Flurry of home sales producing market shortage
By Don Kirkland
Put your home on the market today and start packing. It very well could be sold tomorrow—at a price higher than you were asking.
That’s the good news. The bad news is that you may have a hard time finding a replacement home at a price you want to pay unless, of course, you’re willing to move farther away.
The inventory of resale homes, particularly in the Kyrene Corridor, has diminished so dramatically in recent weeks, say Realtors, that buyers are bidding on properties at dollar amounts exceeding the listing price.
“What you have is a classic high-demand, short-supply situation, and rather frenetic buying activity,” says Jeff Lucas, a real estate broker whose offices serve the area.
The situation is due in part to the availability of low-interest mortgages during the past five years, which prompted a number of homeowners to refinance at rates as low as five percent.
Now that interest rates are beginning to creep up again, Lucas says, owners are reluctant to give up their lower-cost mortgages, resulting in what he says has been a 30 percent to 35 percent reduction in resale-home inventory.
There is another side to the story, however, and Lucas cautions that delaying a move now could result in even higher costs later.
“Everyone is saying that rates are going to continue to go up,” says Lucas. And even at today’s 6¼ percent rate, he says, 30-year mortgages are still a bargain.
“For buyers who don’t get in the market now, the fear is that prices will continue to appreciate and (interest) rates will go several points higher, so the buyer who gets in a year from now could be disadvantaged over one buying now.”
One objection to buying in today’s market, according to Lucas, is that home prices may hit a plateau in the foreseeable future.
“That is highly, highly unlikely,” he says. “You have incredibly high prices around us, as in the L.A. market, and we’re 30 percent below Colorado prices. I think it’s very unlikely that prices (here) are going to decline any time soon.”
To illustrate, a 1,350-square-foot resale condo in the Orange County suburb of Mission Viejo recently sold for $410,000. A 1,750-square-foot condo in Centennial, a southeast Denver suburb, sold for $263,000.
“We have an interesting dilemma in Denver,” said resident Paul DeCrette, a recent home buyer. “Housing prices here are high, wages are low.”
Such comparisons emphasize the value of homes in the metro Phoenix area and may motivate prospective buyers to take advantage of low costs while they can, observers say. A. Tom Wood, another Kyrene Corridor Realtor, agrees with the assessment.
“We’ve all become so accustomed to seeing five percent (interest rates) that we forget that they were eight percent not too long ago,” he said.
Anyone contemplating a move within the next three years shouldn’t put it off simply because of the recent increase in interest rates, says Wood. “People are going to look back a couple of years from now and say ‘I would’a, I could’a, I should’a.’”
The fact that the Valley has become the fifth largest metro area in the country—projected to pass Chicago for third place within a matter of years—can only testify to the anticipated increase in real estate prices, Wood says.
“We’ve been one of the most affordable sections of the West for years. Now it’s time for us to play catchup.”
Like Lucas, Wood says demand for housing has been phenomenal, particularly in Chandler and Tempe.
“We put one house (on the market) at 11:30 Saturday and by Sunday had a full-price offer.”
While Wood emphasizes the continuing value of Kyrene Corridor homes, he says a new real-estate hotspot is the 85249 zip code, southeast of Arizona Avenue and Germann Road in Chandler.
There, says Wood, buyers typically pay $30 to $50 less per square foot than they would in Park Promenade, where he lives.
While buyers in such areas often can get more for their housing dollar, they have to be aware of the added inconvenience of living farther from infrastructure. In the right locations, says Wood, that too will change.
“If you take any area where houses are going in and find out that Target, Mervyn’s (and other national retailers) have bought up land, it ‘s a fairly safe bet that’s the area is going to boom.”
As to the ongoing value of Valley real estate, Wood concludes, it’s still safe to assume the same average five percent appreciation that has occurred ever since the days of the Great Depression.
“If we’re going to be the third largest city in the country in 30 years, people have got to have some place to go.”
Stephanie DiMaria, owner/broker of Century 21 All Star Realty and a 25-year Valley resident, sees the current market as a great time to think about making a move.
“If a seller is going to sell, this is a great time to do it,” she says.
For those wanting to buy, time is likewise of the essence.
“I’m finding that buyers can’t be sitting on the fencepost anymore. If they do find a house, it’s usually just a matter of days until it’s gone.
“They can’t spend too much time thinking about it.”