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Slide 1 of 72What the Sell?Phoenix Real Estate TrendsMay 16, 2013 Tempe, AZFollow: @RedfinPhoenixLike: http://www.facebook.com/RedfinPhoenix
Slide 2 of 72Agenda● A little bit about Redfin● National Trends● Local Trends● 2013 Predictions● Buyer relevant trends● Financing tends● Seller relevant trends● Redfin resources
Slide 3 of 727 Most Common Questions1. 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 72A Little Bit About Who We Are● Redfin is a real estate brokerage that has helped over 20,000people 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 commission
Slide 6 of 72National Market TrendsThe key metrics across Redfin’s markets:● Home sales rose 25% from February, but were barely up from2012, rising just 0.9% year-over-year, the smallest gain in 14months.● The number of homes for sale declined 31% from March 2012to March 2013 (a slight improvement over the 32% drop inFebruary), and were flat month over month.● Home prices in March increased 15% year over year, and rose6% just since February.● The percentage of listings that were under contract within 14days of their debut inched up yet again from 33.2% in Februaryto 34.8% in March, the highest point on record.
Slide 8 of 72Yesterday’s prices werea historic joke....and not a very funny one.
Slide 9 of 720.0050.00100.00150.00200.00250.00Phoenix 20-City CompositeCase-Shiller: Phoenix Area v. 20-City
Slide 10 of 72Case-Shiller – By the NumbersPhoenix AreaUp 23.0% year-over-yearPeak was July 2006Down 43.7% from peakCurrently at May 2004 prices20-City CompositeUp 9..3% year-over-yearPeak was July 2006Down 29.0% from peakCurrently at September 2003 prices
Slide 12 of 72Local Trends – Recent and Current● 2012 Prices increased 15-47%● Inventory increased 20% from Mar12-Mar13● New home sales and prices increased● Inventory type has changed (REO & SS vs. Trad.)● Interest rates stayed low in 2012● Bidding wars● Homes sold quickly – 43% sold in under 2 weeks● Rental prices increased● Short sales are a bigger mess● New agents and returning agents● New lenders and returning lenders
Slide 13 of 720%5%10%15%20%25%30%35%40%45%50%ParadiseValleyFountainHillsPeoria CaveCreekScottsdale Chandler Gilbert Tempe Mesa Glendale Avondale PhoenixMedian Sold $/sqft Year over Year
Slide 14 of 72‐10,000 20,000 30,000 40,000 50,000 60,000 70,000 Jan‐03May‐…Sep‐03Jan‐04May‐…Sep‐04Jan‐05May‐…Sep‐05Jan‐06May‐…Sep‐06Jan‐07May‐…Sep‐07Jan‐08May‐…Sep‐08Jan‐09May‐…Sep‐09Jan‐10May‐…Sep‐10Jan‐11May‐…Sep‐11Jan‐12May‐…Sep‐12Jan‐13Number of Active Listings# of Active Listings
Slide 15 of 7217,000 18,000 19,000 20,000 21,000 22,000 23,000 24,000 Number of Active Listings12 Months# of Active ListingsMedia Says: 1% Dropin Inventory fromMar12 to Mar13
Slide 16 of 72-2,0004,0006,0008,00010,00012,00014,00016,00018,00020,000Active Listings vs. UCB – The Real CountActives UCBReality: 20%INCREASE inInventory fromMar12 to Mar13
Slide 17 of 72Months of Supply024681012141618Queens County Nassau County Suffolk CountyMonthsSupply of Inventory2011 2012
Slide 18 of 72$‐$20 $40 $60 $80 $100 $120 $140 Sep‐10Oct‐10Nov‐10Dec‐10Jan‐11Feb‐11Mar‐11Apr‐11May‐11Jun‐11Jul‐11Aug‐11Sep‐11Oct‐11Nov‐11Dec‐11Jan‐12Feb‐12Mar‐12Apr‐12May‐12Jun‐12Jul‐12Aug‐12Sep‐12Oct‐12Nov‐12Dec‐12Jan‐13Feb‐13Mar‐13Apr‐13Avg $/sqft for 3 Bedroom HomesBy Listing TypeTraditionalLender OwnedShort Sale
Slide 19 of 72-10%0%10%20%30%40%50%60%70%How are Home Buyers Paying for Homes?Cash vs Conv. vs FHACASH FHA Conv
Slide 20 of 72Multiple Offersof homes sold Jan. – Apr. in Phoenixwere ALL-CASH deals
Slide 21 of 72Multiple Offersof Redfin offers faced competition(October 2012 – April 2013 Phoenix)
Slide 22 of 72Homes for Sale by Listing TypeShort Sales, 5%Lender Owned, 7%Traditional, 88%
Slide 23 of 720%10%20%30%40%50%60%70%80%90%Jan‐08Mar‐08May‐…Jul‐08Sep‐08Nov‐08Jan‐09Mar‐09May‐…Jul‐09Sep‐09Nov‐09Jan‐10Mar‐10May‐…Jul‐10Sep‐10Nov‐10Jan‐11Mar‐11May‐…Jul‐11Sep‐11Nov‐11Jan‐12Mar‐12May‐…Jul‐12Sep‐12Nov‐12Jan‐13Mar‐13Single Family Home Sales % of Total by Type 2008‐2013Entire Phoenix Valley Source: ARMLSTraditionalLender OwnedShort SalesOh &*$Where isthis going? Comfortable Chaos Recovery
