NextHome Valleywide News

Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

Nov. 18, 2021

November 2021 Market Update

Housing Predictions: Who to Believe?

Median Price Rising 1% per Month

For Buyers:

‘Tis the season for 2022 projections in the housing market and, as expected, there are conflicting opinions among national housing analysts. 

 

Zillow and Goldman Sachs predict home values will rise nationally 14-16% between now and the end of 2022. CoreLogic released their prediction that home values will only rise 1.9% next year, citing a concern with rising interest rates. Then there’s Zelman and Associates warning that investors are over-building and over-buying as household formation and population growth are weak, challenging the notion of a housing shortage.

 

Who do we believe? Zillow recently pulled out of the business of buying homes after realizing their algorithm was failing to accurately value homes under current market conditions. CoreLogic’s prediction last year, that home values would drop 6.6% by May 2021, was a gross misfire as values soared instead. While Zelman is waiving a caution flag, the organization is stopping short of issuing a price prediction for next year.

 

In the meantime, prices in Greater Phoenix continue to rise. Prior to 2020, the median had been rising at 0.6%-0.8% per month on average (7-10% per year) which was in response to a milder seller market. In the 2020-2021 extreme seller market, that average rose to 1.3% per month in 2020 and 2.3% per month so far in 2021, with a peak in the Spring between 3-5% and 1% per month average since June.

 

Many local analysts agree the past rate of increase is indeed unsustainable. The payment for a 1,500-2,000 sqft home has risen 33%, or $500/month since last November, and the median rent on the MLS for the same sized home increased $372/month. At the rate prices have been increasing for the past 2 years, returning to a mere 7-10% annually would be considered a massive relief for buyers.

 

For Sellers:

While the caution flags are waving for a softer housing market next year, there are a number of positive indicators in Greater Phoenix that may keep our market appreciating, albeit slower. While interest rates, affordability, sluggish population growth and household formation are valid reasons for concern, here are a few counter-indicators to consider:

  • Lending practices have loosened up with the new $625,000 loan limit and more consideration of self-employed borrowers
  • Arizona is ranked in the top 10 states for population growth and household formation over the past decade due primarily to domestic migration
  • Per the Arizona Department of Economic Opportunity’s October Employment Report: Jobs and the labor force have completely recovered from last year’s pandemic losses
  • Unemployment claims have fallen to pre-pandemic levels
  • W-2 Incomes have continued to rise and are up 3.4% YOY

While the market is expected to downshift sometime next year, the local economy and current supply and demand indicators for Greater Phoenix still point to strong price appreciation for at least 3-6 months.

 

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.
  • Visit our blog at NextHome Valleywide News for a monthly Phoenix Market Update.
Posted in Market Updates
Nov. 4, 2021

7 Home Safety Strategies

7 Home Safety Strategies

According to the FBI, more than one million burglaries are committed in the United States each year, with victims suffering an estimated $3 billion in combined property losses.1 Fortunately, there are some proven tactics you can use to decrease your likelihood of a home invasion.

Most burglars won’t go to extreme lengths to enter a residence. They are looking for easy access with minimal risk. A monitored security system can be an effective deterrent—homes without one are 300% more likely to be burglarized—but it isn’t the only way to protect your property.2 The strategies below can help to maximize your home’s security and minimize your chances of being targeted by intruders.

Thinking about listing your home? We have some additional recommendations for you. Contact us to find out the procedures we use to keep our clients and their property safe and secure during the buying and selling process.

Check Your Doors and Windows

According to home security company ADT, the most common entry point for a burglar is an unlocked front door (34%) followed by a first-floor window (23%) or back door (22%).3 So securing these points of entry is essential.

  • Evaluate the condition of your doors and locks.  

A steel door is generally considered the strongest, but many homeowners prefer the look of wood. Whatever material you choose, make sure it has a solid core and pair it with a Grade 1 or 2 deadbolt lock with a reinforced strike plate.4

  • Add window locks and security film.

Aftermarket window locks are an easy and inexpensive upgrade that can provide an additional layer of protection for your home. Choose a lock that is compatible with your window frame material and a style that is appropriate for the window type. And consider using a specialty film on windows that are adjacent to a door. Security film holds shattered glass in place, making the windows more difficult to penetrate.5

Landscape for Security

When it comes to outdoor landscaping, many of us think about maintenance and curb appeal. But the choices we make can impact our home’s security, as well. Thieves target homes that they can enter and exit without being detected. Here are a few tweaks that can make your property less appealing to potential intruders.

  • Increase visibility from the street.

A privacy hedge may keep out nosy neighbors, but it can also welcome thieves—so trim overgrown trees and shrubs that obstruct the view of your property. According to police officers, they offer an ideal environment for criminals to hide.6

  • Place thorny bushes and noisy gravel below windows.

Don’t eliminate shrubbery altogether, though. Certain hedges can actually offer a deterrent to robbers. Plant thorny rose bushes or sharp-leaved holly beneath your first-story windows for both beauty and protection. Add some loose gravel that crunches when disturbed.

Light Your Exterior

When it’s dark outside, criminals don’t need to rely on overgrown shrubbery to hide. Luckily, a well-designed outdoor lighting system can make your home both safer and more attractive.

  • Install landscape lighting.

Eliminate pockets of darkness around your yard and home’s perimeter with strategically placed outdoor lights. Use a combination of flood, spot, well, and pathway lights to add interest and highlight natural and architectural details. 

  • Use motion-activated security lights to startle intruders.

The soft glow of landscape lighting isn’t always enough to dissuade a determined intruder. But a motion-activated security light may stop him in his tracks. And if you choose a Wi-Fi connected smart version, you can receive notifications on your phone when there’s movement on your property.

 

Make It Look Like You’re Home

 

Motion-activated lights aren’t the only way to make an intruder think you’re at home. New technology has made it increasingly possible to monitor your home while you’re away. This is especially important since most burglaries take place on weekdays between 10 am and 3 pm, when many of us are at work or school.2

  • Turn on your TV and leave a car in the driveway.

A survey of convicted burglars revealed that the majority avoid breaking into homes if they can hear a television or if there’s a vehicle parked in the driveway.7 If you’re away from home, try connecting your TV to a timer or smart plug. And when you travel, leave your car out or ask a neighbor to park theirs in your driveway.

  • Install a video doorbell

In that same survey, every respondent said they would knock or ring the doorbell before breaking into a home. A video doorbell not only alerts you to the presence of a visitor, it also enables you to see, hear, and talk with them remotely from your smartphone—so they’ll never know you’re gone.

