Phoenix market trends class 3.21.13
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  • Generally:Above 6 = buyer marketBelow 6 = Seller market
  • This graphs shows the very consistent pricing between the different types of homes.
  • Lender owned sales make up 53% of the sales each month, however only 21% of the homes for sale are lender owned. Indicates a very fast market for lender owned homes.
  • REO Price DropsBanks typically list their homes with the goal of selling fairly quickly. We know they will drop the price 3% every 3-4 weeks and they won't accept an offer that nets them less than 3-5% of the current list price. The blue line shows how much the home dropped in price from the first day it hit the market to its sales price. Which is why I call it "Drop From Original List Price". The chart below shows banks are pricing homes a lot higher these days which means they have to drop their price a lot more before they receive an offer. Drop from Final List Price, tells us how much they came down in negotiations. If this number is negative, it shows the homes sold for above the final list price. For example, in June of last year, banks sold their homes for 3% above the final list price (on average). In January of this year, banks sold their homes for almost 2% below the final list price. Single family homes 50k+
  • REO Days on MarketThe chart below shows REO homes sold in January 2013 stay on the market an average of 30% longer than they did in January of 2012.Single family homes 50k+
  • 20% chance an REO home will sell for list price5% chance the REO home will sell for 1, 2, 3 or 4% below list price4% chance the REO home will sell for 1, 2, 3% above list price
  • Question – how much will the seller come down in negotiations? How much do sellers drop their price from the time they list the home?I pulled up all the data for the following - single family homes  - sold in 2012 - sold for $200k+ - traditional sale - (16,000+ results)I was looking for a correlation between the length of time a home is on the market and the total price drop along with the % sellers come down in price during negotiations. Here is what I found... Sellers rarely come down more than 3% during negotiations unless the home has been on the market longer than 60 days2. Homes on the market 60-365 days only come down and average of 4% during negotiations. 3. If a home is over priced by more than 10% when it hits the market, it most likely won't sell. On average, homes on the market for 6 months before accepting a contract only come down an average of 9.4% (includes price drops and negotiations). Bottomline, if your buyer wants the seller to come down more than 3% when negotiations start, the seller most likely won't accept your offer. So save yourself the time and find another home. 
  • 200k+, Single Family homes – Trad(?)43% chance the home will sell in the first 30 days - Avg 1.9% drop in negotiations - Avg .4% drop in price
  • LEED ratings are for buildings that meet sustainable design requirements.
  • Solar roof panels save energy by producing your own solar electricity and offer credit for excess solar electricity produced.Radiant barrier roof sheathing improves cooling energy efficiency and increases indoor comfort.Low-E, dual pane windows block 95% of UV rays and reduce window heat gain by 64% compared to ordinary glass.Improved insulation techniques help to minimize gaps and higher thermal properties (R-value) add to energy efficiency.Designed and properly sealed duct system to improve comfort and efficiency.Compact fluorescent bulbs are included instead of less efficient incandescent bulbs.Programmable thermostats regulate your home’s temperature year-round.High efficiency ENERGY STAR® rated water heater, refrigerator, and dishwashers help save money by using less energy.In October, existing home prices were up more than 34 percent versus 2011 and new-home sales were up 85 percent, according to a housing report released by ASU’s W. P. Carey School of Business

