redfin's free market trends class - phoenix
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Slide 1 of 72
What the Sell? Phoenix Real Estate Trends
May 16, 2013 Tempe, AZ
Follow: @RedfinPhoenixLike: http://www.facebook.com/RedfinPhoenix
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Agenda● A little bit about Redfin● National Trends● Local Trends● 2013 Predictions● Buyer relevant trends● Financing tends● Seller relevant trends● Redfin resources
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7 Most Common Questions1. How fast are homes selling?2. How much will the seller come down on the price?3. Why are the REO’s listed so high?4. Where are short sales?5. Where are prices headed?6. Is this a buyers market or sellers?7. Are new homes a good deal?
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A Little Bit About Who We Are● Redfin is a real estate brokerage that has helped over 20,000
people buy or sell a home; 97% would refer us to a friend.
● Customers, not commissions● Informed decisions● The right home for the right price
● No obligation● Get back a portion of our commission
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National Market Trends
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National Market TrendsThe key metrics across Redfin’s markets:
● Home sales rose 25% from February, but were barely up from 2012, rising just 0.9% year-over-year, the smallest gain in 14 months.
● The number of homes for sale declined 31% from March 2012 to March 2013 (a slight improvement over the 32% drop in February), and were flat month over month.
● Home prices in March increased 15% year over year, and rose 6% just since February.
● The percentage of listings that were under contract within 14 days of their debut inched up yet again from 33.2% in February to 34.8% in March, the highest point on record.
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National Market Trends
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Yesterday’s prices were a historic joke.
...and not a very funny one.
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0.00
50.00
100.00
150.00
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Phoenix 20-City Composite
Case-Shiller: Phoenix Area v. 20-City
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Case-Shiller – By the Numbers Phoenix AreaUp 23.0% year-over-yearPeak was July 2006Down 43.7% from peakCurrently at May 2004 prices
20-City CompositeUp 9..3% year-over-yearPeak was July 2006Down 29.0% from peakCurrently at September 2003 prices
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Local Trends
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Local Trends – Recent and Current● 2012 Prices increased 15-47%● Inventory increased 20% from Mar12-Mar13● New home sales and prices increased● Inventory type has changed (REO & SS vs. Trad.)● Interest rates stayed low in 2012● Bidding wars● Homes sold quickly – 43% sold in under 2 weeks● Rental prices increased● Short sales are a bigger mess● New agents and returning agents● New lenders and returning lenders
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0%
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15%
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Paradise Valley
Fountain Hills
Peoria Cave Creek
Scottsdale Chandler Gilbert Tempe Mesa Glendale Avondale Phoenix
Median Sold $/sqft Year over Year
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‐
10,000
20,000
30,000
40,000
50,000
60,000
70,000 Jan‐03
May‐…
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Number of Active Listings
# of Active Listings
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17,000
18,000
19,000
20,000
21,000
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24,000
Number of Active Listings12 Months
# of Active Listings
Media Says: 1% Drop in Inventory from Mar12 to Mar13
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2,000
4,000
6,000
8,000
10,000
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Active Listings vs. UCB – The Real Count
Actives UCBReality: 20% INCREASE in Inventory from
Mar12 to Mar13
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Months of Supply
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Queens County Nassau County Suffolk County
Months
Supply of Inventory
2011 2012
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$‐
$20
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$140 Sep‐10
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1Au
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Avg $/sqft for 3 Bedroom HomesBy Listing Type
Traditional
Lender Owned
Short Sale
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-10%
0%
10%
20%
30%
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50%
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70%
How are Home Buyers Paying for Homes?Cash vs Conv. vs FHA
CASH FHA Conv
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Multiple Offers
of homes sold Jan. – Apr. in Phoenix
were ALL-CASH deals
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Multiple Offers
of Redfin offers faced competition(October 2012 – April 2013 Phoenix)
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Homes for Sale by Listing TypeShort Sales, 5%
Lender Owned, 7%
Traditional, 88%
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0%
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20%
30%
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50%
60%
70%
80%
90%Jan‐08
Mar‐08
May‐…
Jul‐0
8Sep‐08
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9Sep‐09
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0Sep‐10
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Single Family Home Sales % of Total by Type 2008‐2013Entire Phoenix Valley Source: ARMLS
TraditionalLender OwnedShort Sales
Oh &*$Where is
this going? Comfortable Chaos Recovery
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What’s Coming in 2013?● Smaller increase in values (5-7%)
►Scottsdale 4%►Gilbert 8% ►Phoenix 12%
● Increased interest rates● Fewer FHA loans and fewer cash buyers● Different type of bidding wars, its not about the money this time● Home inspections will be the new deal killer● Pre and post possessions more common● New Agents = Chaos● Short Sales less desirable● Lender Owned homes, more time to dabble
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Lender Owned (REO’s)What are they up to?
