Navigating the Arizona Real Estate Market Today
We are in unprecedented times and are seeing changes day to day in all areas of life and the Arizona Real Estate Market is no different. I understand the fears that many are having at this time and with any great change it can be expected. Fear is a normal and healthy part of change, panic is not. At this time, I am choosing to harness this adversity and to fluidly adjust our team and operations to meet the demands of our current environment. You will not see us panicking. Instead our motto is hold fast, adjust the sails, and stick with the facts. Which is precisely what is detailed out for you below.
Please note that our Arizona Real Estate market is unique in many ways. If you live in another state please consult with your local real estate expert. If you have any questions you can always reach me on my cell at 480-266-7656 or at lindsay@vistagroup.us. I am so grateful to be on this wild adventure with you and I am here to support you in any way I can during this challenging time.
Showings
Pre-Qualification/Proof of Funds is Now Required
If you do not have your proof of funds documentation ready, or a pre-qualification form from the lender, we cannot show you any properties. Please work with your lender to get what you need. If you are just curious or starting your search, now is a good time to pause and stick to the online virtual tours available.
PPE Required & Limited # of People Allowed
To limit exposure and to maintain safe practices, our team is following the guidelines set forth while meeting with clients in person or showing homes. We ask that you bring your own personal face mask and sanitizer and wear the face mask when walking through properties, including vacant properties.
When we enter a listing that is occupied you will see individual packages set aside for each listing appointment. They will have the time for the appointment and will contain gloves and booties. If the seller has put this out (which I have seen at 100% of my showings over the past week), it is required and not optional. If the seller has not left out the package I will be asking you to enter the house, remove your shoes, and immediately wash your hands. I will also be carrying Clorox wipes to wipe down switches and door knobs before anything is touched within the house.
If you are experience any illness symptoms such as fever, sore throat, headache, chills- I ask that you refrain from conducting any showings in person until you are symptom free for 48 hours. Instead you may opt for a virtual showing. There is a maximum of 2 people allowed in addition to the real estate agent for ALL showings. This is not optional. We are also not taking children under the age of 18 along for showings. If you have children, we ask that you leave them with a caregiver.
Inventory
Last year seemed stressful enough for buyers with less than a month of inventory in some parts of the Valley, but just when you think you’ve seen everything- think again. Listings are down 52% from last year at this time and prices are up 11% from last year! What that means to you is that instead of having 5 homes to choose from that closely match your criteria, you may have 1 home that matches your criteria. There may be some things you have to sacrifice in the property to get the location you want. For example if you want to live in a certain zip code but have a very restricted price, you may have to go for the house that needs some work or change the zip code. I understand how stressful finding the perfect home may be and will be doing my best to assist you with finding it however we also ask for you to keep an open mind and be patient since a limited inventory can lengthen a home search.
The Phoenix area market is also experiencing a “frenzy” state in many parts of Maricopa County which means that for every 100 homes that hit the market 200 are going under contract. Homes that have been sitting for a while that needed some work are starting to sell, the perfect turnkey home will sell quickly and with multiple offers. This is not the time for low balling, getting a deal, or asking for the seller to pay your closing costs unless you are prepared to go over asking price. The market has “slowed down” a little but is still considered frenzy. For example 3 weeks ago we had 300 homes that were going under contract for every 100 new listings. The slow down you are seeing is the Phoenix market coming back into a normal frenzy. Even if we continue to see a slow down, you will see a healthy neutral market but to some it may seem as if our market is crashing. Rest assured, this is not the case. We are just calming down a bit from the craziness that we have become accustomed to over the last year. Don’t let multiple offers scare you either. We have many strategies for winning the bid in a multiple offer situation and will discuss these with you at the time.
If you have considered selling your home, now is certainly a good time to sell since there is very low competition and the prices are still continuing to grow. Even if growth slows from the 11% we saw last year to 3% in a healthy market- you will be gaining equity in your home.
Lending
Many of our lending partners have been feeing the pain and pressure of this market from an abundance of refinances, to volatility in the rates, to federal decisions that impact their overall operations. If you thought lending practices had drastically changed from 2005, then you’re in for an even greater awakening.