Phoenix market trends class 3.21.13 Phoenix market trends class 3.21.13 Presentation Transcript

  • What the Sell? Phoenix Real Estate Trends March 21, 2013 Glendale, AZ Follow: @RedfinPhoenix Like: http://www.facebook.com/RedfinPhoenixSlide 1 of 72
  • Median Sold $/sqft Year over Year50%45%40%35%30%25%20%15%10%5%0%Slide 2 of 72
  • Agenda ● A little bit about Redfin ● National Trends ● Local Trends ● 2013 Predictions ● Buyer relevant trends ● Financing tends ● Seller relevant trends ● Redfin resourcesSlide 3 of 72
  • 7 Most Common Questions 1. How fast are homes selling? 2. How much will the seller come down on the price? 3. Why are the REO’s listed so high? 4. Where are short sales? 5. Where are prices headed? 6. Is this a buyers market or sellers? 7. Are new homes a good deal?Slide 4 of 72
  • A Little Bit About Who We Are ● Redfin is a real estate brokerage that has helped over 20,000 people buy or sell a home; 97% would refer us to a friend. ● Customers, not commissions ● Informed decisions ● The right home for the right price ● No obligation ● Get back a portion of our commissionSlide 5 of 72
  • National Market TrendsSlide 6 of 72
  • National Market Trends Multiple Offers - More than a Quarter of Listings Still Selling Fast ● 2012 inventory fell 30% ● Through the first 6 weeks of 2013 – inventory dropped another 18% ● Multiple offers are not only against 3 or 5 buyers, but more like 10, 20 and sometimes even 30 or moreSlide 7 of 72
  • National Market Trends ● January YoY Prices up 10% ● January YoY sales increased 9.1% ● 70% of homes in January had competing offers ● 30% of new listings were under contract in < 2 weeks ● # new construction projects in Q4 2012 up 44% YoY ● What could slow the market? ► Mortgage rates have increased to 3.75% (highest since last Sept.) ► Eventually money will get more expensive and buyers will become more scarceSlide 8 of 72
  • Yesterday’s prices were a historic joke. ...and not a very funny one.Slide 9 of 72
  • Case-Shiller: Phoenix Area v. 20-City250.00200.00150.00100.00 50.00 Phoenix 20-City Composite 0.00Slide 10 of 72
  • Case-Shiller – By the Numbers Phoenix Area Up 22.8% year-over-year Peak was July 2006 Down 45.4% from peak Currently at October 2003 prices 20-City Composite Up 5.5% year-over-year Peak was July 2006 Down 29.4% from peak Currently at September 2003 pricesSlide 11 of 72
  • Local TrendsSlide 12 of 72
  • Local Trends ● 2012 Prices increased 15-47% ● Inventory dropped (again) ● New home sales increased ● Inventory type has changed (REO & SS vs. Trad.) ● Interest rates stayed low ● Bidding wars ● Homes sold quickly – 43% sold in under 2 weeks ● Rental prices increasedSlide 13 of 72
  • Median Sold $/sqft Year over Year50%45%40%35%30%25%20%15%10%5%0%Slide 14 of 72
  • - 10,000 20,000 30,000 40,000 50,000 60,000 Jan-03 70,000 May-03Slide 15 of 72 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Number of Active Listings Sep-10 Jan-11 May-11 Sep-11 Jan-12 # of Active Listings May-12 Sep-12 Jan-13
  • Number of Active Listings 18 Months30,000 # of Active Listings25,00020,00015,00010,000 5,000 -Slide 16 of 72
  • Active Listings vs. UCB – The Real Count20,000 Active s18,00016,00014,00012,00010,000 8,000 6,000 4,000 2,000 - Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13Slide 17 of 72
  • Supply of InventoryMonths of Supply 18 16 14 12 10 Months 8 6 4 2 0 Queens County Nassau County Suffolk County 2011 2012Slide 18 of 72
  • Avg $/sqft for 3 Bedroom Homes By Listing Type$120$100 $80 $60 $40 $20 Traditional Lender Owned $- Short SaleSlide 19 of 72
  • Multiple Offers 52% of homes sold Sept. – Nov. in Phoenix were ALL-CASH dealsSlide 20 of 72
  • Multiple Offers 46% of Redfin offers faced competition (August 2012 – February 2013 Phoenix)Slide 21 of 72
