• Josh :) grateful

PHX Buyer's Real Estate Market FROM HELL!

Good morning fine friend :)

The other day I was driving to the store and saw a new for sale sign pop up (obviously I'm a bit sensitive to it) haha... and it was an Open Door listing... I almost swerved into a parked car I was so distracted... I was like... "why would anyone?... right now of any time?"...


If you don't know Open Door and OfferPad, they are companies that will buy your home outright, never letting your home get on the market, no showings, pick your close date, hell, some will even move you. Great right?! Yeah!

But!...


Unlike a real estate agent who asks for a 5% or 6% listing/selling commission, these companies don't sell your property, they "BUY" it from you... and in doing so there's no selling commision... awesome right!?


Yes!

But NO!

There's a buying fee....

From other clients we've seen and heard that we've seen such a fee has been 8% - 10%, 12%+.... to buy your home. Hell, if an agent wants to refer their client to them, we agents have a special site where we can ALSO include our %% and it's then ALSO included in the offer presented to the seller! Goodness!!!!!!


Aside from that double dipping %% inclusion, their idea would have been practical back when the market was a balanced one, or a shit one... Obviously this is a business model that cannot sustain itself long term.... especially with what I'm about to share with you...


Before I do, I need to throwback classic data for you.



September 2007

For the First Time - More Listings Expire Than Are Sold

On September 26, 2007, the 7 day rolling average for monthly sales was 3,842 among all areas and types. For the same monthly period ending September 26, 3,877 listings expired and 5,667 listings were canceled. This is the first time that expired listings have exceeded sold listings. Canceled listings have exceeded sold listings since June 25. This unusual situation is a result of the record number of active listings and a falling demand level, 41% below the average monthly sales for 2001-2007.

15 Months Supply

On September 25, for the total market (all areas and types) there is now a 15 month supply of active listings, a new record high. The recent increase in this figure is primarily due to the sharp drop in the monthly sales rate, although active listings have also been rising.

Other records set today are: Days on Market - Active - record high of 126 Listing Success Rate - record low of 27.9% 12 Month Appreciation - record low of -7.8%

Moody's Forecasts 17.8% Decline for Phoenix Metro Pricing

Meanwhile new records were set on September 21 for Active Listings - record high - 57,630

Days Inventory Based on Annual Sales - Active - record high - 342 Months Supply Based on Monthly Sales - record high - 14.8 12 Month Appreciation - record low - -6.7%

WOW!

Although we weren't in the real estate business at that time, Chas and I were ones who got to live through it and ultimately short sold our home. So we know first hand how stressful it was.


Fast forward to a few short 7ish years later, we started serving people in real estate.. At that time things were starting to level out within the industry. It was like watching people come out after a bad storm stepping away from the fallen debris, beaten, but not broken.

Fast forward another 6 years to today. The numbers of today are equally overwhelming to the ones above... There are approximately 40,000 real estate agents in the valley having the densest population of realtors in the country, with a failure rate of 80% within 2 years, and then another 80% by year 5..

We are grateful to have made it to year 6... With the average agent in the PHX area closing between 0-3 homes a year, we have had the incredible privilege to help north of 140 families buy or sell a home. With that fortunate experience under our belt, I believe our perspective to be sound with wisdom and not speculation.


In 2007, we were suffering from artificial sales prices, corrupt agents, corrupt lenders, bad title companies, palm greased appraisers, and no regulation on the how's and what's in selling and buying homes. If you wanted a house - you got a house.

Since then lawsuits have been filed, federal regulations have changed, (changed a couple times alone in our 6 year window) bad agents and lenders have been weeded out (mostly). Today you have to prove where your $1,000 deposit came from in order to count it... ie, you sold $1,000 at a garage sale and want to use it with you down payment - nope! not happening today!... got's to have a paper trail! [we've almost lost 2 transactions due to this kind of stipulation]

Today the industry has gone to the other side of the spectrum. With such changes, some good, some extreme, I believe the market values of homes today are more sound than during the boom.


For the most part.

Supply and demand are grossly rearing their head and you can't help but see that impact. I am no fortune teller, I can only assess what the data in front of me is telling me.

In 2007, 08, 09 for a Seller came down to how low could you go, how low the bank would allow, how desperate you could become and deal with.... amazing for a Buyer!!


I believe right now we are in the same kind of unprecedented times, but 180 degrees different.


The number above in your head from September 2007: 57,630

On Tuesday this week I checked the available listings, January 2021: 5,300


Today, 2021 for a Buyer it's how high can you go, what contingencies are you willing to give up, as-is, no inspection, no appraisal, how many title fees extra are you willing to pay for, how long of a closing date 45-90 days? how special are you compared to the other 5-20 buyers we're looking at, is your letter emotionally connected enough.. and, and, and. grueling is an understatement... but Amazing for a Seller!!