Slide 24 of 72What’s Coming in 2013?● Smaller increase in values (5-7%)► Scottsdale 4%► Gilbert 8%► Phoenix 12%● Increased interest rates● Fewer FHA loans and fewer cash buyers● 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● New Agents = Chaos● Short Sales less desirable● Lender Owned homes, more time to dabble
Slide 25 of 72Lender Owned (REO’s)What are they up to?
Slide 26 of 72-4%-2%0%2%4%6%8%10%12%14%Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan FebLender Owned Price DropsDrop From Original List PriceDrop from Final List Price (negotiations)
Slide 27 of 72-10203040506070Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan FebLender OwnedAverage Days on MarketAverage Days on Market
Slide 28 of 720%5%10%15%20%25%Chance an Lender Owned willsell for above or below list price% of total
Slide 29 of 72REO 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. Justbecause they over priced the home doesnt mean they willcome down that much more during negotiations.● You can make an offer and roll the dice the appraisal will dropthe value, but its not a wise decision● Mysterious multiple offers after 30+ Days on the Market
Slide 30 of 72Traditional SalesAre they over priced?How much will the Sellers comedown?
Slide 31 of 72Traditional 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 week
Slide 32 of 720.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%1-7 8-14 15-21 22-29 30-44 45-59 60-89 90-119 120-149 150-180 180-364 365+Days on Market vs Price DropsAvg of Total Price DropAvg Price Drop Before Accepted ContractAvg Price Drop During Negotiations
Slide 33 of 720%2%4%6%8%10%12%14%16%18%20%1-7 8-14 15-21 22-29 30-44 45-59 60-89 90-119 120-149 150-180 180-364 365+% of Sales Compared to Days on Market% of Sales43% of HomesSell in the first30 days
Slide 34 of 72DOM vs. Price Drop Takeaways1. Sellers rarely come down more than 3% during negotiations unlessthe home has been on the market longer than 60 days2. Homes on the market 60-365 days only come down and averageof 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 6months before accepting a contract only come down an averageof 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 youroffer. Save yourself the time and find another home.
Slide 35 of 72Changes in the NewConstruction Industry
Slide 36 of 72What’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 37 of 72Construction 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 increases
Slide 38 of 72Top 5 Builders in Sales1. Pulte Homes2. D.R. Horton3. Meritage Homes4. Shea Homes5. Blandford Homes
Slide 40 of 72Buyer 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 41 of 72Buyer 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 shoes
Slide 43 of 72Financing trends● Rules, Rules, Rules● Mortgage 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● Questions
Slide 44 of 72Who makes the lending rules● Government Oversight● Wall Street● Servicer Companies● Warehouse Lines● Lenders● Etc, etc, etc
Slide 45 of 72Who makes the lending rules● Government Oversight► Dodd/Frank -The Dodd–Frank Wall Street Reform andConsumer Protection Act (Pub.L. 111–203, H.R. 4173)was signed into federal law by President Barack Obamaon July 21, 2010. Passed as a response to the late-2000s recession, it brought the most significant changesto financial regulation in the United States since theregulatory reform that followed the Great Depression.It made changes in the American financial regulatoryenvironment that affect all federal financial regulatoryagencies and almost every part of the nations financialservices industry*Dodd/Frank: http://en.wikipedia.org/wiki/Law_of_the_United_States#Federal_law
Slide 46 of 72Who makes the lending rules►MDIA – Federal Reserve►RESPA - Effective July 21, 2011, the Real EstateSettlement Procedures Act (RESPA) will be administeredand enforced by the Consumer Financial ProtectionBureau►TILA / Reg Z - FDIC►ECOA / Reg B – FTC / CFPB►HOEPA► Higher-Priced Loans
Slide 47 of 72Who makes the lending rules● Wall Street►Mortgage Backed Securities● Loan Servicers● Warehouse Lines● Lending CompaniesTREND: Probably see more government oversight and regulation of mortgageactivities. This is a balancing act by the government, Keep restrictions strongenough to protect consumers but lose enough to allow for economic growth.
