Scottsdale Real Estate Buying & Selling Trends and Tips

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June 20, 2019

Most consumers overestimate what it takes to get a mortgage

Most consumers overestimate what it takes to get a mortgage

Source: Jessica Guerin , Housingwire

Fannie Mae survey reveals widespread lack of mortgage knowledge

When it comes to obtaining a mortgage, the majority of consumers think it requires a higher credit score and larger down payment than is actually necessary, according to a recent survey by Fannie Mae.

Of the 3,647 surveyed consumers, most vastly overestimated the requirements to obtain a mortgage. Specifically, 53% thought a credit score of 650 was required, when many lenders actually allow a score of 580.

And, when asked how much money a borrower is required to put down, 40% said they didn’t know. Of those who did have an idea, they cited 10% as a required minimum, while a number of programs offer as little as 3% down.

Only 23% of respondents were aware of low-down payment programs, up just 1% from three years earlier.

Further, when it came to debt-to-income ratios, consumers were equally confused, with as many as 61% saying they didn’t know – up from 59% three years ago. Of those who did provide a guess, they cited 40% as the required DTI, when many lenders actually approve 50%.

Fannie Mae’s survey also revealed that even those who were preparing to purchase a home in the next few years were only slightly more confident and more knowledgeable than the rest.

“The lack of mortgage qualification understanding is pervasive, even among current homeowners, those who say they are actively planning to purchase a home in the next three years, and those who successfully answered questions testing general financial literacy,” the researchers wrote.

And it appears things have not improved over time.

“Despite increased exposure to credit scores and online resources, consumer understanding about what it takes to qualify for a mortgage has not improved since our original study in 2015, potentially discouraging willing and qualified Americans from taking steps toward homeownership,” the researchers wrote.

The idea that misperceptions about mortgage requirements could hold some back from pursuing homeownership is troubling, and the researchers suggest lenders see this as an impetus to promote education.

“We see an important opportunity for lenders and other mortgage market participants to work toward narrowing this knowledge gap, utilizing more effective mortgage education that is timely, customized, convenient, and simple,” they stated.

 
 
Posted in Buyers
June 20, 2019

Resale price of single-family Valley homes sets barrier-breaking record in May

Resale price of single-family Valley homes sets barrier-breaking record in May

Above: Verrado in Buckeye.REAL ESTATE | 7 Jun | 

For the first time, the single-family resale price of a home in Maricopa County was more than $300,000, ending at $308,000 in May, according to Fletcher R. Wilcox, vice president Grand Canyon Title and author of The Wilcox Report.

Wilcox said the reason for the record sale price is demand fueled by population and job growth.  Maricopa County was the No. 1 county for its population increase in 2018, according to the U.S. Census Bureau.  Companies are moving to Maricopa County to seek employees because of its population growth.  People are moving to Maricopa County because they see companies moving here.  It is a momentum playing off each other, and I see this continuing.  Both people and jobs will continue to fuel the demand to own a home.    

There were 7,562 sales of single-family resales in May.  This is the highest number of sales since June 2011 when there were 7,790.

According to Wilcox’s report:

• The median sale price for a single family resale ended at $308,000 in May 2019.  This is now the new monthly record high for the median sale price.  The month with the previous highest median sale price was March 2019 when it was $297,000.  Before this time, the record month was June 2018 at $295,000 and before that time we have to go all the way back to the pre-real estate recession month of June 2006 when it was $287,500. 

• For the second month in a row, the year-over-year slow-down for sales of single-family resales has ended.  Sales of single-family resales in Maricopa County (Greater Phoenix) in May 2019 were 7,562.  This was 430 more or 5.1% higher than May 2018.  Sales were also higher in April 2019 over April 2018.  Previous to April 2019, sales were down year-over-year for eight consecutive months starting in August 2018.  See Table one.  Another highlight for May 2019 is that 7,562 sales is the highest number of sales for a month since June 2011 when there were 7,790 sales.  But in June 2011 the median purchase price for a single family resale was $126,500 compared to $308,000 in May 2019.      

• New monthly listings of single family resales were up year-over-year in both May and April.  They were down year-over-year in February and March.

• When comparing sales of single-family resales in May 2019 to May 2018 we see a substantial decrease in sales under $200,000.  In this price range, there were 350 fewer sales in May 2019.  A reason for this decrease is that since purchase prices keep going up there are just fewer homes for sale in this price range compared to last year at the same time.  In almost every sale price range at $250,000 or above, we see a year-over-year increase in the number of sales.  There were 721 more sales at $250,000 or above this May over last May.  Sales in the $200,000 to $249,999 price range were almost breakeven, there were seven fewer sales this May compared to last May.  

