I’ve been talking to lots of people lately. Meeting new folks, who are not necessarily in real estate and get their information from the news, mostly.
And, once they find out I’m in real estate, they offer condolences and then start pumping me for information. People do love real estate, and they do love a great story.
My perspective has been that Scottsdale sales have been lagging the rest of the valley because prices have not dropped enough. I also believe that home prices in other parts of the Phoenix metropolitan area have dropped too far. When a property gets 10 offers in a week, or another property sells for 25% over listing price, and agents are begging you to call them if it “falls out”, you get the sense that maybe the bottom of the market (related to pricing) may be close. Maybe not in Scottsdale (or Tempe) yet, but definitely there are signs in other parts of the valley.
One of the other trends that I’m seeing is that “flippers” are back. I made this comment the other day, and the person responded with “They started this problem.” My response was that “they” are filling a very important need right now. When I go into a property that a bank has asked me to list, I never know what I will find. Either the home will be vacant, or not. If it’s vacant, it may be immaculate, or it may be totally trashed. And if it’s totally trashed, there’s a good chance that all the kitchen appliance have been ripped out, including the kitchen sink. The bathroom may be in the same condition. The light fixtures and fans may have been pulled out too. These homes need some serious rehab, and investors who will go in and restore them to a livable condition are going to be part of the solution.
On the other hand, I’m finding many more of the lender owned homes that have been taken care of. A couple have been in meticulous condition, with the occupants even cleaning the carpet before they leave. For me, these are the heart breakers. Someone who loved their home, took care of it, and life happened. Got laid off, lost their retirement income, got sick, took a pay cut to keep their job, and more.
Most of us can’t tell the future. Some are forecasting a real estate recovery later this year, next year, and maybe even longer. What I see is that there is opportunity and strife at every bend in the road. Lender owned homes dominate the market in many (most?) areas of the valley. In Scottsdale, we see more short sales, which can be the precursor to foreclosure, depending on the situation. For now (and always), the market is, what the market is.
Cash and FHA loans are the primary means that buyers are using to purchase homes. Investors and many first-time home buyers. People are still moving to the Phoenix area. Our job market is stronger than most. Some are looking ahead to retirement, thinking that now is a good time to buy a second home to retire to in 5-10 years.
As I said, opportunity and strife exist. At all times, in all markets. We have many more challenges to overcome to get to a more balanced market, but I can tell you that there are many who are on not waiting around for that to happen.
The numbers tell the story:
Number of active home listings is down 20% from a high in October, 2007 and down 15% from this time last year. Pending sales are up. Prices are down.
After the stagnation that we experienced in the real estate market over the past couple of years, I’d say that this increased activity is a sign of improvement. Would you?
{ 2 comments… read them below or add one }
Nice article. I believe you are right… there is a role for the ‘flipper’ and in fact it is actually the more traditional role ‘flippers’ have always played.
All of our markets are different, but there at least is this beginning of a feeling that says the pain is not going to get worse. Oh, things still hurt… they just aren’t hurting more.
Can’t predict the future, but the data is beginning to help lead to different conclusions.
List accordingly.
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Thank you for the great article Dru! ….. I get the same response when talking to people when then find out I work in real estate.
I have worked with several investors who are taking advantage of the current market conditions and purchasing fix-n-flip properties as well as ‘cashflowing’ rental properties.
Your response to the person’s comment about the flippers is ‘right on’. I don’t think most people understand the need for flippers in today’s market. As you stated, there are many homes out there that are in deplorable condition and will never qualify for FHA financing. The role the flipper is taking to rehab those homes and provide move-in ready condition properties is necessary for a quicker market recovery.