Fueled by the news that there were more detached homes sold in Maricopa County last month than in any month since October 2005 and watching homes that clients coming into town this weekend disappear off the market in a hurry, I made the observation that this feels like 2005.
In reality, this surge we’re seeing in the Phoenix real estate market isn’t all that much like 2005 outside of the relatively short life of many listings and the presence of multiple offers on many properties.
Going back four years, a listing agent putting a new home on the market would run the comparable sales and then attach a sales price a certain percentage higher than the last sale in a neighborhood (the actual figure mattered less than the practice.)
Appraisals were not an issue because both seller and listing agent knew the home wasn’t going to appraise for the sales price. And it didn’t matter, because buyers would willingly and readily (if not happily) waive the appraisal contingencies built into the contract in order to get their hands on a house.
Fast forward to today and it’s not unusual to see multiple offers placed on a home as soon as it’s put on the market – generally speaking this happens only with bank owned homes but also can happen for extremely well priced owner-occupied properties. But the pricing methodology that’s leading to those offers has changed.
Again, this is more prevalent with bank owned homes but can apply to any property where the seller wants out yesterday. The listing agent runs the comparable sales as he or she did back in the day but now prices the home a certain percentage below the last sales in the same neighborhood in hopes of spurring a bidding war that will carry the final sales price above the last sales in the neighborhood.
The trouble for many would-be buyers is they’re missing the signs. They’re not looking at the comps. They’re not looking at the thinning inventory and shortening time on market. They’re seeing the price tag but missing the blue light special announcement over the store intercom.
Today I talked to a fellow agent who has a buyer wanting to look at bank owned homes for sale in the $230,000 to $240,000 range. Which is well and good, except the buyer only has $180,000 to spend. For this buyer to get these homes, the banks would have to be willing to accept around 15 to 20% below list price.
Keep in mind that before this recent spike, bank owned homes were settling out at an average of 95% of list price. I’ve not run the March numbers as of yet (it’s on the to do list) but my hunch is that figure is creeping up. In other locales, such as sunny San Diego, the final sales price has on average been higher than the list price.
The market’s definitely changed over the past few weeks. Opportunities still abound for those who are realistic about where the market stands because prices haven’t started to rebound signifnicantly.
So is this 2005 all over again? Not really. Hopefully we won’t see that type of insanity again anytime soon, if ever.
But I’ll tell ya … this also isn’t 2007 or 2008.[tags]Phoenix real estate[/tags]