Posted on July 3rd, 2009 by Jonathan Dalton

Most home buyers have at one time been a home seller. Most home sellers have at one time been a home buyer. And yet both buyers and sellers often forget what it was like to be in the other position, even if it only was recently that the shoe was on the other foot.

When you were selling a home, what would your reaction have been to an offer 20 percent below market value? Would you have rationally said, “well, this is a buyers’ market so this is natural” or would you have questioned the parentage of the buyers? If you’re like the vast majority of sellers, you’re in the latter category.

Conversely, when you were buying a home, would you automatically offer not just the list price but a few dollars more just because the home was that special or would you offer less to establish a negotiating position and try and uncover the seller’s real bottom line?

Purchasing real estate in Phoenix or elsewhere isn’t a complex dance. Everyone knows the rhythm and the steps. You bid here, we counter here, agreement comes there and all end up (relatively) happy at the end.

What complicates things is emotion but with a little empathy and a reach back into our memory we ought to be able to set some of that aside in the effort to attain the goal.

That’s the one rule that works, the only rule we and the Flint Tropics have. Everybody Love Everybody.

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Posted on July 2nd, 2009 by Jonathan Dalton

There’s nothing like a trip back in time to give some perspective on just how far the Phoenix real estate market has shifted the past several months.

This morning I was talking to a client about where the market was at the start of November when a particular property was purchased from a lender. Here are what the absorption rates looked like then:

Phoenix Real Estate Inventory: November 5

	Sold	Active	Absorption
City	10/5/08-11/5/08	11/5/08	Rate	Change
Anthem	61	328	5.38	-1.09
Avondale	141	965	6.84	0.82
Buckeye	124	1,217	9.81	0.15
Carefree	2	134	67.00	1.00
Cave Creek	30	496	16.53	-4.59
Chandler	213	1,797	8.44	0.36
Desert Hills	9	95	10.56	-13.69
El Mirage	75	507	6.76	0.12
Fountain Hills	27	494	18.30	-3.27
Gilbert	264	2,017	7.64	0.88
Glendale	251	2,116	8.43	-0.13
Goodyear	126	936	7.43	-0.18
Laveen	59	544	9.22	0.94
Litchfield Park	44	412	9.36	-0.11
Maricopa	152	964	6.34	0.32
Mesa	368	3,288	8.93	-0.37
Paradise Valley	9	508	56.44	14.36
Peoria	162	1,654	10.21	0.26
Phoenix	1,081	11,179	10.34	-0.20
Queen Creek	295	1,745	5.92	0.25
Scottsdale	220	4,000	18.18	0.77
Sun City	60	552	9.20	-3.09
Sun City West	30	512	17.07	1.98
Surprise	245	1,671	6.82	0.24
Tempe	53	518	9.77	0.93
Tolleson	62	499	8.05	1.52
Waddell	11	141	12.82	1.15
Total	3,846	38,191	9.93	0.14

And this is where the market stands as of this past Tuesday:

Phoenix Real Estate Inventory: June 30

	Sold	Active	Absorption
City	5/30/2009-6/30/09	6/30/09	Rate	Change
Anthem	52	149	2.87	0.01
Avondale	242	351	1.45	0.04
Buckeye	276	606	2.20	0.02
Carefree	3	123	41.00	-22.50
Cave Creek	46	371	8.07	0.43
Chandler	358	1,020	2.85	0.27
Desert Hills	4	47	11.75	-1.00
El Mirage	123	162	1.32	0.08
Fountain Hills	50	344	6.88	-0.20
Gilbert	388	1,163	3.00	0.19
Glendale	435	929	2.14	0.17
Goodyear	202	457	2.26	0.20
Laveen	146	308	2.11	0.10
Litchfield Park	75	171	2.28	0.12
Maricopa	234	404	1.73	0.24
Mesa	583	1,778	3.05	0.08
Paradise Valley	17	506	29.76	5.19
Peoria	294	821	2.79	0.23
Phoenix	1,972	5,257	2.67	0.22
Queen Creek	357	849	2.38	0.43
Scottsdale	372	2,967	7.98	0.45
Sun City	70	358	5.11	0.44
Sun City West	59	374	6.34	-0.95
Surprise	351	831	2.37	0.22
Tempe	96	374	3.90	0.07
Tolleson	137	200	1.46	0.21
Waddell	21	84	4.00	-0.16
Total	6,547	20,741	3.17	0.21

The obvious question is how could someone have seen this coming? And the somewhat self-serving answer is to watch the inventory updates here on All Phoenix Real Estate. If you had been following the weekly updates you would have seen the tide turn at the beginning of April. And the current market wouldn’t be a surprise.

