/
  6. Realtor.com – https://www.realtor.com/advice/sell/assessed-value-vs-market-value-difference/

March 2019 Market Update

Price Reductions up 71% in $200-250k Range

Sellers:  Get Competitive–It’s “Buyer Season”

March 2019 Market Update

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For Buyers:

Good news for buyers over the past few weeks, interest rates came down a few notches. That combined with the increased loan limit for conventional financing gave buyers a little boost.  The new loan limit for conventional financing in Maricopa County is $484,350 as of a few months ago and the new limit for FHA financing is $314,827. Just 3 years ago, the limits were $417,000 and $271,050 respectively. The FHA limit increase hasn’t had as much impact on buyer demand as the conventional increase thus far. While the overall market is down 8.7% in sales this month, the biggest winner has been the $500K-$600K price range which is up 15%.

For Sellers:

“Buyer Season” in Greater Phoenix typically lasts from February to May with a peak in April.  Sellers who decide to list their home in March should be aware that they have just 8-10 more weeks of peak buyer activity before the summer slowdown. This is a very competitive time for sellers. Price reductions are at their seasonal peak in the luxury price ranges, however it’s most noticeable in the battleground price range of $200K-$400K. The number of weekly price reductions on listings between $200K-$250K are up a whopping 71% where competing supply is 32% higher than last year and price reductions are up 42% between $250K-$400K where supply is 26% higher. It’s a good idea to be competitive in both price and condition right out of the gate as buyer demand remains below normal overall in Greater Phoenix.

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area and are not sure where to turn we can help! Search for homes at ChandlerAreaHomeSearch.com where 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.

February 2019 Market Update

Price Reductions up 24% in Greater Phoenix

Sellers:  Stop Trying to Time the Market

February 2019 Market Update

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For Buyers:

A weak 4th quarter for sales in 2018 has resulted in 11,874 price reductions in the first 5 weeks of 2019. That’s 24% higher than this same time last year. Price reductions on listings between $200K-$500K specifically are up 40%. The most notable price range with a 42% increase is $200K-$250K.  This may come as a surprise to some because this price range is below the median sales price of $263K.  However, this area is currently a battleground of competition between traditional sellers, flip investors and new construction as inventory is up 26% and contracts are down 10%. Flip investors acquire and sell over 50% of their inventory in this price range. New home builders increased their sales by 22% in this range last year. Traditional sellers are now under more pressure to improve the condition of their home and provide incentives for buyers in order to compete.

For Sellers:

This isn’t a good time for sellers to get caught up in timing the market so as to sell their home at the ideal “peak of price”. While it’s understandable for sellers not to want to leave any money on the table, the reality is that price peaks don’t happen in seller markets. They occur in balanced markets. Balanced markets are fine to sell in, but they’re not as fun or profitable for sellers as they expect; especially if their property is hard to sell due to condition or location. As the seller market continues to weaken, it’s more important than ever for sellers to list their property while they still have the advantage of low competition, price it competitively and don’t spit on the first contract.  Buyer activity, while lower, will continue to accelerate through May.  This is go time.

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area and are not sure where to turn we can help! Search for homes at ChandlerAreaHomeSearch.com where 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.

January 2019 Market Update

Greater Phoenix Buyer Contracts Down 15%

It’s Still a Good Time to Sell . . . For Now

January 2019 market update

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For Buyers:

The monthly average interest rate rose to 4.64% in December 2018, up 0.69% from the previous December’s 3.95%. For buyers who will purchase at the current median sales price of $260,000, that equates to approximately $100 added to their monthly payment compared to last year. Buyers averaged 1,845 square feet at this price; nearly 100 square feet smaller than if they had purchased last year. It doesn’t help matters by renting either. As single family homes appreciated 8.1% per square foot, single family lease payments also rose 8.6% during the same time frame. With that, buying is still a good option over renting if only to stabilize one’s monthly housing expense. Sale prices will continue rising in the first half of 2019, but at a slower rate and they’re not expected to decline at this juncture. Instead, buyers may see a little more flexibility from sellers in the form of repairs, closing costs, and possibly interest rate buy-downs in the higher price ranges.

For Sellers:

The market continues to favor sellers entering into 2019, but not nearly as much as it did at the beginning of 2018. Supply is still 34% below normal compared to 36% below normal this time last year. It’s buyer demand that has shifted as buyers grapple with affordability and concerns about an overvalued market. Demand at this time last year was measured 1% above normal; today it’s 13% below normal. While it may feel like a buyers market compared to the last four years, it is far from one. Greater Phoenix is still in a seller’s market, however it’s weaker out of the gate. This means there is still more demand than supply, but multiple offers will not be as common, there will be fewer sales overall and scenarios will vary widely depending on price range. Demand could change in either direction depending on interest rates, however for the time being buyers and sellers have to play the hand they’ve been dealt.  For those wondering if it’s still a good time to sell, the answer is “yes” for now.

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area and are not sure where to turn we can help! Search for homes at ChandlerAreaHomeSearch.com where 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.