Courtesy of the Cromford Report, some additional and supporting commentary for you.

I hope you're sitting down.

This is for single-family detached homes across Greater Phoenix, priced at $500,000 or less. There are just 1,943 of them for sale compared with 10,253 in December 2018. At the time we thought 10,254 was low compared with normal, and it still is. 1,943 is a crazy number for a metropolitan area of nearly 5 million people. We also note:

  • there are hardly any distressed homes for sale

  • the first week of January has seen the number stabilize, but not increase

  • last year the count also stabilized for a couple of weeks but then started falling away rapidly between mid January and mid March

  • The jump in April and May 2020 was caused by lock down and looks unlikely to re-occur in 2021.

Prices are likely to increase massively over the next 6 months in these current circumstances. This applies even if demand cools considerably. Since the turn of the year we have been closely watching to see if the arrival rate of new listings would improve and make the supply situation somewhat easier. After 12 days we can report that new listings have instead arrived at a feeble rate, lower than the January of the last 3 years and well below what we had been expecting based on December's patterns.

As a result the overall supply situation has got worse. not better. The following large cities now have fewer than 100 single-family active listings without a contract:

  1. Maricopa 67

  2. Fountain Hills 70

  3. Tempe 73

  4. Goodyear 75

  5. Chandler 86

  6. Cave Creek 87

  7. Buckeye 90

  8. Gilbert 95

  9. Glendale 98

These numbers are pathetic, just a fraction of what we would normally see. Tiny Wickenburg has 75 so is enjoying a relatively abundant supply.

The situation for buyers is getting even more desperate and since January is usually the BEST month for new listings the outlook for 2021 is already dire from a buyer's point of view. Buyers are likely to outnumber sellers by at least 5 to 1 for the foreseeable future. This is the most extreme example of a seller's market we have ever witnessed.

Basic economic theory should tell us what this will do to pricing. It is likely to rise even faster than it has done over the last 6 months.

​If you were expecting the craziness to stop in 2021 you were badly mistaken. Supply is still collapsing, driving the CMIs higher at a rapid pace in 16 of the 17 cities. Paradise Valley is the exception, where demand has declined a little over the past 2 months. At 275.2, the PV CMI is still close to its record high. Chandler has overtaken Gilbert at the top of the table and 12 cities are over 500 (only 4 last month).

It does not make the list of 17 largest cities but El Mirage has already broken through the 800 level and is closing in on 900.


THIS IS IMPORTANT, NOTE: [CMI] is a value that provides a short term forecast for the balance of the market. It is derived from the trends in paneind, active, and sold listings compared with historical data. VALUES BELOW 100 INDICATE A BUYERS MARKET, WHILE VALUES ABOVE 100 INDICATE A SELLERS. 100 = Balanced market between Buyers and Sellers.


Year 2020 like no other:


We do not expect any big numbers for January. January tends to be the slowest month for closed listings in every year. However if ranked against all other Januaries, 2021 could possibly be another record breaker. The listings under contract are there to support that and prices are certainly much higher than in any past year. end Cromford Report data.

FINAL THOUGHTS

With Covid, crazy presidential shit going on, life shit, all things considered, things are incredible for real estate wise in a way never anticipated. Money is super cheap! Home values are incredible!! averaging over 100% of list price [regardless of zip code] It sells over the weekend with 60-90 showings!! Likely with multiple offers! [we had 22 offers on one house this year] Hell yes it's time to sell!!

BUT!

If you need to purchase a home afterwards, you need to pause a moment and think things out. If you don't have a plan B, C, D, it might not be the time. It would be easy right now for a real estate agent to support a seller wanting to sell.. especially with everything I mentioned above, why not?! We've been on the other side of pizza and beer these couple months with a handful of clients deciding that although things are awesome for a seller, it's not the right time to sell. That's a difficult conversation, sometimes an emotionally charged conversation...

But it's the RIGHT kind of conversation.

If you or someone you know is needing to have that kind of conversation, we are a safe place to ask questions without expectation. Even in a covid compliant, 6 feet apart, outside under the sunset "safe place" to talk. We would be grateful to serve you or them. :)

~Just let us know :) PS! Keep a lookout in the mail! January's newsletter is already in production and it's packed with great info! If we don't have your mailing address and you'd like one - in Arizona or out of state - let us know and we'd be happy to add you to the list. :)


Tons of awesome shit!! :)


As always, thank you for being amazing! If you have any questions about what we shared here, we're happy to help. I wonder how many open houses are rocked out here?! ... hahha This market is likely settled with a good old fashioned handshake :) Have a grateful weekend!



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