The key to any decision is information … those who have it can make the most informed choices, those without or with only partial information are left to wonder.

Yesterday, buyers from Alaska closed on a second-home in Queen Creek. The notion of previewing each property before making an offer gave way to the reality of the speed with which homes were selling. Fire off the offers, then use the inspection period to see what kind of shape the home might be in.

On our 15th offer, we found success. Relatives in the area joined the home inspector for the walkthrough and these folks have a home which, with a little work, will be a terrific property in which they can escape the snow.

(Quick aside: I still recommend making a trip to the Valley before purchasing, just to get the lay of the land. These folks had done just that not so long ago.)

These folks read the signs, adjusted their strategy and got their property. Adjustments are necessary. It harkens back to Einstein’s definition of insanity, to do the same thing over and over again expecting different results.

Wishing we could go back to the higher inventory levels of November is pointless. That’s not where the market is. And, depending on who you listen to, it’s not where we’re going to be again anytime soon.

Such is the case of the Canadian dollar, which rallied past the 90-cent mark. There was speculation among some readers that the Canadian dollar would keep rising until it was back at par as it had been in 2007. Don’t settle for 91 cents went the message, hold out for the full dollar or more.

If you watch the currency markets you know how this worked out … the Canadian dollar has slid backward over the past couple of weeks. It’s still stronger than where it was only a few months ago but not as strong as it had been a few weeks back.

Adjust to the current market and you’ll succeed.

What’s the big thing to watch in the current market, at least for Tobey and me? Price movement or, more to the point, the lack of movement despite the decrease in inventory and increase in demand. The flattening of the price curve stands in defiance of everything we know about the law of supply and demand. And that’s because of a variable that’s been added to the equation.

If you remember my old analogy about the Phoenix real estate market being like a car stuck in the mud. The accelerator’s being pushed to the floor but the tires keep spinning, unable to gain any traction. Why? The lenders are standing to the side with a water hose making even more mud. How? By continuing to price homes below current market levels in order to initiate a quick sale.

Price new homes to the market at the level of the past sales and they’ll still move. Maybe it will take 10 days instead of five, but they’ll still sell. And then you’ll see prices move …

… assuming the assinine HVCC laws don’t continue to serve as a further anchor. (Note to the folks in charge - if most investments come with the required caveat “past performance is not an indicator of future results” then how is it that we’re now requiring appraisers to factor past declines into future values? Assume the market will remain down, hold the prices down accordingly and you have the self-fulfilling prophecy.

(Buyers do the same thing, or at least did back when there was room to maneuver on the price of bank owned properties.)

Banks tend to be fairly unintelligent when it comes to selling real estate so it might take them a bit longer to figure out proper pricing. And there’s a slight chance they just won’t.

If they do, though, and the prices start reacting to the laws of supply and demand as they should, are you prepared for the change?

If you’re reading this website, you’re well on your way.

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Posted on June 30th, 2009 by Jonathan Dalton

As Keith Jackson might put it, the Phoenix real estate market has a little hitch in its giddyup this week. Inventory continues to fall but sales also have dropped off for the month of June after extremely strong showings in April and May.

We have had 6,547 closed sales the past 30 days (not quite final June numbers since we won’t know what closed today until it appears in the system tomorrow) which is down about 500 from last week’s report. Inventory fell by just under 200 homes for an absorption rate of 3.17 months.

Bank owned sales over the past 30 days fell under the 4,000 mark to 3,904; inventory remains low at 3,188 but the drop in sales have given us a slight increase to .82 months of inventory.

For short sales, there are 5,249 active listings and 831 closed sales over the past 30 days for 6.32 months of inventory. And among non-bank owned, non-short sale homes, there are 12,304 active listings and 1,812 closed sales for 6.79 months of inventory.

As always, the particulars for the various cities and towns in the Phoenix real estate market are below. And also as always, all data is provided by the Arizona Regional MLS and is deemed reliable but not guaranteed.

