January 14, 2021
For those trying to understand the current real estate market for the Phoenix metro area, I have compiled some thoughts and information based on research and experiences I’m currently having while assisting clients buy and sell.
In short, we are in a market skewed strongly to advantage a seller. In my view, three things have driven this: extremely low inventory; historically low interest rates; and Covid. Let me explain…
The Real Estate Market measures inventory (the number of homes actively for sale,) in months. A balanced market that favors neither the seller or the buyer, is typically said to be 4.0 – 6.0 months of inventory. Cities around metro Phoenix are ranging from 1.4 – 2.9 months of inventory. To help put this into perspective, we have 1/3 to 1/2 of the homes for sale that are needed for a more balanced market. Stats from the end of 2020, show a 63% decline in inventory and a 25% increase in sales. Everything I read projects sales not slowing down any time soon. So, as sales continue to ramp up, inventory levels will continue to shrink.
Low Interest Rates
We’ve seen interest rates on a 30-year fixed mortgage well below 3%. These rates are being called “historical lows.” Will they hold steady? My magic ball is broken, but my guess is that they probably won’t go much lower, but also won’t rise dramatically in the short term either. This is exciting to those looking to buy a home!
Here are my personal opinions about how Covid has affected our local real estate market: 1) Many folks that have been forced to work from home have realized that they need a larger or differently configured home to accommodate their new lifestyles; 2) Arizona has become an attractive place for relocation by states with higher costs of living, especially since remotely working is becoming more the norm. You simply don’t have to live and work in the same city or state now; and 3) Those anxious to make a home transition, i.e. sell and purchase another, became hesitant to sell last year when Covid hit. And now, they may be hesitant to sell because they wonder if they can find another home with so few homes on the market, i.e. low inventory.
The factors discussed above create a conundrum for many, because they fear that if they sell their home, they won’t be able to win a contract on another. The typical Buyer may need funds from their sale in order to use as down payment and closing costs for another home purchase. If they do need the funds from their sale, and do not have a plan for “interim housing,” they could only present a “contingent” offer. A contingent offer states that they must close the sale of their home in order to purchase the one they are offering on. In a more balanced market, this may not be a huge issue. But, in this market, a seller that has received multiple offers, probably many or all, over asking price, will not be tempted by one that has a contingency attached.
If you are in a position where you want to make a home change but need the funds from your sale to purchase another, my recommendation is to sell your home now for top dollar, then if needed, put your belongings in storage and move in somewhere temporarily to give yourself time to find and purchase your perfect home. With inventory this low, and the Buyer’s market this competitive, it is very difficult to do it any other way.
If you are in wonderful position where you don’t need the funds from your sale to purchase another home, then now is the time to take advantage of top dollar values and very low interest rates!
Regardless of your position, I am here, ready willing and able to help you navigate the market and help you achieve your home goals!
Contact me if you or someone you knows needs assistance. 602-284-7781 or email.