  • 2013 Predictions ● Smaller increase in values (5-7%) ● Increased interest rates ● Different type of bidding wars, its not about the money this time ● Home inspections will be the new deal killer ● Pre and post possessions more common ● Lease backs are more common as well ● What could make 2013 another strong year? ● What could make it a weak year?Slide 22 of 72
  • Homes for Sale by Listing Type Short Sales, 6% Lender Owned, 9% Traditional, 85%Slide 23 of 72
  • Single Family Home Sales % of Total by Type 2008-2013 Entire Phoenix Valley Source: ARMLS90% Where is this Oh &*$ Comfortable Chaos Recovery80% going?70%60%50%40%30%20%10% Traditional Lender Owned Short Sales 0%Slide 24 of 72
  • REO’s What are they up to?Slide 25 of 72
  • REO Price Drops 14% Drop From Original List Price 12% 10% 8% 6% 4% 2% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb -2% -4%Slide 26 of 72
  • REO Days on Market 70 Average Days on Market 60 50 40 30 20 10 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan FebSlide 27 of 72
  • Chance an REO will sell for above or below list price25% % of total20%15%10%5%0%Slide 28 of 72
  • REO Take Aways ● There are fewer REOs selling ● REOs are being listed much higher than the market value. ● At the same time, banks are still tight on negotiations. Just because they over priced the home doesnt mean they will come down that much more during negotiations. ● You can make an offer and roll the dice the appraisal will drop the value, but its not a wise decision ● Mysterious multiple offers after 30+ Days on the MarketSlide 29 of 72
  • Traditional Sales Are they over priced? How much will the Sellers come down?Slide 30 of 72
  • Traditional Sales ● Two Types ► Flipped ► Owner Owned ● Priced comparably ● Priced at the top of the market ● Tough on negotiations ● 19% sell in the first two weeks ● 43% sell in the first 30 days ● Multiple offers during 1st week on the market ► Unlikely after the 1st weekSlide 31 of 72
  • Days on Market vs Price Drops18.0% Avg of Total Price Drop Avg Price Drop Before Accepted Contract16.0% Avg Price Drop During Negotiations14.0%12.0%10.0%8.0%6.0%4.0%2.0%0.0% 1-7 8-14 15-21 22-29 30-44 45-59 60-89 90-119 120-149 150-180 180-364 365+Slide 32 of 72
  • % of Sales Compared to Days on Market20%18% 43% of Homes Sell in the first % of Sales16% 30 days14%12%10%8%6%4%2%0% 1-7 8-14 15-21 22-29 30-44 45-59 60-89 90-119 120-149 150-180 180-364 365+Slide 33 of 72
  • DOM vs Price Drop Takeaways 1. Sellers rarely come down more than 3% during negotiations unless the home has been on the market longer than 60 days 2. Homes on the market 60-365 days only come down and average of 4% during negotiations. 3. If a home is over priced by more than 10% when it hits the market, it most likely wont sell. On average, homes on the market for 6 months before accepting a contract only come down an average of 9.4% (includes price drops and negotiations). 4. Bottom line, if you want the seller to come down more than 3% when negotiations start, the seller most likely wont accept your offer. Save yourself the time and find another home.Slide 34 of 72
  • Changes in the New Construction IndustrySlide 35 of 72
  • What’s New with New Homes? ● Technology ● Green building ► HERS index (Energy Star) ► SRP Powerwise ► Solar panels ► CFL lightbulbs ► 14-SEER HVAC ► Low-E glass ► Spray foam insulation ● Is it effective for the owner? ► Est. Annual Savings: $1,000+ ► Caution with solar ● Is it cost effective for the builder?Slide 36 of 72
  • Construction Boom ● Cause and Effect of New Construction Boom ► Prices increases: 34% in 12 months ► Increased sales: 85% in 12 months ► Build time takes longer ► Quality becomes a concern ► Material shortage ► Labor shortage ► Lotteries ► Tough Negotiations ● Why? ► Shortage of resale homes ► Recent resale price increasesSlide 37 of 72