Posted in Buyers
June 20, 2019

Here are the 5 metro Phoenix areas with the biggest increases in home sales

Here are the 5 metro Phoenix areas with the biggest increases in home sales

Source: , Arizona Republic

Phoenix-area homebuyers flocked north in 2018.

The sprawling north, stretching from Surprise past Scottsdale, includes four of the five ZIP codes with the biggest annual increase in home sales in 2018, according to The Arizona Republic’s Street Scout Home Values.

The Street Scout data comes from The Information Market, owned by the Arizona Regional Multiple Listing Service.

Only areas with at least 50 sales last year were ranked.

Here's a look at each. 

85387: Surprise 

This large north Surprise area saw home sales jump 52 percent to 896 in 2018.

The area bisected by U.S. 60 is home to part of Sun City Grand and several newer communities that aren’t age restricted.

Prices might have helped draw buyers because the 85387 area had a 2 percent drop last year. The area’s median fell to $276,928.

85040: South Phoenix

This neighborhood is hot. Home sales jumped 37 percent in the south Phoenix area that also made the list of ZIP codes with the biggest price increases in 2018

Last year, 661 homes in the affordable 85040 neighborhood changed hands, while home prices shot up 22 percent to $201,000.

The Valley’s median price is $268,000.

Homes priced below $200,000 are selling "like hot cakes" in South Phoenix as both first-time buyers and investors bid on them," said Bettina Franco, a real estate agent with HomeSmart. 

85263: Rio Verde

Rio Verde is a small area tucked between McDowell Mountain Regional Park and the Tonto Forest in the far northeast Valley

In 2018, 320 homes sold in the 85263 area, up 36 percent from 2017.

A community that includes a neighborhood for buyers 55 and older called Trilogy at Verde River opened in Rio Verde in 2018, boosting sales.

The median price for homes in this neighborhood is $516,266.

85083: Northwest Phoenix

Home sales climbed 35 percent to reach 729 during 2018 in this neighborhood, near Interstate 17 and Loop 303.

The Deems Hill Recreation Area is in the middle of the area, where the median price reached $365,000 in 2018. That’s up 7 percent from 2017.

85054: Phoenix’s Desert Ridge area

Home sales were up 29 percent during 2018 in this popular area home to newer houses, apartments, a J.W. Marriott and Desert Ridge Marketplace.

The median home price climbed 13 percent last year to reach $550,000 in the neighborhood bisected by Loop 101.

Land has sold to home builders in the Desert Ridge area for hefty prices in the past year. New home prices could easily climb again this year.

Posted in Buyers
June 20, 2019

5 Phoenix-area neighborhoods that offer the best value for first-time homebuyers and investors/flippers

South Phoenix, close to freeways and the biggest city park in the U.S., didn't begin to rebound from the housing bust until recently. (Photo: Nick Oza/The Republic)

5 Phoenix-area neighborhoods that offer the best value for first-time homebuyers and investors/flippers

Source:AZCentral: , Arizona Republic

Home prices have shot up in metro Phoenix, but deals can still be found if you know where to look.

Finding that Valley neighborhood, block or home that is still a bargain and likely to rise in value sooner rather than later is the end game for most homebuyers, investors and flippers.

People often ask me where I think home values will rise or fall next because I’ve been reporting on home sales and prices since the mid-1990s.

Rising home prices are making it so much tougher for first-time buyers. So this year I am sharing some neighborhoods where houses are priced below $300,000.

A disclaimer: I am not advocating to buy in these areas. Some of the areas come with higher crime rates or other urban issues. But when a friend or source asks me where first-time buyers can still afford houses closer in, here's my answer. 

South Phoenix

I thought this central Valley area close to freeways and the biggest city park in the U.S. would rebound 15 years ago. But the housing boom and bust delayed its comeback until now.

Home sales in the area’s 85040 ZIP code soared 37% last year. Prices in that neighborhood climbed 22% to $201,000 but are still affordable compared with metro Phoenix’s median home price of $268,000.

South Phoenix has golf and gated communities closer to South Mountain in the 85042 ZIP code. But the median price for that area is only $250,000.

A cool new community called Avance on a former golf course, right next to the preserve, opens in May. Prices there are expected to start above $300,000.

Downtown Mesa

The median home price in downtown Mesa’s 85201 ZIP code is $220,000, up 10% from last year. The Evergreen Historic District with homes dating to 1910 can be found here.

Benedictine University has a new campus in downtown Mesa, and Arizona State University is opening one. ASU’s investment in downtown Phoenix helped create a rental housing boom in that area.

Sunnyslope

Light rail, new universities and investment from the Mormon Church are giving this older area a boost. Several new restaurants have opened, and new housing projects are planned.

It’s become a place for people to hang out again.

This often-maligned north Phoenix neighborhood that stretches up and around Seventh Street and Seventh Avenue north of Northern Avenue to North Mountain is starting to see home prices rise and more businesses open.