Phoenix Real Estate Inventory: June 30

	Sold	Active	Absorption
City	5/30/2009-6/30/09	6/30/09	Rate	Change
Anthem	52	149	2.87	0.01
Avondale	242	351	1.45	0.04
Buckeye	276	606	2.20	0.02
Carefree	3	123	41.00	-22.50
Cave Creek	46	371	8.07	0.43
Chandler	358	1,020	2.85	0.27
Desert Hills	4	47	11.75	-1.00
El Mirage	123	162	1.32	0.08
Fountain Hills	50	344	6.88	-0.20
Gilbert	388	1,163	3.00	0.19
Glendale	435	929	2.14	0.17
Goodyear	202	457	2.26	0.20
Laveen	146	308	2.11	0.10
Litchfield Park	75	171	2.28	0.12
Maricopa	234	404	1.73	0.24
Mesa	583	1,778	3.05	0.08
Paradise Valley	17	506	29.76	5.19
Peoria	294	821	2.79	0.23
Phoenix	1,972	5,257	2.67	0.22
Queen Creek	357	849	2.38	0.43
Scottsdale	372	2,967	7.98	0.45
Sun City	70	358	5.11	0.44
Sun City West	59	374	6.34	-0.95
Surprise	351	831	2.37	0.22
Tempe	96	374	3.90	0.07
Tolleson	137	200	1.46	0.21
Waddell	21	84	4.00	-0.16
Total	6,547	20,741	3.17	0.21

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Posted on June 29th, 2009 by Jonathan Dalton

These days, with homes in the Phoenix real estate market often selling within a handful of days and no time to preview or show before writing an offer, it seems I’m spending more and more time simply writing contracts.

Should one get accepted then I move into the regular mode - ordering and attending inspections, coordinating the transaction between the lender, buyer and escrow, negotiating repairs (unless it’s a bank owned home and no repairs are being made) and all the rest of the work that goes into a successful home purchase.

But 95 percent of the offers I’m writing aren’t getting there. And since my role is a bit more limited - I have less overhead when I’m not driving hither and yon to show homes to a buyer before he or she makes a decision - I’m wondering. Is there a place in the Phoenix real estate market for an agent chargining an up-front, pay-per-contract-written fee?

DOJ fun prevents me from using real numbers. But let’s say I started offering a service where a buyer pays me $XX per contract that I write. Should one prove successful, the amount paid would be credited back out of the commission paid either in full or at most up to the amount of the commission.

If you’re serious about purchasing, would you be willing to pay to have the time that it takes to research a property and write a contract?  Does a program such as this sound better or worse than charging an up-front retainer of a certain amount on homes under a certain price point?

Of course, the obvious flaw is there are hundreds if not thousands of local agents who will write the contract for free. Some of these are the same ones who will flaunt local MLS rules and hand buyers the lockbox codes without thinking twice.

Still, the quickly multiplying contracts sitting in my Documents folder makes me think that this might be a path worth pursuing.

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Posted on June 29th, 2009 by Jonathan Dalton

There was an article over on Active Rain today that had me shaking my head. The basic implication was pricing a property competitively to sell is important but outstanding marketing could help bring in some extra dollars.

Realizing that all real estate local, that’s simply not true in the Phoenix real estate market these days. In fact, one could debate whether it’s ever been true.

I have a buyer looking for properties in two subdivisions in Goodyear. We’ve been in the midst of the multiple offer mosh pit on a couple of places and after coming away bruised but unsuccessful I thought I’d check specifically among non-bank owned, non-short sale homes.

Guess what? There’s nothing to be had at a competitive price. Maybe this is because any home that was competitively priced already has gone under contract. But there wasn’t a single home I could point to that was within shouting distance of market value based on the rest of the comps.

But the bank owned homes are beat to hell …

No, they aren’t. At least not all of them. The homes we recently have bid on have been in good condition … not pristine, but truth be told, almost no homes really are pristine.

Marketing can help a home sell more quickly and can possibly raise the value slightly but at the end of the day prevailing market values are going to tell the tale. No one is going to pay $25,000 above list because of the customized yard sign or color flyers. Those may help sell your house versus another, but only if the price is right.

When in doubt, KISS continues to apply.

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