It’s been a while since we have looked at the market to see where we are at. It’s going to help if I remind you of some important dates and numbers from the recent past that serve as important reference points and bench marks.
In past blogs we have discussed the lowest and highest inventory levels the Valley has ever seen. Let’s look at those again.
We know that Nov 2007 had the highest level of inventory with 62,581 residential dwellings listed for sale at that time. It didn’t take long for irresponsibly loose lending guidelines to see their way to massive amounts of delinquencies, which forced tens of thousands of homes to the market, at half of their mortgaged amounts (otherwise known as short sales).
We also know that May 2005 was the time when MLS showed its lowest level of active residential homes for sale, inventory plummeted down to 13,161 active residential dwellings for sale. During this time, financing a home was as easy as buying alcohol at the store, all you really needed was an ID. Home mortgage borrowers, with no means to purchase a home, could easily do so. It was quite literally; no job, no income, no savings…no problem. Houses where flying off the shelves and it didn’t matter how much you offered it for, it was going to sell.
Important inventory levels:
· April of 2016 had a residential inventory level of 25,232 homes for sale and
· June of 2017 MLS showed 18,200 residential homes available for sale.
· 13,161 All-time low inventory level for Maricopa County.
Today’s MLS inventory level shows 16,085 residential homes available for sale.
This is less than 3,000 listings away from our all-time low inventory level.
This can have unpleasant affects for buyers trying to purchase homes. Low inventory brings about more than just high-prices. Low inventory also brings multiple offers for buyers to compete against, and the likelihood of such including bidding wars. The other day I was inquiring about a home I was going to put an offer in on for my buyer. The seller’s agent told me to advise my buyer that if they wanted to be in the running, they needed to guarantee the seller some amount in cash over list price, if the property did not appraise. These are serious signs of a seller’s market and all very reminiscent of the way things went in 2005.
Does this mean the market is going to crash? The answer is, if it does, it probably won’t be for the same reasons as last time. The stability and structure of lending guidelines and mortgage backed security markets now, compared to that of 2005, is night and day. It was easy to notice something was wrong in 2005. Actually; it was easy to notice what was wrong in 2005, especially if you were a real estate agent or a lender. Mortgages where way too easy to qualify for. No one had the foresight to know the devastation it would have, so quickly. I can tell you that if there is going to be another crash, signs of instability are not anywhere as apparent as they were in 2005.
So if today’s boom isn’t driven by irresponsible lending practices like in 2005, then what is the reason? I know we have been over this before and I don’t want to sound like a broken record; however, it’s simple economics. Low supply (inventory) and high demand (more people wanting to buy they homes available) = higher prices.
We are only starting to see these market traits appear. The moral of this story has a similar theme to that of many of our messages. If you are interested in buying a home, sooner is always better than later. I like to call it the equity train. Currently, the train is puffing along full steam ahead, the sooner you jump on board, the better the ride will be. If you prefer the words of Roy Rogers,
“Don’t wait to buy real estate, buy real estate and wait.”
Talbot Real Estate Team has resources available to help you: break your lease early, pay your down payment and closing costs; as well as, save you money on your monthly payment. These are programs and resources that other real estate professional don’t necessarily have access to or knowledge of. Call us, there is still time before the real craziness starts.