Keep Valuables Out of Sight

Few home invasions are conducted by criminal masterminds. In fact, a survey of convicted offenders found that only 12% planned their robberies in advance, while the majority acted spontaneously.8 That’s one of the reasons security experts caution against placing valuables where they are visible from the outside.9

  • Check sightlines from your doors and windows.

Don’t tempt robbers with a clear view of the most commonly stolen items, which are cash (think purses and wallets), jewelry, electronics, firearms, and drugs (both illegal and prescription).6 Take a walk around your property to make sure none of these items are easily visible.

  • Secure valuables in a safe.

Consider the possessions that are on display inside your home, as well. It’s always a good idea to lock up firearms, sensitive documents, and expensive or irreplaceable items when you have housekeepers or other service providers on your property.

Highlight Your Security Measures

While it’s prudent to hide your valuables, it’s equally important to advertise your home’s security features. In surveys, convicted burglars admit to avoiding homes with obvious protective measures in place.7,8

  • Install outdoor cameras.

Security cameras are the most common home protection device and for good reason.10 Not only do they help prevent crime (burglars are known to avoid them), they can offer peace of mind for homeowners who want to sneak a peek at their property while away.11 And if you do experience a break-in, security camera footage can help police identify your intruder.

  • Post warning signs.

Security system placards and beware-of-dog signs are also shown to be effective deterrents.8 Of course, you should back up your threats with a noisy alarm and loud barking dog for maximum impact.

Limit What You Share on Social Media

Social media platforms can be a great way to stay connected with friends and family, but it’s easy to reveal more than you’ve intended. Be thoughtful about what you’re posting—and who has access.

  • Delay posting photos or travel updates.

It can be tempting to upload a concert selfie or pictures from your beach vacation. But these types of photos scream: “My house is unoccupied!” Try to wait until you’ve returned home to share the photos on social media. 

  • Set privacy restrictions on your accounts.

Think twice about connecting with strangers or casual acquaintances on social media. If you enjoy sharing family updates and personal photos, it’s safer to limit your followers to those you truly know and trust.

YOUR HOME IS SAFE WITH US

We take home security seriously. That’s why we have screening procedures in place to keep our clients and their homes safe when they are for sale. We also remind our buyers to change the locks before they move into their new homes and provide referrals to locksmiths and home security companies that can help. To learn more about our procedures and how you can stay safe during the buying and selling process, contact us to schedule a free consultation!

Sources:

  1. Federal Bureau of Investigation-https://ucr.fbi.gov/crime-in-the-u.s/2019/crime-in-the-u.s.-2019/topic-pages/burglary
  2. Bankrate-https://www.bankrate.com/insurance/homeowners-insurance/house-burglary-statistics/
  3. ADT-https://www.adt.com/resources/how-do-burglars-break-into-houses
  4. National Crime Prevention Council-https://www.ncpc.org/wp-content/uploads/2017/11/locking-your-home-reva-1pdf.pdf
  5. SafeWise-https://www.safewise.com/blog/10-simple-ways-to-secure-your-new-home/
  6. Forbes-https://www.forbes.com/sites/houzz/2014/03/20/how-your-landscaping-can-keep-burglars-away/?sh=2a8addf27429
  7. KGW News-https://www.kgw.com/article/news/investigations/86-burglars-say-how-they-break-into-homes/283-344213396
  8. Science Daily-https://www.sciencedaily.com/releases/2013/05/130516160916.htm 
  9. Security.org-https://www.security.org/home-security-systems/home-invasion-protection/
  10. SafeWise-https://www.safewise.com/resources/security-stats-facts/
  11. The Guardian-https://www.theguardian.com/business/2017/aug/18/former-burglars-barking-dogs-cctv-best-deterrent

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.
  • Visit our blog at NextHome Valleywide News for a monthly Phoenix Market Update.
Posted in Real Estate Trends
Oct. 20, 2021

October 2021 Market Update

Forbearance Ends--Not The Seller Market

Supply Up 93% Since April

For Buyers:

The housing supply shortage is still in full swing, and there is online speculation that the end of forbearance may be the source of relief as some homeowners may need to sell. According to Black Knight, the national number of mortgages in forbearance has declined 67% from a peak of 4.76M in May of last year to 1.6M as of September 28th, 2021. Surveys from the Mortgage Bankers Association indicate that at least 80% of homeowners have stayed in their homes after forbearance. That means roughly 600,000 properties have already been added to the national supply of homes for sale over the past year without causing home values to decline. If we can expect 20% of the 1.6M remaining homeowners in forbearance to leave their home; that’s roughly 6,400 properties per state on average. Since Greater Phoenix alone records roughly 11,000-14,000 closings per month, the number of properties exiting forbearance may be enough to ease the lack of supply for a short while, but probably not enough to cause prices to decline in Greater Phoenix.

For Sellers:

The Greater Phoenix housing market is cooling, but it is far from cold. To put the last 6 months in perspective, from April 1st to October 1st, supply rose 92% from 3,591 to 6,883* active listings in the Arizona Regional MLS. In the same time frame, listings under contract dropped 9% from 11,939 to 10,878*. While a rise in supply combined with a decline in contracts in escrow indicates a cooling of the market, it’s important to put it in perspective from a seasonal and a non-seasonal point of view.

Seasonally, it’s normal for listings in escrow to drop between April and October. However, despite the most recent drop to 10,878 is still higher than previous counts on October 1st from 2014-2019, which ranged between 8,100 and 9,800. This places demand notably higher than even the pre-pandemic seller markets.

It is not seasonal for supply to rise between April and October, so a 93% increase is a notable shift. However, a count of 6,883 active listings is extremely low. In the last balanced market of 2014, the count on October 1st was 21,796. During the seller markets from 2015-2019, October 1st counts declined from 18,000 to just over 12,000 listings. So despite the 93% increase in supply, it’s still 45% lower than the pre-pandemic 2019 seller market and 68% below the last balanced market of 2014.

The effects of this 6-month weakening are mild. Here are a few:

• The Median Days on Market prior to contract has increased from 5 days to 11 days

• The Sale Price to List Price ratio has decreased from 101.8% (1.8% over list price) to 0.3%

• Sales over Asking Price have decreased from 60% of sales to 47% of sales

• The Median Amount over List has decreased from $20,000 to $11,000.

It’s good to be a seller.