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-4%
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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
Lender Owned Price DropsDrop From Original List Price
Drop from Final List Price (negotiations)
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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
Lender OwnedAverage Days on Market
Average Days on Market
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25%
Chance an Lender Owned will sell for above or below list price
% of total
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REO Take Aways● There are fewer REOs selling ● REOs are being listed much higher than the market value. ● At the same time, banks are still tight on negotiations. Just
because they over priced the home doesn't mean they will come down that much more during negotiations.
● You can make an offer and roll the dice the appraisal will drop the value, but its not a wise decision
● Mysterious multiple offers after 30+ Days on the Market
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Traditional Sales
Are they over priced?How much will the Sellers come down?
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Traditional Sales● Two Types
►Flipped►Owner Owned
● Priced comparably● Priced at the top of the market● Tough on negotiations● 19% sell in the first two weeks● 43% sell in the first 30 days● Multiple offers during 1st week on the market
►Unlikely after the 1st week
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0.0%
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1-7 8-14 15-21 22-29 30-44 45-59 60-89 90-119 120-149 150-180 180-364 365+
Days on Market vs Price DropsAvg of Total Price Drop
Avg Price Drop Before Accepted Contract
Avg Price Drop During Negotiations
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1-7 8-14 15-21 22-29 30-44 45-59 60-89 90-119 120-149 150-180 180-364 365+
% of Sales Compared to Days on Market
% of Sales43% of Homes Sell in the first
30 days
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DOM vs. Price Drop Takeaways1. Sellers rarely come down more than 3% during negotiations unless
the home has been on the market longer than 60 days
2. Homes on the market 60-365 days only come down and average of 4% during negotiations.
3. If a home is over priced by more than 10% when it hits the market, it most likely won't sell. On average, homes on the market for 6 months before accepting a contract only come down an average of 9.4% (includes price drops and negotiations).
4. Bottom line, if you want the seller to come down more than 3% when negotiations start, the seller most likely won't accept your offer. Save yourself the time and find another home.
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Changes in the New Construction Industry
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What’s New with New Homes?● Technology● Green building
►HERS index (Energy Star)►SRP Powerwise►Solar panels►CFL lightbulbs► 14-SEER HVAC► Low-E glass►Spray foam insulation
● Is it effective for the owner?► Est. Annual Savings: $1,000+ ►Caution with solar
● Is it cost effective for the builder?
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Construction Boom● Cause and Effect of New Construction Boom
►Prices increases: 34% in 12 months► Increased sales: 85% in 12 months►Build time takes longer►Quality becomes a concern►Material shortage► Labor shortage► Lotteries► Tough Negotiations
● Why?►Shortage of resale homes►Recent resale price increases
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Top 5 Builders in Sales1. Pulte Homes2. D.R. Horton3. Meritage Homes4. Shea Homes5. Blandford Homes
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Buyer Trends
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Buyer Trends● Multiple offers, do they still exist?● How to present a strong offer
►Minimal added verbiage►Make it easy to determine the net price►30 Day closing►DocuSign►Fast turn arounds with paperwork►Use a local lender
● Investor competition►Does it exist?
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Buyer Trends Cont.● Who are the new sellers
►What are they thinking►Why are they so firm on the price
● Pre/Post possession and lease backs►What to consider
● Home inspections ►The new deal killer►Second round of negotiations
● Inspection Negotiations►You can only ask for repairs, not concessions►Only ask for work you would do if you were in their shoes
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Financing Trends
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Financing trends● Rules, Rules, Rules● Mortgage Lending in America● Fannie, Freddie, HUH?● Bye Bye FHA● USDA● VA● Condo Life, How hard is it to achieve● Private vs Government – MAIN EVENT! ● Rates● Questions
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Who makes the lending rules● Government Oversight
● Wall Street
● Servicer Companies
● Warehouse Lines
● Lenders
● Etc, etc, etc
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Who makes the lending rules● Government Oversight
► Dodd/Frank -The Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111–203, H.R. 4173) was signed into federal law by President Barack Obamaon July 21, 2010.[1] Passed as a response to the late-2000s recession, it brought the most significant changes to financial regulation in the United States since the regulatory reform that followed the Great Depression.[2][3][4]
It made changes in the American financial regulatory environment that affect all federal financial regulatory agencies and almost every part of the nation's financial services industry
*Dodd/Frank: http://en.wikipedia.org/wiki/Law_of_the_United_States#Federal_law
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Who makes the lending rules►MDIA – Federal Reserve ►RESPA - Effective July 21, 2011, the Real Estate
Settlement Procedures Act (RESPA) will be administered and enforced by the Consumer Financial Protection Bureau
►TILA / Reg Z - FDIC ►ECOA / Reg B – FTC / CFPB ►HOEPA ► Higher-Priced Loans
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Who makes the lending rules● Wall Street
►Mortgage Backed Securities
● Loan Servicers
● Warehouse Lines
● Lending Companies
TREND: Probably see more government oversight and regulation of mortgage activities. This is a balancing act by the government, Keep restrictions strong enough to protect consumers but lose enough to allow for economic growth.
