Hold 'Em or Fold 'Em
The old song is never truer than today! Today's market conditions can have a very big effect on the decision to sell. Many people are pondering the question, “Is now the time to sell?” For many this is a question of finances, home values, family needs, job requirements, every situation is as different as the individuals themselves. Some questions are: Will I get a good price for my home? How long will it take to go through the process? Will I be able to purchase a newer larger home? With market inventory continuing to rise slightly along with interest rates combined with a slight pull back on the part of the investors, it kind of feels like we are on the verge of a stutter in the market. THIS IS A NECESSARY STEP if we are to return to a normal market. Our market has been heavily skewed either toward the buyer or seller since 2004. A normal market would be 45-60 days average market time with a 4 to 5 months supply of homes on the market at a given time and sellers receiving approximately 95% of their asking price. We are currently experiencing 20 day market times (if you remove the short sale homes that remain active until the bank approves them), a 45 day supply of homes, and the seller receiving a little over 97% of asking price. This is still very much a sellers market but it may change very rapidly and here is why.
As interest rates climb, they inherently devalue the price of homes and eliminate more and more buyers from each price point. As prices climb, the “blue sky” available to investors along with their return on investment continues to shrink and makes the investors progressively less interested in the Phoenix/Metro area because rents have not climbed at the same rate that home prices have risen over the past couple of years. This is nothing more than shrinking demand. This is offset somewhat by more and more buyers who short sold or foreclosed on their home being eligible to come back into the market (3 years after short sale to obtain an FHA loan).
As pricing gets to the point that the new builders re-engage in the market, this will only further increase the supply of homes. Again, this is a necessary step toward a normal market.
That being said, the transition from our sellers market is coming soon and it will be ugly at least for the first couple of months. I anticipate a flood of sellers, afraid they will miss the boat, along with many investors simply taking their profit to produce a slight and sudden oversupply of homes, which will place downward price pressure or in essence a small (nothing like the big ones we have had recently) bubble. I recommend if you are contemplating a sale, NOW IS THE TIME TO PUT YOUR HOME ON THE MARKET. Do not wait for the signs of the slowing to be readily apparent to the general public and especially do not wait for the news to state the market is slowing (they are still saying the market is rising rapidly)
For move up sellers, it is especially important to get your transactions started as soon as possible. Remember, it is still a sellers market so if you wait to buy the other home you are losing the appreciation on the difference between your home value and the one you are purchasing. Also make sure that you do not visit any of the new home builders without Al Gage representing you. This means CONTACT ME PRIOR TO VISITING THE MODEL HOMES!
For buyers, all is not lost! Interest rates are still very low even if they are not at the lowest level in 40 years. They are likely not going back to those historically low rates and homes are still at or below what it would cost to replace them as a new build. We are still getting good prices for our buyers and waiting is just not in your best interest. If you have short sold or foreclosed on a home and it has been more than three years, please contact us to see if you are eligible for a mortgage at this time