Its lower-income housing may deter some buyers, while others like the great diversity. It spans the ZIP codes 85020 and 85021 and is one of the most affordable neighborhoods in both.

The median home price in 85021, the more affordable area, is $301,000. But that area also includes parts of the much-pricier north central neighborhood.

Some interesting luxury homes can be found in Sunnyslope around the Phoenix Mountains Preserve.

Melrose Woodlea area

Buyers can find midcentury homes with relatively affordable price tags in several midtown neighborhoods in the 85013 and 85015 ZIP codes.

The Willo, Encanto and Uptown neighborhoods, where prices are much higher, border this area.

“Neighborhoods bordering some of the historic districts are great places to look, too,” said Sherry Rampy, a central Phoenix real-estate agent with with Brokers Hub Realty. “Grandview is one of my favorites, or St. Gregory/Westwood, and there are some hidden gem “no-name” neighborhoods also between Seventh and 15th streets and Osborn and Indian School roads.”

The redevelopment of Park Central Mall and the many new apartments going up in midtown are also giving this area a boost.

The median home price in 85013 is $325,000, but houses that need some work can be found for less. The median price in 85015 is $229,000.

West Phoenix

The 85017 ZIP code is home to growing Grand Canyon University. The school helpedrevitalize the area that had Phoenix’s highest crime rate in 2010.

This west Phoenix neighborhood is drawing investors, who are buying homes and turning them into rentals for students, and flippers, who are redoing the area’s older brick ranch-style houses.

Crime rates have dropped and home values have climbed in this area near Interstate 17. The median home price in the 85017 ZIP code has rebounded 302% from $41,000 after the crash in 2011 to $165,000 in 2018.

Despite the jump, it’s still one of the Valley’s most affordable neighborhoods.

Investors/flippers

These areas are top picks for investors and flippers for the same reasons they draw first-time buyers.

That means first-time buyers will face a lot of competition for the best properties.

But for buyers who don’t want to fix up a house or want to rent in an area before buying, it means more options.

For buyers interested in affordable new homes, check out a list of the least pricey new communities. Most are in metro Phoenix's edge suburbs.

Next week I’ll share top picks for move-up buyers.

 

Posted in Buyers
June 19, 2019

What is Private Mortgage Insurance (PMI)?

What is Private Mortgage Insurance (PMI)?

Whether it is your first time or your fifth, it is always important to know all the facts when it comes to buying a home. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).

What is PMI?

Freddie Mac defines PMI as:

“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.

Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”

As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:

“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.” 

According to the National Association of Realtors, the average down payment for all buyers last year was 13%. For first-time buyers, that number dropped to 7%, while repeat buyers put down 16% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.

Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:What You Need to Know About Private Mortgage Insurance (PMI) | MyKCMThe larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:

“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Bottom Line

If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.

 

Posted in Buyers
June 18, 2019

Why Is So Much Paperwork Required to Get a Mortgage?

Why Is So Much Paperwork Required to Get a Mortgage?

When buying a home today, why is there so much paperwork mandated by the lenders for a mortgage loan application? It seems like they need to know everything about you. 

Furthermore, it requires three separate sources to validate each and every entry on the application form. Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any other time in history.

1. The government has set new guidelines that now demand that the bank proves beyond any doubt that you are indeed capable of paying the mortgage.

During the run-up to the housing crisis, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again.

2. The banks don’t want to be in the real estate business.

Over the last several years, banks were forced to take on the responsibility of liquidating millions of foreclosures and negotiating an additional million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they have to double (maybe even triple) check everything on the application.

However, there is some good news in this situation.

The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a low mortgage interest rate.

The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process, but also paid a higher interest rate (the average 30-year fixed rate mortgage was 8.12% in the 1990s and 6.29% in the 2000s).

If you went to the bank and offered to pay 7% instead of around 4%, they would probably bend over backward to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

Posted in Buyers
June 18, 2019

Time for Your Dream Home, Gen X!

Time for Your Dream Home, Gen X!

During the housing market crash, Gen X homeowners lost more wealth than other generations. However, things are changing now! A strong economy, increasing home prices, and the recovery of the housing market are helping this generation to regain their lost wealth.

According to Pew Research Center,

Their fortunes have rebounded more than those of other generations during the post-recession economic expansion and as home and stock prices have risen. Since 2010, the median net worth of Gen X households has risen 115%. In fact, in 2016, the most recent year with available data, the net worth of a typical Gen X household had surpassed what it was in 2007 ($84,200 vs. $63,400)”.

The same report also mentioned,

15% of Gen X’s homeowners were ‘underwater’ on their homes in 2010 (meaning they owed more than they owned). By 2016 only 3% were underwater.

As a result of homes regaining market value and their increasing net worth, many Gen Xers are presented with the opportunity of selling their current home in order to move up to the house they always dreamed of!