  • Top 5 Builders in Sales 1. Pulte Homes 2. D.R. Horton 3. Meritage Homes 4. Shea Homes 5. Blandford HomesSlide 38 of 72
  • Buyer TrendsSlide 39 of 72
  • Buyer Trends ● Multiple offers, do they still exist? ● How to present a strong offer ► Minimal added verbiage ► Make it easy to determine the net price ► 30 Day closing ► DocuSign ► Fast turn arounds with paperwork ► Use a local lender ● Investor competition ► Does it exist?Slide 40 of 72
  • Buyer Trends Cont. ● Who are the new sellers ► What are they thinking ► Why are they so firm on the price ● Pre/Post possession and lease backs ► What to consider ● Home inspections ► The new deal killer ► Second round of negotiations ● Inspection Negotiations ► You can only ask for repairs, not concessions ► Only ask for work you would do if you were in their shoesSlide 41 of 72
  • Financing TrendsSlide 42 of 72
  • Financing trends ● Rules, Rules, Rules ● Mortgae Lending in America ● Fannie, Freddie, HUH? ● Bye Bye FHA ● USDA ● VA ● Condo Life, How hard is it to achieve ● Private vs Government – MAIN EVENT! ● Rates ● QuestionsSlide 43 of 72
  • Who makes the lending rules ● Government Oversight ● Wall Street ● Servicer Companies ● Warehouse Lines ● Lenders ● Etc, etc, etcSlide 44 of 72
  • Who makes the lending rules ● Government Oversight ► Dodd/Frank -The Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111–203, H.R. 4173) was signed into federal law by President Barack Obama on July 21, 2010.[1] Passed as a response to the late- 2000s recession, it brought the most significant changes to financial regulation in the United States since the regulatory reform that followed the Great Depression.[2][3][4] It made changes in the American financial regulatory environment that affect all federal financial regulatory agencies and almost every part of the nations financial services industry *Dodd/Frank: http://en.wikipedia.org/wiki/Law_of_the_United_States#Federal_lawSlide 45 of 72
  • Who makes the lending rules ► MDIA – Federal Reserve ► RESPA - Effective July 21, 2011, the Real Estate Settlement Procedures Act (RESPA) will be administered and enforced by the Consumer Financial Protection Bureau ► TILA / Reg Z - FDIC ► ECOA / Reg B – FTC / CFPB ► HOEPA ► Higher-Priced LoansSlide 46 of 72
  • Who makes the lending rules ● Wall Street ► Mortgage Backed Securities ● Loan Servicers ● Warehouse Lines ● Lending Companies TREND: Probably see more government oversight and regulation of mortgage activities. This is a balancing act by the government, Keep restrictions strong enough to protect consumers but lose enough to allow for economic growth.Slide 47 of 72
  • Lending in America • Depository Bank • Mortgage Bank / Correspondent Lender • Mortgage Broker • Private Money • Wall Street / Hedge FundsSlide 48 of 72
  • Lending in America – Depository Banks ● Wells Fargo, Chase, US Bank, Bank of America ● Credit Unions ● Employ Loan Officer’s, Underwriters, Processors, Compliance, etc ● Heavy compliance – CFPB, Basel III, SEC, etc etcSlide 49 of 72
  • Lending in America – Mortgage Bank ● Peoples Mortgage / Correspondent Lender ► Employs Loan Officer, Underwriter, Processor, Compliance ● Warehouse Line ● Buyers of mortgages – Depository Banks, Hedge Funds, Wall Street ● Different Guidelines (and Same)Slide 50 of 72
  • Lending in America – Mortgage Broker ● Middelman ● Brunt of mortgage meltdown blame ● Strict guidelines ● Discloses Fees DifferentlySlide 51 of 72
  • Lending in America – Other ● Private Money ● Hedge Funds ● Wall Street Companies TREND: As we see the market tighten with guidelines the goal of the government is to get private money back into buying mortgage. They may buy from depository banks, mortgage banks, and mortgage brokersSlide 52 of 72