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.
  • Visit our blog at NextHome Valleywide News for a monthly Phoenix Market Update.

 

Posted in Market Updates
Sept. 30, 2021

9 Tips for Moving/Selling at Same Time

Selling your home when you still need to shop for a new one can feel daunting to even the most seasoned homeowner––especially when the demand for new homes keeps rising, but the supply feels like it's dwindling.¹ You're not alone either if you're already feeling drained by the complex logistics of trying to sell and buy a new home all at once. 

Searching for a new home can be exciting, but many homebuyers admit that it can also be stressful, especially if you live in an unpredictable market with plenty of competitors. Unfortunately, waiting out a competitive housing market isn’t always the best idea either since listings are expected to remain limited in the most coveted neighborhoods for some time.²

That doesn't mean, though, that you should just throw up your hands and give up on moving altogether. In fact, as a current homeowner, you could be in a better position than most to capitalize on a seller’s market and make a smooth transition from your old home to a new one. 

We can help you prepare for the road ahead and answer any questions you have about the real estate market. For example, here are some of the most frequent concerns we hear from clients who are trying to buy and sell at the same time.

“WHAT WILL I DO IF I SELL MY HOUSE BEFORE I CAN BUY A NEW ONE?”

This is an understandable concern for many sellers since the competitive real estate market makes it tough to plan ahead and predict when you'll be able to move into your next home. But chances are, you will still have plenty of options if you do sell your home quickly. It may just take some creativity and compromise. 

Here are some ideas to make sure you're in the best possible position when you decide to list your home:

Tip #1: Flex your muscles as a seller. 

In a competitive market, buyers may be willing to make significant concessions in order to get the home they want. In some cases, a buyer may agree to a rent-back clause that allows the seller to continue living in the home after closing for a set period of time and negotiated fee.

This can be a great option for sellers who need to tap into their home equity for a downpayment or who aren’t logistically ready to move into their next home. However, many lenders limit the duration of a rent-back to 60 days, and there are liability issues to consider before entering into an agreement. A contract and security deposit should be in place in case of any property damage or unexpected repairs that may be needed during the rent-back period.³ 

Tip #2: Open your mind to short-term housing options. 

While it can be a hassle to move out of your old home before you’re ready to move into your new one, it’s a common scenario. If you’re lucky enough to have family or generous friends who offer to take you in, that may be ideal. If not, you’ll need to find temporary housing. Check out furnished apartments, vacation rentals and month-to-month leases. If space is an issue, consider putting some of your furniture and possessions in storage. 

You may even find that a short-term rental arrangement can offer you an opportunity to get to know your new neighborhood better—and lead to a more informed decision about your upcoming purchase.

Tip #3: Embrace the idea of selling now and buying later.

Instead of stressing about timing your home sale and purchase perfectly, consider making a plan to focus on one at a time. Selling before you’re ready to buy your next home can offer a lot of advantages. 

For one, you’ll have cash on hand from the sale of your current home. This will put you in a much better position when it comes to buying your next home. From budgeting to mortgage approval to submitting a competitive offer, cash is king. And by focusing on one step at a time, you can alleviate some of the pressure and uncertainty.

“WHAT IF I GET STUCK WITH TWO MORTGAGES AT THE SAME TIME?”

This is one of the most common concerns that we hear from buyers who are selling a home while shopping for a new one, and it’s realistic to expect at least some overlap in mortgages. To make sure you don't get into a situation where you are carrying dual mortgages for longer than you can afford, examine your budget and calculate the maximum number of months you can afford to pay both.⁴

If you simply can’t afford to carry both mortgages at once, then selling before you buy may be your best option. (See Tip #3 above.) But if you have some flexibility in your budget, it is possible to manage both a home sale and purchase simultaneously. Here are some steps you can take to help streamline the process:

Tip #4: As you get ready to sell, simplify. 

You can condense your sales timeline if you only focus on the home renovations and tasks that matter most for selling your home quickly. For example, clean and declutter all of your common areas, refresh your outdoor paint and curb appeal, and fix any outstanding maintenance issues as quickly as possible. 

But don't drain unnecessary time and money into pricey renovations and major home projects that could quickly bog you down for an unpredictable amount of time. We can advise you on the repairs and upgrades that are worth your time and investment.

Tip #5: Prep your paperwork. 

You'll also save valuable time by filing as much paperwork as possible early in the process. For example, if you know you'll need a mortgage to buy your next home, get pre-approved right away so that you can shorten the amount of time it takes to process your loan. 

Similarly, set your home sale up for a fast and smooth transition by pulling together any relevant documentation about your current home, including appliance warranties, renovation permits, and repair records. That way, you're ready to provide quick answers to buyers' questions should they arise.

Tip #6: Ask us about other contingencies that can be included in your contracts. 

Part of our job as agents is to negotiate on your behalf and help you win favorable terms. For example, it’s possible to add a contingency to your purchase offer that lets you cancel the contract if you haven't sold your previous home. 

This tactic could backfire, though, if you're competing with other buyers. We can discuss the pros and cons of these types of tactics and what’s realistic given the current market dynamics.

“WHAT IF I MESS UP MY TIMING OR BURN OUT FROM ALL THE STRESS?” 

When you're in the pressure cooker of a home sale or have been shopping for a home for a while in a competitive market, it's easy to get carried away by stress and emotions. To make sure you're in the right headspace for your homebuying and selling journey, take the time to slow down, breathe and delegate as much as possible. In addition:

Tip #7: Relax and accept that compromise is inevitable

Rather than worry about getting every detail right with your housing search and home sale, trust that things will work out eventually––even if it doesn't look like your Plan A or even your Plan B or Plan C. Perfecting every detail with your home decor or timing your home sale perfectly isn't necessary for a successful home sale and compromise will almost always be necessary. Luckily, if you've got a good team of professionals, you can relax knowing that others have your back and are monitoring the details behind the scenes.

Tip #8: Don't worry too much if your path is straying from convention

Remember that rules-of-thumb and home-buying trends are just that: they are estimates, not facts. So if your home search or sale isn't going exactly like your neighbor’s, it doesn't mean that you are doomed to fail. 

It's possible, for example, that seasonality trends may affect sales in your neighborhood. So a delayed sale in the summer or fall could affect your journey––but not necessarily. According to the National Association of Realtors, the housing market tends to be more competitive during the summer and less competitive during the winter.⁵ But it's not a hard and fast rule, and every real estate transaction is different. That's why it's important to talk to a local agent about your specific situation.