Slide 48 of 72Lending in America• Depository Bank• Mortgage Bank / Correspondent Lender• Mortgage Broker• Private Money• Wall Street / Hedge Funds
Slide 49 of 72Lending in America – DepositoryBanks● 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 etc
Slide 50 of 72Lending in America – MortgageBank● Peoples Mortgage / Correspondent Lender►Employs Loan Officer, Underwriter, Processor, Compliance● Warehouse Line● Buyers of mortgages – Depository Banks, Hedge Funds, WallStreet● Different Guidelines (and Same)
Slide 51 of 72Lending in America – MortgageBroker● Middelman● Brunt of mortgage meltdown blame● Strict guidelines● Discloses Fees Differently
Slide 52 of 72Lending in America – Other● Private Money● Hedge Funds● Wall Street CompaniesTREND: As we see the market tighten with guidelines the goal of thegovernment is to get private money back into buying mortgage. They may buyfrom depository banks, mortgage banks, and mortgage brokers
Slide 53 of 72Fannie 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 implicatebacking 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 toreduce their role in the housing market
Slide 54 of 72Bye Bye FHA● HUD – US Department of Housing and Urban Development►http://portal.hud.gov/hudportal/HUD?src=/about/hud_history● 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. Greatrates but high mortgage insurance. Will probably see a shift to 5% downconventional loans.
Slide 55 of 72USDA and VA● USDA?►United States Department of Agriculture• Rural Areas• Special programsTREND: We don’t see a lot of changes with VA programs. USDA continues to havechanges and oversight.
Slide 56 of 72Condo 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 ListTREND: Will probably continue to see GSE’s back away and wait for privatecapital to come back into the market before we see losing of guidelines
Slide 57 of 72Private vs. Government● We’ve seen continued pressure to entice private money backto the market● Probably won’t see any real movement until rates rise.● Any economic slow down may keep this from happeningsoon.
Slide 58 of 7218.45%0%2%4%6%8%10%12%14%16%18%20%Apr-71Aug-72Dec-73Apr-75Aug-76Dec-77Apr-79Aug-80Dec-81Apr-83Aug-84Dec-85Apr-87Aug-88Dec-89Apr-91Aug-92Dec-93Apr-95Aug-96Dec-97Apr-99Aug-00Dec-01Apr-03Aug-04Dec-05Apr-07Aug-08Dec-09Apr-11Aug-12Interest Rates 1971 - Today30 Yr Fixed Source: Freddie MacInterest Rate
Slide 59 of 723.00%3.20%3.40%3.60%3.80%4.00%4.20%4.40%Interest Rates Past 18 months30 Yr Fixed Source: Freddie MacInterest Rate
Slide 62 of 72Seller 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 perk
Slide 63 of 724 Important Listing Strategies1. Pricing►Price it to sell in the first 1-2 weeks►Multiple offers draw in top dollar and fewer negotiations►Strong pricing creates urgency2. Photos►Realistic, quality photos►Hire a professional►Better photos = more visits = more offers = more money3. Availability►Make the home easy to see4. Keep it clean at all times
Slide 65 of 72Which home are you more likely to visit?
Slide 66 of 72Attracting 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 show
Slide 67 of 72Best improvements to make● Normally bad advice, but not today1. Cosmetic repairs► Paint over past repairs2. Roof touchups► Fix broken tiles, etc3. AC tune up► $50-804. Minor landscaping► Improve curb appeal5. Clean the pool6. Remove signs of distress► Show pride of ownership7. Simple staging
Slide 72 of 72Thanks for Coming!Please fill out the survey that was handed out at the beginning ofclass. We appreciate the feedback!Check out our upcoming classes and events athttp://www.redfin.com/buy-a-home/classes-and-events