  • Fannie Mae and Freddie Mac● Fannie Mae - http://www.fanniemae.com/portal/about- us/company-overview/about-fm.html● Freddie Mac - http://www.freddiemac.com/corporate/company_profile/● Prior to 2008 they were private companies with implicate backing by federal government.● Post 2008 became a GSE (Government Sponsored Enterprise) TREND: We may see these two entities merge and become one. Government is trying to reduce their role in the housing marketSlide 53 of 72
  • Bye Bye FHA ● HUD – US Department of Housing and Urban Development ► http://portal.hud.gov/hudportal/HUD?src=/about/hud_hist ory ● FHA loans (GSE) ● Cost has risen drastically ► Was .55% ► Now 1.25% ► Going to 1.35% TREND: HUD/FHA continue to raise the cost of ensuring a FHA Loan. Great rates but high mortgage insurance. Will probably see a shift to 5% down conventional loans.Slide 54 of 72
  • USDA and VA ● USDA? ► United States Department of Agriculture • Rural Areas • Special programs TREND: We don’t see a lot of changes with VA programs. USDA continues to have changes and oversight.Slide 55 of 72
  • Condo Life ● Special Restrictions ● Condo Questionnaire / Certs ► https://www.condocerts.com/ ● Typically lower priced ● Property Flips can be a problem ● Must be on FHA Condo Approved List TREND: Will probably continue to see GSE’s back away and wait for private capital to come back into the market before we see losing of guidelinesSlide 56 of 72
  • Private vs Government ● We’ve seen continued pressure to entice private money back to the market ● Probably won’t see any real movement until rates rise. ● Any economic slow down may keep this from happening soon.Slide 57 of 72
  • 10% 12% 16% 18% 20% 0% 2% 4% 6% 8% 14% Apr-71 Sep-72 Feb-74Slide 58 of 72 Jul-75 Jan-77 Jun-78 Nov-79 Apr-81 Sep-82 Feb-84 18.45% Jul-85 Jan-87 Jun-88 Nov-89 Apr-91 Sep-92 Feb-94 Jul-95 Jan-97 Jun-98 Interest Rates 1971 - Today Nov-99 30 Yr Fixed Source: Freddie Mac Apr-01 Sep-02 Feb-04 Jul-05 Jan-07 Jun-08 Nov-09 Apr-11 Interest Rate Sep-12
  • Interest Rates Past 18 months 30 Yr Fixed Source: Freddie Mac4.40% Interest Rate4.20%4.00%3.80% 3.53%3.60%3.40%3.20%3.00%Slide 59 of 72
  • Slide 60 of 72
  • Seller TrendsSlide 61 of 72
  • Seller trends ● Who is your competition? ► REO’s ► Flipped homes ► Other home owners more desperate to move ● Who are today’s buyers? ► Home buyers ► Investors looking for the last good deal ● What are buyers expecting/wanting? ► Clean, move-in ready ► Used to seeing flipped homes ► If its not perfect, they will want some other perkSlide 62 of 72
  • 4 Important Listing Strategies 1. Pricing ► Price it to sell in the first 1-2 weeks ► Multiple offers draw in top dollar and fewer negotiations ► Strong pricing creates urgency 2. Photos ► Realistic, quality photos ► Hire a professional ► Better photos = more visits = more offers = more money 3. Availability ► Make the home easy to see 4. Keep it clean at all timesSlide 63 of 72
  • Time for a quiz…Slide 64 of 72
  • Which home are you more likely to visit?Slide 65 of 72
  • Attracting the right buyer ● Investors ► Want a good deal ► Will flip or rent ► Do very little work to the home ► Price it accordingly for the type of investment property ► Remember, investors can get work done for less ● Home Buyers ► Make it move in ready ► Neutral pain ► Very clean ► Easy to showSlide 66 of 72
  • Best improvements to make ● Normally bad advice, but not today 1. Cosmetic repairs ► Paint over past repairs 2. Roof touchups ► Fix broken tiles, etc 3. AC tune up ► $50-80 4. Minor landscaping ► Improve curb appeal 5. Clean the pool 6. Remove signs of distress ► Show pride of ownershipSlide 67 of 72
  • Good StagingSlide 68 of 72
  • ...Not So Good StagingSlide 69 of 72
  • Redfin resourcesSlide 70 of 72
  • Redfin resources ● Offer insights ● Stats pages ● ForumsSlide 71 of 72
  • Thanks for Coming! Please fill out the survey that was handed out at the beginning of class. We appreciate the feedback! Check out our upcoming classes and events at http://www.redfin.com/buy-a-home/classes-and-eventsSlide 72 of 72