Tip #9: Enlist help early.

Which leads us to our final tip: If possible, call us early in the process. We'll not only provide you with key guidance on what you should do ahead of time to prepare your current home for sale, we'll also help you narrow down your list of must-haves and wants for your next one. That way, you'll be prepared to act quickly and confidently when it’s time to list your house or make an offer on a new one.

It's our job to guide you and advocate on your behalf. So don't be afraid to lean on us throughout the process. We’re here to ease your burden and make your move as seamless and stress-free as possible.

BOTTOMLINE: COLLABORATE WITH A REAL ESTATE PROFESSIONAL TO GET TAILORED ADVICE THAT WORKS FOR YOU

Buying and selling a home at the same time is challenging. But it doesn't have to be a nightmare, and it can even be fun. The key is to educate yourself about the market and prepare yourself for multiple scenarios. One of the best and easiest ways to do so is to partner with a knowledgeable and trustworthy agent. 

A good agent will not only help you evaluate your situation, we will also provide you with honest and individually tailored advice that addresses your unique needs and challenges. Depending on your circumstances, now may be a great time to sell your home and buy a new one. But a thorough assessment may instead show you that you're better off pausing your search for a while longer. 

Contact us for a free consultation so that we can help you review your options and decide the best way forward.

Sources: 

  1. Board of Governors of the Federal Reserve System, FEDS Notes - https://www.federalreserve.gov/econres/notes/feds-notes/housing-market-tightness-during-covid-19-increased-demand-or-reduced-supply-20210708.htm
  2. Federal Reserve Bank of St. Louis, FRED Economic Data - https://fred.stlouisfed.org/series/MSPUS 
  3. Realtor.com - https://www.realtor.com/advice/sell/what-is-a-rent-back-agreement/
  4. Bankrate.com - https://www.bankrate.com/real-estate/sell-your-house-while-buying-another/
  5. National Association of REALTORS - https://www.nar.realtor/blogs/economists-outlook/seasonality-in-the-housing-market 

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.
  • Visit our blog at NextHome Valleywide News for a monthly Phoenix Market Update.
Posted in Real Estate Trends
Sept. 16, 2021

September 2021 Market Update

Activity Spiked 20% In $400-800K Range

Sellers Over $1M Enjoying a Hot Summer

For Buyers:

Buyer demand has rallied sharply over the past 4 weeks, which is unusual for this time of year. The rally is exclusively between $400K-$800K, spiking nearly 20% in contract activity since the end of July. We have to wait until the transactions close and record to identify the buyers, but judging from July’s closing analysis we expect to find a surge in iBuyer purchases (aka “Internet Buyers”). The most notable iBuyers active in Greater Phoenix are OpenDoor, OfferPad, Zillow, and now RedFin. At least one of these organizations has increased their approved acquisition price to a $750,000 limit, which could explain the sudden spike in sales.

iBuyers do not buy and hold property, they primarily engage in a short-term flip strategy and their activity does not constitute true demand. True demand is someone who will live in the home or rent it to someone who will live in the home. Flip investors are strictly the middlemen between the seller and the final buyer, which adds one extra closing to the books and makes true demand appear larger than reality by increasing the total number of sales without increasing the level of supply.

The existence of institutional flip investors in the marketplace can be frustrating for buyers from a competition standpoint, but in the end these buyers still need to re-sell the home to someone. As prices have reached levels beyond the affordability threshold for a larger percentage of residents, the question is whether or not iBuyers will be able to flip their acquisitions with the same profit margins going forward.

Permits for new homes are up 32% for January through July this year and are at their highest since 2006. Considering the average build time for a new home is anywhere from 10-14 months due to supply chain disruptions, iBuyers and sellers in general may be seeing more competition from new construction starting in the 4th quarter 2021 and into early 2022. 

For Sellers:

While the $400K-$800K market is seeing elevated activity, the luxury market over $1M is a different story. Make no mistake, the luxury market is still extremely hot but it’s not because buyer activity is rising. Listings in escrow over $1M have dropped 17% since June, but that’s normal for this time of year in this segment. The reason the luxury market is still hot is due to a simultaneous drop in competing supply. It’s more prominent over $1.5M where supply has dropped 10%, also since June.

So if contract activity isn’t rising, then why is supply over $1M dropping? It’s seasonal. Every year from May to July there’s an elevated number of cancelled and expired listings in this price point, which reduces the number of active listings. This year was no different. Additionally, the number of new listings added monthly to supply dropped 26% between April and August, which meant there were fewer new listings to replenish those that cancelled or expired. The result is a luxury supply count 31% lower than this time last year.

This is good news for the sellers who remained active over the summer. Even though luxury demand came down, it’s still 21% higher than it was last September with fewer competitors. If the market follows its seasonal tendencies there will be a rally of new listings coming to the party in October, possibly giving buyers more choice in the 4th quarter.

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.
  • Visit our blog at NextHome Valleywide News for a monthly Phoenix Market Update.

 

Posted in Market Updates
Sept. 1, 2021

5 Factors Reveal Where Market Is Headed

5 Factors Reveal Where Market is Headed

It’s the old supply-and-demand predicament: Home sales in the U.S. continue at a torrid pace, but the availability of listings remains limited. Buoyed by historically low mortgage rates, buyers keep shopping for homes, reducing the available inventory and sparking a rise in home prices across the country.

News website The Atlantic summarized the sizzling home market this way:

“Pick a housing statistic at random, and it’s probably setting an all-time record. Home prices: record high. Inventory: record low. Percentage of homes selling above asking price: record high. Average time on market: record low.”¹

Meanwhile, homebuilders are contending with an increase in material costs and a shortage of labor. These issues come amid an ongoing shortage of housing. A study commissioned by the National Association of Realtors found the U.S. is coping with a deficit of about 2 million single-family homes and about 3.5 million other housing units.²

So what can we expect from U.S. real estate? Here are five factors that illustrate where the housing market is today and is likely heading tomorrow.

ROCK-BOTTOM MORTGAGE RATES TO GRADUALLY RISE

Low interest rates continue to fuel demand from homebuyers. Some experts believe mortgage rates will creep up later this year, but they expect rates to remain near historic lows.3 However, the Federal Reserve signaled in mid-June that it may institute two interest rate hikes as soon as 2023, which could then trigger a more substantial uptick in mortgage rates.4

In June, the Mortgage Bankers Association reported that 2020 closed with the average rate for a 30-year, fixed-rate mortgage sitting at 2.8%. But the association anticipates the average rate climbing to 3.5% at the end of 2021 and 4.2% by the end of 2022.5

“As the economy progresses and inflation remains elevated, we expect that rates will continue to gradually rise in the second half of the year,” said Sam Khater, chief economist at Freddie Mac.6

What does it mean for you?