In the past week many lenders have changed their minimum qualification requirements. We are seeing a minimum FICO score of 680-700, debt to income ratios between 40-43%, and Loan to Value Rates drop down to 80% in some cases. The lower down payments have gone away for now and only the highest credit ratings can get a loan. We have seen these changes across all loan types. For more information we recommend you speak to the lender you are working with.
If you are purchasing a 2nd home, you will likely need to seek a private lender or pay in cash, as many of the major banks have also limited lending on 2nd homes.
Rates are still historically low though, so if you can get qualified you will be a able to afford more house than you could if rates were higher.
If you are a seller, this may mean that you will have less showings and that it may take a little longer to get an offer on a property but the good news is that you can be assured if they have a pre-qualification form, they are a strong buyer.
Virtual Services
For years, I have had the amazing ability to work with clients all across the globe. I’ve had buyers in China, in unknown locations while on active duty with the military, or living elsewhere within our country and have not been able to conduct business in person. Having built our virtual platform in the past, we are able to smoothly adjust to today’s changing environment.
Sellers – All documents will be sent to you digitally to sign. Keys to the property can me mailed to us at our Ahwatukee office. Photo packages still include professional photo’s, 3D virtual tours, matter port tours (where people can measure room sizes), and drone footage where allowed. At closing, the title company will send a mobile notary to your home wherever you may live within the continental US And its territories. Outside of the U.S. the forms for you to sign will be sent to the U.S, Embassy within that country. We will discuss the showing guidelines with you to make sure you are comfortable with the process and feel safe and protected with people coming into your home. All showings will require proof of funds or a pre-qualification form and the agent will need a special code from us to access the key box. Our handyman is still available and working with clients to meet their needs for any repairs that need to get done prior to the listing going active, or after the repair negotiations have taken place.
Buyers – All documents will be sent to you digitally to sign. If you are out of state or do not want to be present for showings, we do virtual showings where we will take videos or Zoom/Facetime with you while walking a property. That gives you the ability to be present without physically being present. If you choose to come for showings we ask that you follow the guidelines set forth above. Home inspection walk through’s are no longer being done with buyers present. The inspection company will send the report complete with pictures and will do a phone consultation with you and us after the inspections are completed. Appraisal’s have also changed in certain price points and many are doing a “drive buy” appraisal.
When you sign the documents for title, the title company will provide instructions. Each company has a different process but so far all of them restrict it to only the people listed on the purchase contract that can be present. I will be available via phone/Facetime/Zoom for questions. Final walk through’s will be conducted virtually and we will leave a key box on the property with your new set of keys. Once the property records aka closes, we will give you the code to the key box. Our other services such as moving concierge and interior design consultation have not changed.
Investment Portfolios
Rental demand is still incredibly high and inventory limited. Rental rates are still continuing to climb and an average of 200 people a day are moving into the valley as of April 1st. Despite the pandemic, the valley is continuing to grow. Job losses are unfortunately impacting some sectors yet we are seeing new jobs being added from other sectors. Moving from short term rentals to long term rentals is a shift we have seen over the past 30 days. Even with a more significant slow down or shift, the Phoenix Market has operated well above a neutral market for several years and that slow down or shift will see it coming back into balance, creating a healthier Real Estate Market. It is unlikely that Phoenix will see a “crash” in the market since the crash from the early 2000’s was caused by bad lending practices and fraudulent loans. With conservative lending practices, you can expect that your portfolio will be able to bear the storm.
We also need to prepare you for a shift in expectations. We have become accustomed to CAP rates and ROI rates that were very high in the past few years. In the coming months and years you may need to shift your perspective into what the healthy returns will look like in a neutral market. If you were used to 12-18% CAP Rates you may see a 3-6% CAP rate. Shifting expectations to account for conservative yet realistic growth will be important. Even with those that weathered the earlier crash, they have seen significant gains in their properties since that time. Do not let the current state of affairs scare you, roll with it and you will come out the other side just fine.
If you are in stressed financial state and need to sell your inventory, now is the time to sell and take the equity out. If you have questions on taxes or 1031 exchanges we ask you to speak with your lawyer or tax advisory before you sign any listing documents. If you are considering growing your portfolio, private lending, 1031 Exchange, or cash will be the route to take until the lenders loosen up their stringent requirements. As always, it is a pleasure serving you. I am receiving market data daily and will be keeping you informed.
If you have questions please don’t hesitate to reach out. Wishing you good health and prosperity, Lindsay
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