Inventory, interest rates and the million-dollar home shape Scottsdale housing
By Terrance Thornton | Digital Free Press
If one had to put a characterization to the single-family housing market of the Phoenix metropolitan area part of Maricopa County is — to a slight degree, experts say — in favor of those looking to sell brick-and-mortar.
Two trends have emerged real estate experts who spoke with the Arizona Digital Free Press say: The first is homes in the million-dollar space are the fastest segment of homes sold in Maricopa County meanwhile concession negotiations determine final sale prices for more modestly priced properties.
According to the Cromford Report, price points between $250K and $800K in Maricopa County are showing 40-57% of sales involving seller-paid concessions, and the median concession is $9,000, according to officials at Realty One North Scottsdale.
“Even though we may have seen a decline of buyers getting loans due to the higher interest rates, we continue to see cash buyers buying properties, even in the million-dollar market, which happens to be one of the fastest selling price points,” said Kathy Laswick, managing broker, Realty One Group North Scottsdale.
“Arizona itself has grown by 15% in the last five years. We are seeing an influx of folks migrating from highly taxed states like California, people are selling at a much higher price point and coming to Arizona cash in hand finding ‘deals’ compared to where they were previously living. Due to our warmer climate, we also continue to see a rapid increase of people who are selling all of their assets from other states and retiring here in Arizona, also paying cash.”
On May 3, Howard Schneider and Ann Saphir at the Reuters news service reported the Federal Reserve raised its interest rate by a quarter of a percentage point to the 5% to 5.25% range, which had been anticipated by financial experts and American Realtors alike.
Ms. Laswick points out the data suggests meaningful economic trends of note in the Phoenix metropolitan single-family housing market.
“What makes Arizona a unique and resilient economy in terms of the single-family housing market is that low inventory, paired with cash buyers, and limited distressed sales has stabilized pricing in most areas of the Valley,” she said. “According to Forbes, about 30% of single-family homes are being bought with cash. This percentage has been consistent for more than five years, this is pretty substantial.”
From a data perspective it is more likely for a seller to see a return on the sale about 5% lower than just a few years ago, Ms. Laswick says.
“Many sellers are under the wrongful impression that they are going to sell for late 2021 and early 2022 prices,” she said. “While the market is showing signs of improvement, average home values are still 5-6% lower than they were in the height of the boom. From the Realty One Group North Scottsdale office, most of these clients are not first-time homebuyers.”
Although there are not too many first-time homebuyers shopping in Scottsdale ZIP codes, Ms. Laswick says, local Realtors ought to be prepared for an influx of them over the next decade.
“What I will say is we are about to have a huge influx of first-time homebuyers in the next 10 years with xennials especially if rents remain high,” she pointed out.
“Regardless of area, the primary reason for consumer mobility remains fairly constant: clients have a life-changing situation but right now people are slower to move because inventory/supply is low and interest rates are higher than they have been in years. Sellers are worried that they won’t find another home to replace their current one, and if they do, how much more will their monthly payment be? All that being said, we are still seeing 7,000+ homes selling each month, and I suspect we will see a continuous influx of first-time homebuyers within the next 10 years, especially if rents remain high.”
An anecdotal word on Scottsdale housing
The Digital Free Press spoke with two Scottsdale real estate agents: one a successful veteran of the industry and the other a new member of the sales guild.
“When advising sellers it is very important to set expectations early on,” said Michael Wills, who holds his license with HomeSmart, the largest broker in the American southwest, where he is a perennial ‘Diamond Club’ member.
“We went through a very long period where sellers were incredibly spoiled. Sellers knew their home would sell immediately and that they were in complete control. The last 12-15 months has been a very difficult adjustment period for some sellers. While it is still a strong market, it is much more balanced.”
Mr. Wills has been selling Arizona real estate for 20 years, is a Scottsdale native and community steward and provides the community he calls ‘home’ represents a community many want to live.
“Pricing is more important than ever right now,” he said. “If a home is priced too high, it will absolutely start piling up days on market. Year over year the Phoenix market has seen about 9% price drop in sales prices, sellers need to understand that when pricing their home. They also need to understand the importance of truly having their house ready for the market.”
Mr. Wills says the recent fire sales experienced in pockets throughout Maricopa County are over.
“Good homes that are priced right still sell quickly so they will need to put forward a strong offer if they want the home. The rapid increase in mortgage rates has really created sticker shock for buyers,” he said. “We have a whole generation of buyer’s that have never seen rates over 4% but historically, rates are still low.”
Lauren Strait, an agent at Realty One Group North Scottsdale, points out interest rates today are remain historically low compared to the double-digit figures of the 1980s and early 1990s.
“The U.S. has seen much higher rates in the past, in fact we saw double digits in the early ‘80s and ‘90s,” she said. “There are also a lot of programs available to sellers and buyers through lenders that helps to offset these higher rates as well. I recently met with a lender who is offering free refinancing options for buyers if they choose them.”
Ms. Strait offers affordable inventory remains a stark concern of the Maricopa County single-family housing ecosystem.
“The key we are seeing right now that differs from other states is the low inventory of single-family homes,” she said. “For example, today in Phoenix, there are only about 1,200 homes available for sale on the market, with almost 300 of them listed for over $1 million.”
‘Shapiro’s Law of Sunshine’ in Scottsdale housing market persists
If there is one truth Gary Shapiro, principal at Shapiro Realtors, believes when it comes to selling Arizona real estate: all seasons of weather are better in Scottsdale — even the hot ones.
Mr. Shapiro, who has been selling real estate and advising clients for more than 50 years, says he wants to re-define customer service in the local real estate arena. After all, the foundation of any business, he reminds, is about interpersonal relationships.
“Our market has always been driven by what I refer to as ‘Shapiro’s Law of Sunshine,’” he said. “As long as we have blue skies and palm trees billowing in the breeze, people will want to move here to escape frigid winters, flooding, hurricanes, tornados, and other natural disasters.”
Mr. Shapiro offers as interest rates are destined to continue the manufactured increase fueled at the Federal Reserve now is the time to get into the real estate market of Maricopa County.
“I’m advising sellers this is a good time to sell, provided there is a genuine need to sell, and they have identified their next home. Prices are strong and demand is high depending on what they own, its location and condition,” he said. “I’m advising buyers this is a good time to buy. It has rarely paid off to wait for better interest rates or possible future declines in values. They are better off to seize the opportunity to acquire their dream home now.”
Mr. Shapiro reminds the brand of Scottsdale is a coveted place to live, work and play known the world over.
“Scottsdale has always been a highly sought after address and destination. It has a famous worldwide reputation as a great place to live, work, learn and play,” he said. “You can go almost anywhere and just say you live in Scottsdale and people will know about it and be jealous.”