You’ve likely heard the old saying about “striking while the iron is hot.” Well, that phrase applies to the current environment for mortgage rates. It’s impossible to predict with certainty when mortgage rates will rise or fall. So, when mortgage rates are at or near historic lows (as they are today), you should seriously consider taking advantage of those rates to borrow money for a home purchase or to refinance your existing mortgage.

HOME PRICES EXPECTED TO KEEP CLIMBING

Low mortgage rates are sparking interest among homebuyers, but some are running into affordability issues.

In June, the national median list price for a home reached an all-time high of $385,000, up 12.7% on a year-over-year basis.7 And according to the Home Buying Institute, various reports and forecasts indicate home prices will keep climbing throughout 2021 and into 2022.8 

While this may be welcome news for homeowners, high prices are pushing homeownership out of reach for a growing number of first-time buyers. In a recent CoreLogic survey, 82% of respondents listed housing affordability as a key problem.9

“Younger and first-time buyers, including younger millennials, are faced with the challenge of having sufficient savings for a down payment, closing costs and cash reserves,” said Frank Martell, President and CEO of CoreLogic. “As we look to the balance of 2021, we expect price rises to continue which could very well push prospective buyers out of the market in many areas and slow home price growth over the next year.”9

What does it mean for you?

If you’re a buyer waiting on the sidelines for prices to drop, you may want to reconsider. While the pace of appreciation should taper off, home prices are expected to continue climbing. And rising mortgage rates will only make a home purchase more expensive. 

SINGLE-FAMILY HOME SALES REMAIN ROBUST

While record-high prices are sidelining some buyers, the impressive pace of single-family home sales marches on.

Single-family home sales are down from their peak in October 2020 yet are still above the overall level last year. In May 2021, 5.8 million existing single-family homes were sold in the U.S. That’s a 45% increase over the 4 million homes sold in May 2020.10

However, home sales saw a 0.9% dip in May 2021 compared with the previous month, the National Association of Realtors says. That was the fourth straight month for a decline in home sales. The number of home sales has slid recently because of rising prices coupled with a shortage of available homes amid intense demand.10

Fannie Mae expects total home sales to tick up slightly in the fourth quarter and finish the year up 3.8% over last year. They also forecast a slight decline of 2.2% in sales volume in 2022.11

What does it mean for you?

The market for single-family home sales remains quite active. As a result, if you’re a homeowner, you may want to ponder whether to sell now, even if you hadn’t necessarily been thinking about doing so. With demand high and inventory low, your home could fetch an eye-popping price. 

LACK OF INVENTORY STILL CONSTRAINS THE HOME MARKET

According to the National Association of Realtors, in May there were 1.23 million previously owned homes on the market, down 20.6% from the same time last year.10 This translates to a 2.5-month supply of homes, which is well below the 6 months of inventory typically seen in a balanced market.10,12

According to the Realtors group, this lack of inventory translates into tougher searches for buyers and contributes to a rise in prices.10

“Demand for bigger and more expensive accommodations amid the COVID-19 pandemic, which has left millions of Americans still working from home, is driving a housing market boom. The inventory of previously owned homes is near record lows,” according to Reuters.13

What does it mean for you?

If you’re thinking of selling your home, now may be the right time to do it. Across the country, it’s a seller’s market, meaning demand is outpacing supply. That supply-and-demand imbalance puts sellers in a great position to sell their homes at a premium price. The May 2021 Realtors Confidence Index from the National Association of Realtors found the average home that was sold attracted five offers, and the association says nearly half of homes are selling above list price.14,15

CONSTRUCTION OF SINGLE-FAMILY HOMES SEES SLIGHT UPTICK

Frustrated buyers may soon find some relief, however, from an increase in new construction. Economists forecast that 1.1 million new houses will be started in 2021, compared with a predicted 940,000 units just six months ago, with 1.2 million new starts predicted for 2022 and 2023, according to the Urban Land Institute.16 

Amid the rise in home construction, builders are coping with rising costs for materials. In April, the National Association of Home Builders estimated that a surge in lumber prices over the previous year had led to $35,872 being tacked onto the cost of an average new single-family home.17

“Shortages of materials and labor have builders struggling to increase production of new homes, though the demand remains strong,” Robert Frick, corporate economist at Navy Federal Credit Union, told the Reuters news service. “Potential homebuyers should expect tight inventories and rising prices for both new and existing homes for the foreseeable future.”18

Builders (and buyers) did receive some good news in June, though: Lumber prices are coming down—although likely to remain above pre-pandemic levels for the foreseeable future.19

What does it mean for you?

Given the issues affecting the new-home market, it may make sense to widen your home search to include both new and existing homes. Your brand-new dream home may not be available, but you might be able to find an existing home that lives up to your vision. Keep in mind that we can help you find either a new or existing home and can advocate for you to ensure you get the best deal possible.

ARE YOU THINKING OF BUYING OR SELLING?

If you’re in the market for a home, you’re ready to sell your house or you’ve simply been wondering whether you should sell, you definitely could benefit from an expert to help you navigate the sizzling hot real estate market. Let’s set up a free consultation to discuss your situation. We can help you figure out your options and come up with a plan to capitalize on the value of your current property or to find your ideal next home.