According to the 2019 Home Buyers and Sellers Generational Trends Report by the National Associations of Realtors, in 2018 Gen Xers made up the second largest share of home buyers by generation at 24%.

The report also provided some highlights about their purchase:

  • Greatest share that purchased a multi-generational home (16%).
  • Largest share that purchased a detached single-family home (88%).
  • Highest median household income ($111,100).
  • Bought the most expensive homes of all the generations.
  • Job-related relocation was identified as the primary reason to buy.

But this generation is not only buying- they are selling too!

  • Largest share of home sellers (25%).
  • Highest median household income among sellers ($123,600).
  • Tenure in the previous home was a median of 9 years.
  • House too small was indicated as the primary reason to sell.
  • 91% sold the home using a real estate professional.

Bottom Line

If you are a Gen Xer who would like to know exactly how much your house is worth today so you can move up to the home of your dreams, let’s get together to analyze your current circumstances.

Posted in Buyers
June 6, 2019

Mortgage Rates Slump to 2-Year Low—but Consumers May Not Bite

Mortgage Rates Slump to 2-Year Low—but Consumers May Not Bite

Source:Realtor.com

Rates for home loans slid as investors snatched up bonds in the wake of an intensifying global trade war.

The 30-year fixed-rate mortgage averaged 3.82% in the May 30 week, down from 3.99%, Freddie Mac said Thursday. It was the lowest level since September 2017 for the popular product, and its sixth-straight weekly decline.

The 15-year fixed-rate mortgage averaged 3.28%, down from 3.46%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.52%, down 8 basis points.

Fixed-rate mortgages follow the path of the 10-year U.S. Treasury note. Investors are flocking to bonds as trade war worries wallop markets and the end of the economic cycle appears to be drawing nearer. When bond prices rise, yields fall.

Continue Reading......

Posted in Buyers
May 30, 2019

The Truth about Housing Affordability

The Truth about Housing Affordability

There have been many headlines decrying an “affordability crisis” in the residential real estate market. While it is true that buying a home is less affordable than it had been over the last ten years, we need to understand why and what that means.

On a monthly basis, the National Association of Realtors (NAR), produces a Housing Affordability Index. According to NAR, the index…

“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”

Their methodology states:

“To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”

So, the higher the index, the more affordable it is to purchase a home. Here is a graph of the index going back to 1990:

The Ultimate Truth about Housing Affordability | MyKCM

It is true that the index is lower today than any year from 2009 to 2017. However, we must realize the main reason homes were more affordable. That period of time immediately followed a housing crash and there were large numbers of distressed properties (foreclosures and short sales). Those properties were sold at large discounts.

Today, the index is higher than any year from 1990 to 2008. Based on historic home affordability data, that means homes are more affordable right now than any other time besides the time following the housing crisis.

With mortgage rates remaining low and wages finally increasing, we can see that it is MORE AFFORDABLE to purchase a home today than it was last year!

Bottom Line

With wages increasing, price appreciation moderating, and mortgage rates remaining near all-time lows, purchasing a home is a great move based on historic affordability numbers.

Posted in Buyers
May 29, 2019

2 Things You Need to Know to Properly Price Your Home

2 Things You Need to Know to Properly Price Your Home

In today’s housing market, home prices are increasing at a slower pace (3.7%) than they have over the last eight years (6-7%). However, they are still are above historical norms. Low supply of listed homes and high demand from buyers has pushed prices to rise rapidly.

In the mind of the homeowner, annual home price appreciation over 6% has become the new normal. This becomes a challenge when a homeowner looks to refinance or sell their home, as the expectation of what the homeowner believes the home should be worth does not always line up with the bank’s appraisal.

Every month, the Home Price Perception Index (HPPI) measures the disparity between what a homeowner seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.

Over the last five months, the gap between the homeowner’s opinion and the bank’s appraisal has widened to -0.78%. This is important for homeowners to note, as even a 0.78% difference in appraisal can mean thousands of dollars that a buyer or seller would have to come up with at closing (depending on the price of the home).

The chart below illustrates the changes in home price estimates over the last 12 months.

2 Things You Need to Know to Properly Price Your Home | MyKCM

While the appraisal gap widens, another trend is also becoming more common.

According to realtor.com“the share of homes which had their prices cut increased by 2% compared to last year”. Thirty-seven out of the 50 largest US housing markets saw an increase in overall price reductions.

In today’s market, you need an expert agent who can help price your house right from the start. Homeowners who make the mistake of overpricing their homes will eventually have to drop the price. This leaves buyers wondering if the price drop was caused by something wrong with the house. In reality, nothing is wrong- the price was just too high!

Bottom Line

If you are planning on selling your house in today’s market, let’s get together to set your listing price properly from the start!

Posted in Sellers