February 18, 2014

Sellers Should Be Prepared For Cuts In Asking Price

KLAS TV reports from Nevada. “One of the biggest complaints homebuyers have had about the real estate market is they can’t compete with investors who are buying up property with cash. But now, ordinary buyers have a chance to finally close the deal without the fear of investors beating them out. It’s a special program by Fannie Mae only being offered in 27 states, including Nevada. A homebuyer can get 3.5 percent off toward the closing costs and no investors are allowed to bid on the home. ‘This is a great bonus for a buyer who’s looking for a property because they’re basically giving away free money,’ said Nick Nolf, a broker/salesman with the Nolf Group.”

“‘What happens a lot of times, we’ve seen in the past, we have investors that come in and overpay. Let’s say the property is listed at $150,000. They’ll pay $10,000 or $20,000 more for the property, and they’ll pay cash,’ said Noah Herrera, president-elect of the Greater Las Vegas Association of Realtors.”

The Arizona Daily Sun. “A state Senate bill aimed at disallowing city and county energy efficiency standards for new buildings is drawing the ire of astronomers and dark sky advocates. State Sen. Chester Crandell, R-Heber, says he proposed the bill because he thinks that city and county energy requirements are pushing up the cost of new homes. Flagstaff City Councilmember Coral Evans rejected Crandell’s argument that cities are driving up the cost of homes. She said that city, county and the state have waived fees, offered incentives and still watched the price of houses climb. Ultimately, she said, the market sets the cost of a new home. ”

“As long as people are able and willing to pay Aspen, Colo., prices in Flagstaff, there will be an affordable housing crisis, Evans added. ‘To place the blame of the cost of housing here in the city of Flagstaff solely on the shoulders of the city government is truly misleading,’ she said. ‘I think that we need to look at the issue of affordable housing in a historical context to understand why the cost of housing is as it is.’”

KTAR in Arizona. “The Valley’s housing market is changing and so far, it’s not for the better. A new report from the W.P. Carey School of Business at Arizona State University revealed that sales of single family homes dropped 17 percent from December 2012 to the same month in 2013. The news was worse for homes priced under $150,000. Sales of homes in that price range dropped nearly 50 percent during the same time period.”

“‘Buyers are starting to lose enthusiasm,’ said Michael Orr, director of the ASU Center for Real Estate Theory. ‘There are not so many bargains out there for investors. Generally speaking, most areas are seeing more sellers than buyers right now.’”

ABC 15 in Arizona. “According to the ASU report, the percentage of residential properties purchased by investors decreased to 19.3 percent in December, down from a peak 39.7 percent in the summer of 2012. ‘Overall, buyers are enjoying less competition in bids for homes, but sellers should be prepared for possible cuts in asking price,’ said the report’s author, Mike Orr.”

“‘We’re seeing growing evidence the housing slowdown is also being experienced in other parts of the country, including Southern California, Orr said. ‘If current conditions persist in the Phoenix area for several months, downward pressure on pricing will become hard to resist.’”

AZ Family in Arizona. “Investors seem to be losing interest in the Phoenix market, according to Orr’s report, opting instead for better deals to be had in other parts of the country. That waning interest from investors is not new. ‘Demand has been weakening since July, especially demand from investors,’ the report reads. ‘Although December recovered from the very weak level in November, we are still seeing a big drop in demand compared with the last two years.’”

“Looking at all the factors, Orr says the Phoenix housing market has officially hit a slowdown. While prices might not indicate a slowdown right now, the report points out that pricing is a trailing indicator, which means it might take prices several months to reflect what’s happening in the market. According to Orr, the biggest indicator is the ’steep fall in demand’ not just by investors, but by traditional owner-occupiers, as well, particularly at the lower end of the market.”

“‘We are seeing a big drop in demand compared with the last two years, and there are ominous indications of a softening market when we dig deep into the numbers,’ says Orr.”

The Phoenix Business Journal in Arizona. “If the current cooling trend that started in July continues for much longer, 2014 could easily see average and median home prices move a little lower than they were at the end of 2013,’ Michael Orr, the report’s author and housing expert, said in the report.”

“Household formation is also working against the market. Orr pointed out the nation had negative household formation last year for 205,000 homes, according to the U.S. Census Bureau. ‘A larger portion of the population is simply choosing to rent, instead of buy,’ Orr said. ‘That includes much of the millennial generation and those who lost their homes to foreclosure or short sale. They either prefer the rental lifestyle, don’t feel that secure in their jobs, or don’t have the credit history or down payment needed for a purchase.’”

“Orr noted that the Phoenix luxury market — homes priced above $500,000 — is the only sector that hasn’t seen this slowdown. Patrick Jones, past chairman of the Scottsdale Area Association of Realtors, said Orr’s analysis of the luxury market is the only aspect of the report he disagrees with, at least in the North Scottsdale/Cave Creek/Carefree area in which he mostly works and where many individuals own second homes.”

“‘I think the luxury market’s struggling too,’ he said. ‘You can talk to any Realtor in that area. The luxury market is not as hot as that report says.’”

“Jones described his area of the market right now as a direct contradiction to Economics 101: prices continue climbing as demand is falling. He thinks part of the reason is because sellers operate on what they read in the news, which is always based on data that’s one or two months old. Buyers, on the other hand, know what’s going on in real time because they’re out there every day, he said.”

Bits Bucket for February 18, 2014

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