Sources:

  1. The Atlantic - https://www.theatlantic.com/ideas/archive/2021/05/us-housing-market-records/619029/
  2. Wall Street Journal - https://www.wsj.com/articles/u-s-housing-market-needs-5-5-million-more-units-says-new-report-11623835800
  3. Time - https://time.com/nextadvisor/mortgages/mortgage-predictions-2021/
  4. Bankrate - https://www.bankrate.com/banking/federal-reserve/fomc-meeting-recap-june-2021/
  5. Mortgage Bankers Association - https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary/mortgage-finance-forecast-archives
  6. Associated Press News - https://apnews.com/press-release/globe-newswire/mortgages-mortgage-rates-business-0fc0360d0f4af0c988504385fa2794c3
  7. Realtor.com - https://www.realtor.com/research/june-2021-data/
  8. Home Buying Institute - http://www.homebuyinginstitute.com/news/home-prices-will-keep-rising-through-2021/
  9. DS News - https://dsnews.com/daily-dose/07-06-2021/record-high-home-prices-intensify-affordability-challenges
  10. National Association of Realtors - https://www.nar.realtor/newsroom/existing-home-sales-experience-slight-skid-of-0-9-in-may
  11. Fannie Mae - https://www.fanniemae.com/media/40561/display
  12. Real Estate Center at Texas A&M University - https://assets.recenter.tamu.edu/documents/articles/2046-7.pdf
  13. Reuters - https://www.reuters.com/world/us/us-housing-starts-rise-less-than-expected-may-building-permits-fall-2021-06-16/
  14. National Association of Realtors - https://www.nar.realtor/research-and-statistics/research-reports/realtors-confidence-index
  15. Realtor magazine - https://magazine.realtor/daily-news/2021/05/17/report-half-of-homes-sell-above-list-price
  16. Urban Land Magazine - https://urbanland.uli.org/capital-markets/uli-forecast-sees-increased-improvement-in-outlook-for-u-s-economy-2/
  17. National Association of Home Builders - https://eyeonhousing.org/2021/04/higher-lumber-costs-add-more-than-35k-to-new-home-prices-119-to-monthly-rent/
  18. Reuters - https://www.reuters.com/world/us/us-housing-starts-rise-less-than-expected-may-building-permits-fall-2021-06-16/
  19. NPR - https://www.npr.org/2021/06/21/1008843212/lumber-prices-are-finally-dropping-after-they-soared-during-the-pandemic

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.
  • Visit our blog at NextHome Valleywide News for a monthly Phoenix Market Update.

 

Posted in Real Estate Trends
Aug. 18, 2021

August 2021 Market Update

Supply Up 42%; Price Reductions Up 131%

Affordability Below Normal

August 2021 Market Update

For Buyers:

There is a little relief ahead for buyers in Greater Phoenix. Supply continues to rise in price points between $300K-$1.5M and buyer demand has settled into a normal seasonal cool down that is expected to last through the end of the year. What this means for buyers is the 2nd half of 2021 so far has more choice and less competition.

 

There are two things going on right now in the market. The first is a non-seasonal increase in supply, fueled by a high number of new listings hitting the market every week. Typically August is the low point of the summer season for supply. However this year it is the high point and continuing to rise, up 42% since May. That’s good news for buyers as it provides more choice.

 

The second is a seasonal decline in buyer activity. Typically buyer demand shoots up in the first half of the year, peaking around May, then it gradually declines in the 2nd half of the year. Last year the market saw the opposite due to the pandemic, demand dropped when it was supposed to rise and rose when it was supposed to drop. The return to a normal seasonal rhythm in 2021 means that there may be slightly less competition from other buyers in the 3rd and 4th quarters.

 

This doesn’t mean the housing market has gone cold; it has simply made it a little more tolerable to navigate. To put it in numbers, on April 8th, there were 12,862 listings under contract and only 4,177 active. Today on August 9th, there are 11,743 under contract and 7,166 active. Add a recent decline in interest rates keeping payments down and exhausted buyers have a little more room to breathe.

 

For Sellers:

The Home Opportunity Index (HOI), published by the National Association of Home Builders every quarter, measures housing affordability based on the median family income per metro area. Last quarter, the HOI for Greater Phoenix fell to 56 (we predicted it would be 57 based on preliminary MLS data). This is below the normal range for the Phoenix metro area of 60-75.

 

What does this mean? This means that a household making the median family income of $79,000 per year could technically afford 56% of what sold in the 2nd Quarter of 2021. The last time the HOI dipped below 60 was in the 4th Quarter of 2018 when it hit 57. The market responded with a drop in annual appreciation from 10% to just 4% within 3 months. Since June of this year, annual appreciation of the monthly median sales price has declined from 32% to 28%. As affordability declines, it’s reasonable to expect the market will begin to resist the prices sellers initially ask for their homes. In other words, there will be fewer buyers able to bear dramatic monthly increases in home costs like those seen over the past year.

 

Meanwhile, exuberant sellers continue to list their homes at prices that defy comparable sales. As these homes sit for an extra day or two on the market without an accepted contract, weekly price reductions have risen 131% since May with a median price drop of $14,000. Typically, the median price reduction is $5,000.

 

Of course, there are still properties closing over asking price. However, those contracts were accepted approximately 1-1.5 months ago when the market was hotter than it is now. The percentage of sales over asking price has declined from 60% to 55% over the past two months, with the median amount over list price declining as well from $20,000 to $15,000. We expect this trend to continue.

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.
  • Visit our blog at NextHome Valleywide News for a monthly Phoenix Market Update.
Posted in Market Updates
July 28, 2021

Bridging The Appraisal Gap

If you’re searching for drama, don’t limit yourself to Netflix. Instead, tune in to the real estate market, where the competition among buyers has never been fiercer. And with homes selling for record highs,1 the appraisal process—historically a standard part of a home purchase—is receiving more attention than ever. 

 

That’s because some sellers are finding out the hard way that a strong offer can fizzle quickly when an appraisal comes in below the contract price. Traditionally, the sale of a home is contingent on a satisfactory valuation. But in a rapidly appreciating market, it can be difficult for appraisals to keep pace with rising prices.

 

Thus, many sellers in today’s market favor buyers who are willing to guarantee their full offer price—even if the property appraises for less. For the buyer, that could require a financial leap of faith that the home is a solid investment. It also means they may need to come up with additional cash at closing to cover the gap.

 

Whether you’re a buyer or a seller, it’s never been more important to understand the appraisal process and how it can be impacted by a quickly appreciating and highly competitive housing market. It’s also crucial to work with a skilled real estate agent who can guide you to a successful closing without overpaying (if you’re a buyer) or overcompensating (if you’re a seller). Find out how appraisals work—and in some cases, don’t work—in today’s unique real estate environment.

 

APPRAISAL REQUIREMENTS

 

An appraisal is an objective assessment of a property’s market value performed by an independent authorized appraiser. Mortgage lenders require an appraisal to lower their risk of loss in the event a buyer defaults on their loan. It provides assurance that the home’s value meets or exceeds the amount being lent for its purchase.