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Lending in America
• Depository Bank
• Mortgage Bank / Correspondent Lender
• Mortgage Broker
• Private Money
• Wall Street / Hedge Funds
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Lending in America – Depository Banks● Wells Fargo, Chase, US Bank, Bank of America
● Credit Unions
● Employ Loan Officer’s, Underwriters, Processors, Compliance, etc
● Heavy compliance – CFPB, Basel III, SEC, etc etc
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Lending in America – Mortgage Bank● Peoples Mortgage / Correspondent Lender
►Employs Loan Officer, Underwriter, Processor, Compliance
● Warehouse Line
● Buyers of mortgages – Depository Banks, Hedge Funds, Wall Street
● Different Guidelines (and Same)
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Lending in America – Mortgage Broker● Middelman
● Brunt of mortgage meltdown blame
● Strict guidelines
● Discloses Fees Differently
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Lending in America – Other● Private Money
● Hedge Funds
● Wall Street Companies
TREND: As we see the market tighten with guidelines the goal of the government is to get private money back into buying mortgage. They may buy from depository banks, mortgage banks, and mortgage brokers
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Fannie Mae and Freddie Mac● Fannie Mae - http://www.fanniemae.com/portal/about-
us/company-overview/about-fm.html
● Freddie Mac -http://www.freddiemac.com/corporate/company_profile/
● Prior to 2008 they were private companies with implicate backing by federal government.
● Post 2008 became a GSE (Government Sponsored Enterprise)
TREND: We may see these two entities merge and become one. Government is trying to reduce their role in the housing market
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Bye Bye FHA ● HUD – US Department of Housing and Urban Development
►http://portal.hud.gov/hudportal/HUD?src=/about/hud_history
● FHA loans (GSE)
● Cost has risen drastically►Was .55% ►Now 1.25%►Going to 1.35%
TREND: HUD/FHA continue to raise the cost of ensuring a FHA Loan. Great rates but high mortgage insurance. Will probably see a shift to 5% down conventional loans.
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USDA and VA ● USDA?
►United States Department of Agriculture
• Rural Areas
• Special programs
TREND: We don’t see a lot of changes with VA programs. USDA continues to have changes and oversight.
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Condo Life● Special Restrictions
● Condo Questionnaire / Certs►https://www.condocerts.com/
● Typically lower priced
● Property Flips can be a problem
● Must be on FHA Condo Approved List
TREND: Will probably continue to see GSE’s back away and wait for private capital to come back into the market before we see losing of guidelines
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Private vs. Government● We’ve seen continued pressure to entice private money back
to the market
● Probably won’t see any real movement until rates rise.
● Any economic slow down may keep this from happening soon.
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18.45%
0%
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20%
Apr
-71
Aug
-72
Dec
-73
Apr
-75
Aug
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Dec
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Aug
-80
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Apr
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Aug
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-07
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-11
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Interest Rates 1971 - Today30 Yr Fixed Source: Freddie Mac
Interest Rate
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3.00%
3.20%
3.40%
3.60%
3.80%
4.00%
4.20%
4.40%
Interest Rates Past 18 months30 Yr Fixed Source: Freddie Mac
Interest Rate
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Seller Trends
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Seller trends● Who is your competition?
►REO’s►Flipped homes►Other home owners more desperate to move
● Who are today’s buyers?►Home buyers► Investors looking for the last good deal
● What are buyers expecting/wanting?►Clean, move-in ready►Used to seeing flipped homes► If its not perfect, they will want some other perk
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4 Important Listing Strategies1. Pricing
►Price it to sell in the first 1-2 weeks►Multiple offers draw in top dollar and fewer negotiations►Strong pricing creates urgency
2. Photos►Realistic, quality photos►Hire a professional►Better photos = more visits = more offers = more money
3. Availability►Make the home easy to see
4. Keep it clean at all times
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Time for a quiz…
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Which home are you more likely to visit?
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Attracting the right buyer● Investors
►Want a good deal►Will flip or rent►Do very little work to the home►Price it accordingly for the type of investment property►Remember, investors can get work done for less
● Home Buyers►Make it move in ready►Neutral pain►Very clean►Easy to show
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Best improvements to make● Normally bad advice, but not today1. Cosmetic repairs
► Paint over past repairs2. Roof touchups
► Fix broken tiles, etc3. AC tune up
► $50-804. Minor landscaping
► Improve curb appeal5. Clean the pool6. Remove signs of distress
► Show pride of ownership7. Simple staging
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Good Staging
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...Not So Good Staging
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Redfin resources
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Redfin resources● Offer insights● Stats pages● Forums
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Thanks for Coming!Please fill out the survey that was handed out at the beginning ofclass. We appreciate the feedback!
Check out our upcoming classes and events at http://www.redfin.com/buy-a-home/classes-and-events