7 minute read
REAL ESTATE
From Uptown to Downtown, we cover Chandler like the sun
Market ‘precarious’ for buyers and sellers, expert says
BY PAUL MARYNIAK
Arizonan Executive Editor
Driven by iBuyers and investors that are gobbling up substantial numbers of houses, Valley home buyers and sellers may be entering a disquieting and even “precarious” period while renters are facing a continuing rise in rents, judging by the latest observations by a leading analyst of the Phoenix Metro market.
The Cromford Report outlined a series of trends from August sales and listings that likely won’t bring many smiles to anyone but landlords.
“Many surprising changes have occurred in the market over the past month,” Cromford said as it reported that the average sale price per square foot soared by 27.9 percent between August 2019 and last month, up from $194.97 to $249.31.
That pushed up the monthly median sales price in the same time period by 23.4 percent, from $325 to $401,000.
Several developments in August caught the Cromford Report’s eye, particularly a decline in new listings that appears to have been driven by a spending spree by large investors and iBuyers.
“Ordinary home buyers are losing some of their motivation, thanks to prices that are vastly higher than last year,” Cromford said. “Despite low interest rates, affordability has slipped below the normal range for Greater Phoenix.”
The report stated, “If it were not for the activity of investors and iBuyers – and particularly the latter – the market would have cooled during August. This would have been following the trend established since April.
“However, iBuyers have purchased so
This two-story, 2,744-square-foot home on W. Linda Lane in Chandler recently sold for $625,000 $15,000 above the list price. The five-bedroom, two-bath house, built in 1994, boasts a swimming pool and grassy front and backyards.
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many homes over the last month that they are significantly distorting the market dynamics. These homes are mostly going to be re-marketed shortly, so they will almost certainly increase supply over the coming weeks.” Cromford noted, “iBuyers have made offers well in excess of the pricing that we saw from them” in the first half of 2021.
He said it is unclear how iBuyers will price their homes once they return them to the market because “normal buyers no longer have the appetite” they showed through June 2021.
“Achieving sale prices well over cost could prove quite tricky” for the iBuyers, it suggested.
Cromford noted that iBuyers purchased about 2,869 homes over the last three months, which “represents almost 9 percent of resale purchases.”
They also have not sold as many as they have bought, though they are selling more to institutional investors, the Cromford Report stated.
Moreover, it noted, the prices paid by iBuyers for homes are 53-75 percent higher than they were paying a year ago, even though the median price of homes sold in the Phoenix Metro region has increased 26 percent.
The iBuyer and investor buying spree has sharply impacted the availability of resale homes, it said.
“We can see that the iBuyers (particularly Opendoor and Zillow) have increased their inventory massively,” the Cromford Report said. “If iBuyers had not done this, we estimate that supply would already be higher by some 1,800 listings…We conclude that pricing would also be weaker without their intervention. This begs the question: what happens if they stop buying on this massive scale?”
“Investors, too, can decide to stop their buying spree at a moment’s notice. The market is therefore more precarious than if demand were primarily growing through owner-occupiers,” it added.
The news is a lot happier for investors that rent – and not so hot for their tenants, judging by the Cromford Report’s findings.
“Investors intending to rent out their properties are a different matter and the rapid rise in rents over the past year has justified them splashing out,” it said. “Indeed, far more homes are going from iBuyers straight to the rental operators than we saw prior to July 2021. This takes homes off the re-sale market for a long time and reduces supply.”
It also noted “large scale investors with deep pockets are crowding out smaller investors.”
“We have seen larger buying sprees from investors before, notably between 2011 and 2013,” it continued. “However we have never seen iBuyers so determined to increase their top line.”
The average rental price per square
Hyper-local info on homes requires an expert
BY SARA GOLDEN
Arizonan Guest Writer
With the advent of commercial flights to outer space, what we have viewed as rapid travel will change exponentially. The term need for speed will take on new meaning. Our definition of normal will be recalibrated. This is in essence what is happening to our housing market. Our previous definition of hot market has gain warp factor speed. Enough about space adventures.
The #1 question we are asked is should I wait to buy a home until prices drop. The term “buyers’ market” seems like a more comfortable place to purchase. While contrary to popular wisdom, purchasing in a sellers’ market is the correct answer.
Purchasing while homes are continuing to increase in value means your new asset will be worth more the day after you close. Purchasing in a buyers’ market of course means the opposite, your home is worth less.
We continue to be in a wildly healthy sellers’ marketplace. As I like to say, ignore the man behind the curtain, or the national news about housing. We must always focus on hyper-local information.
Chandler and the East Valley have been in a robust sellers’ market. Average values have increase in since 2011 roughly 64 percent while in the past 12 months values have increase 30 percent, according to the Cromford Report. Chandler owners have a huge opportunity to capitalize on the growth both short and long term.
So that begs the next question: Do I stay in my home and renovate? Do I sell and make the move that I have always wanted to do? A personal decision.
We expect another 20 percent increase in values overall in the next 12 months. While a broad statement, it is important to have an analysis of your specific neighborhood.
Some areas will have had a very rapid increase in value on the front end, or at the beginning of the market boom, but may slow considerably due to factors that cap value. A few examples are floor plan obsolescence, surroundings such as powerlines, major roads or commercial areas in close proximity.
Hyper-local information takes a trusted advisor to find and disseminate. While we all love the Zestimate, it misses the boat on the details.
Realtor Sara Golden is part of Long Realty Luxury Platinum Premier and Jay Jasper Associates. Reacher her at sara@ jayjasper.us, 480-625-7829 or saragolden.longrealty.com.
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foot has increased from $1 per square foot to $1.36 in the past two years, Cromford said.
“That is a 36 percent increase in just two years and must be a budget problem for tens of thousands of tenants,” it said, noting rents increased by 28 percent in the previous 18-year period.
“The cost of renting has escalated over a very short period,” Cromford said. “The housing bubble of 2004-2008 saw little to no rise in rents and in fact the low point was 64 cents in February 2005, just as the for-sale market was reaching its highest frenzy. This time is very different, showing that the rapid appreciation in home values is due to real shortage of housing rather than speculative activity based on easy money.”
However, Cromford also noted that all housing costs are soaring in the Valley.
“Although the cost of renting has jumped 36 percent over two years, the average home price per square foot has increased by far more – from $169.26 to $262.21, a jump of 55 percent,” it said.
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