 

In most cases, a licensed appraiser will analyze the property’s condition and review the value of comparable properties that have recently sold. Mortgage borrowers are usually expected to pay the cost of an appraisal. These fees are often due upfront and non-refundable.2 

 

Appraisal requirements can vary by lender and loan type, and in today’s market in-person appraisal waivers have become much more common. Analysis of the property, the local market, and the buyer’s qualifications will determine whether the appraisal will be waived. Not all properties or buyers will qualify, and not all mortgage lenders will utilize this system.3 If you’re applying for a mortgage, be sure to ask your lender about their specific terms.   

 

If you’re a cash buyer, you may choose—but are not obligated—to order an appraisal.

 

APPRAISALS IN A RAPIDLY SHIFTING MARKET

 

An appraisal contingency is a standard inclusion in a home purchase offer. It enables the buyer to make the closing of the transaction dependent on a satisfactory appraisal wherein the value of the property is at or near the purchase price. This helps to reassure the buyer (and their lender) that they are paying fair market value for the home and allows them to cancel the contract if the appraisal is lower than expected.

 

Low appraisals are not common, but they are more likely to happen in a rapidly appreciating market, like the one we’re experiencing now.4 That’s because appraisers must use comparable sales (commonly referred to as comps) to determine a property’s value. These could include homes that went under contract weeks or even months ago. With home prices rising so quickly,5 today’s comps may be lagging behind the market’s current reality. Thus, the appraiser could be basing their assessment on stale data, resulting in a low valuation.

 

HOW ARE BUYERS AND SELLERS IMPACTED BY A LOW APPRAISAL?

 

When a property appraises for less than the contract price, you end up with an appraisal gap. In a more balanced market, that could be cause for a renegotiation. In today’s market, however, sellers often hold the upper hand. 

 

That’s why some buyers are using the potential for an appraisal gap as a way to strengthen their bids. They’re proposing to take on some or all of the risk of a low appraisal by adding gap coverage or a contingency waiver to their offer.

 

Appraisal Gap Coverage


Buyers with some extra cash on hand may opt to add an appraisal gap coverage clause to their offer. It provides an added level of reassurance to the sellers that, in the event of a low appraisal, the buyer is willing and able to cover the gap up to a certain amount.6 

For example, let’s say a home is listed for $200,000 and the buyers offer $220,000 with $10,000 in appraisal gap coverage. Now, let’s say the property appraises for $205,000. The new purchase price would be $215,000. The buyers would be responsible for paying $10,000 of that in cash directly to the seller because, in most cases, mortgage companies won’t include appraisal gap coverage in a home loan.6

 

Waiving The Appraisal Contingency

 

Some buyers with a higher risk tolerance—and the financial means—may be willing to waive the appraisal contingency altogether. However, this strategy isn’t for everyone and must be considered on a case-by-case basis.

 

It’s important to remember that waiving an appraisal contingency can leave a buyer vulnerable if the appraisal comes back much lower than the contract price. Without an appraisal contingency, a buyer will be obligated to cover the difference or be forced to walk away from the transaction and relinquish their earnest money deposit to the sellers.

 

It’s vital that both buyers and sellers understand the benefits and risks involved with these and other competitive tactics that are becoming more commonplace in today’s market. We can help you chart the best course of action given your individual circumstances.

 

DON’T WAIVE YOUR RIGHT TO THE BEST REPRESENTATION

 

There’s never been a market quite like this one before. That’s why you need a master negotiator on your side who has the skills, instincts, and experience to get the deal done...no matter what surprises may pop up along the way. If you’re a buyer, we can help you compete in this unprecedented market—without getting steamrolled. And if you’re a seller, we know how to get top dollar for your home while minimizing hassle and stress. Contact us today to schedule a complimentary consultation.

 

Sources:

  1. Wall Street Journal - https://www.wsj.com/articles/u-s-home-prices-push-to-record-high-slowing-pace-of-purchases-11621605953

  2. US News & World Report - https://realestate.usnews.com/real-estate/articles/what-is-a-home-appraisal-and-who-pays-for-it

  3. Rocket Mortgage – https://www.rocketmortgage.com/learn/appraisal-waiver  

  4. Money - https://money.com/coronavirus-low-home-appraisal/

  5. S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index - https://www.spglobal.com/spdji/en/indices/indicators/sp-corelogic-case-shiller-20-city-composite-home-price-nsa-index/#overview

  6. Bigger Pockets - https://www.biggerpockets.com/blog/appraisal-gap-coverage

  7. Washington Post - https://www.washingtonpost.com/realestate/competitive-buyers-waive-contingencies-to-score-homes-in-tight-market/2021/06/02/d335b050-af2c-11eb-b476-c3b287e52a01_story.html

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

 

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.
  • Visit our blog at NextHome Valleywide News for a monthly Phoenix Market Update.
Posted in Real Estate Trends
July 19, 2021

July 2021 Market Update

What's Ahead as Demand Weakens

Median Sale Price Up 29%

For Buyers:

Buyers with budgets over $300,000 may be noticing that they have more listings to choose from compared to a few months ago. This is especially true in the price points between $400,000 and $800,000 where inventory has grown 92% since February. When a buyer has, for example, 4 or 5 homes available that meet their criteria instead of just one, they are less inclined to throw all of their ammunition into one home in order to win it.

 

They may still offer full price or more, but may not be under as much pressure to waive contingencies and shorten inspection periods. As this subtle change proliferates with more inventory, the buyer experience will become less stressful. As the median sale price continues to rise, affordability is something to pay attention to. Not what’s affordable to you necessarily, especially if you’re out of state, but what percentage of the local population can afford your home if you need to sell right away or sometime in the future. A family making the median income in Greater Phoenix could afford 63% of what sold in the 1st quarter of 2021. That was within the normal range of 60-75%, indicating a good time to buy or sell. While we wait until August for the 2nd quarter measures to be released, we expect the new measure to land around 57%, slightly below normal.

 

This does not indicate that the market will plunge into a buyer market causing prices to decline, but it does indicate a reason to expect prices to rise much slower going forward.

 

For Sellers:

The Greater Phoenix housing market continues to shift from an extreme seller market into a less extreme seller market. As prices continue to rise, more new sellers are motivated to put their home on the market and fewer buyers are able or willing to pay the higher price.

 

Over the next 5 months, give or take, the market is expected to move into a weaker seller market, driven in part by dwindling affordability and buyer fatigue. The first half of 2021 has been so insane with contingency waivers and exorbitant offers over asking price that many sellers may not know what a normal seller market looks like. Here are a few things to expect:

 

Sales price appreciation will not average 3.1% per month. April 2021 saw prices appreciate 5.1% within 4 weeks. May was 2.3%. June was 1.1%. From 2015-2019, a long-term seller market but much weaker than today, prices appreciated at an average of 0.5% per month with a range between 0.3% and 0.8%.

There will be more list price reductions. It’s important to remember that the sales price is the LAST thing to respond in a shifting market. One of the first things to respond is a list price, in the form of a price reduction. When a seller overshoots what the market can bear, they will get the silent treatment in the form of zero offers. That triggers a price reduction by the seller. Weekly price reductions have risen 112% since mid-February from 317 in a week to 672. In a weaker seller market, expect between 1,500-2,000 price reductions every week.

Sellers will get their price, but pay more in concessions. If a seller prices their home high in anticipation of excess demand but only gets one offer instead of multiple offers, they are more likely to accept home warranties, do repairs and offer concessions. Currently the percentage of sales involving concessions is very low at 4%, up from 2.7% the week prior. In 2019, a good seller market, 25% of closed sales involved seller concessions.

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.
  • Visit our blog at NextHome Valleywide News for a monthly Phoenix Market Update.
Posted in Market Updates
June 28, 2021

Could Rising Prices Impact Your Net Worth?

Impact Your Net Worth?

Among its many impacts, COVID-19 has had a pronounced effect on the housing market. Low home inventory and high buyer demand have driven home prices to an all-time high.1 This has given an unexpected financial boost to many homeowners during a challenging time. However, for some renters, rising home prices are making dreams of homeownership feel further out of reach.

If you’re a homeowner, it’s important for you to understand how your home’s value contributes to your overall net worth. If you’re a renter, now is the time for you to figure out how homeownership fits into your short-term goals and your long-term financial future. An investment in real estate can help you grow your net worth, build wealth over time, and gain a foothold in the housing market to keep pace with rising prices.

What is net worth?

Net worth is the net balance of your total assets minus your total liabilities. Or, basically, it is what you own minus what you owe.2

Assets include the cash you have on hand in your checking and savings accounts, investment account balances, salable items like jewelry or a car and, of course, your home and any other real estate you own. 

Liabilities include your total debt obligations like car loans, credit card debt, the amount you owe on your mortgage, and student loans. In addition, liabilities would include any other payment obligations you have, like outstanding bills and taxes.

How do I calculate my net worth?

To calculate your net worth, you’ll want to add up all of your assets and all of your liabilities. Then subtract your total liabilities from your total assets. The balance represents your current net worth. 

Total Assets – Total Liabilities = Net Worth

Ready to calculate your net worth? Contact us to request an easy-to-use worksheet and a free assessment of your home’s current market value!

Keep in mind that your net worth is a snapshot of your financial position at a single point in time. Your assets and liabilities will fluctuate over both the short term and long term. For example, if you take out a loan to buy a car, you decrease your liability with each payment. Of course, the value of your asset (the car) will depreciate over time, as well. An asset that is invested in stocks or bonds can be even less predictable, as it’s subject to daily fluctuations in the market.

As a homeowner, you enjoy significant stability through your monthly real estate investment, also known as your home mortgage payment. While the actual value of your home can fluctuate depending on market conditions, your mortgage payment will decrease your liability each month. And unlike a vehicle purchase, the value of your home is likely to appreciate over time, which can help to grow your net worth. Right now, your asset may be worth significantly more than it was this time last year.3

If you’re a homeowner, contact us for an estimate of your home’s market value so that you can factor it into your net worth calculation. If you’re not a current homeowner, let’s talk about how homes in our area have appreciated over the last several years. That way, you can get an idea of how a home purchase could positively affect your net worth.

How can real estate increase my net worth?

When you put your real estate dollars to work, it’s possible to grow your net worth, generate cash flow, and even fund your retirement. We can help you realize the possibilities and maximize the return on your investment.

Property Appreciation

Generally, property appreciates in one of two ways: either through changes to the overall market or through value-added modifications to the property itself.

Rising prices

This type of property appreciation is the one that many homeowners are enjoying right now. Buyer demand is at an all-time high due to a combination of record-low interest rates and limited housing inventory.4 At other times, rising home prices have been attributed to different factors. Certain local conditions—like a new commercial development, influx of jobs, or infrastructure project—can encourage rapid growth in a community or region and a corresponding rise in home values. Historically, home prices have been shown to experience an upward trend punctuated by intermittent booms and corrections.5

Strategic home improvements

Well-planned and executed home improvements can also impact a home’s value and increase homeowner equity at the same time. The type of home improvement should be appropriate for the home and in tune with the desires of local buyers.

For example, a tasteful exterior remodel that is in keeping with the preferences of local home buyers is likely to add significant value to a home, while remodeling the home to look like the Taj Mahal or a favorite theme park attraction will not. A modern kitchen remodel tends to add value, while a kitchen remodel that is overly expensive or personalized may not provide an adequate return on investment.

Investment Property

You may be used to thinking of investments primarily in terms of stocks and bonds. However, the purchase of a real estate investment property offers the opportunity to increase your net worth both upon purchase and year after year through appreciation. In addition, rental payments can have a positive impact on your monthly income and cash flow. If you currently have significant equity in your home, let's talk about how you could put that equity to work by funding the purchase of an investment property.

Long-term or traditional rental

A long-term rental property is one that is leased for an extended period and typically used as a primary residence by the renter. This type of real estate investment offers you the opportunity to generate consistent cash flow while building equity and appreciation.6 

As an owner, you don’t usually have to worry about paying the utility bills or furnishing the property—both of which are typically covered by the tenant. Add to this the fact that traditional tenants translate into less time and effort spent on day-to-day property management, and long-term rentals are an attractive option for many investors.

Short-term or vacation rental 

Short-term rentals are often referred to as vacation rentals because they are primarily geared towards recreational travelers. And as more people start to feel comfortable traveling again, the short-term rental market is poised to become a more popular option than ever. In 2020 alone, in the thick of widespread travel bans, the short-term rental platform Airbnb’s market share of the hospitality industry reached as high as 41 percent.6

Investing in a short-term rental offers many benefits. If you purchase an investment property in a top tourist destination, you can expect steady demand from travelers while taking advantage of any non-rented periods to enjoy the home yourself. You can also adjust your rental price around peak demand to maximize your cash flow while building equity and long-term appreciation. 

To reap these benefits, however, you’ll need to understand the local laws and regulations on short-term rentals. We can help you identify suitable markets with investment potential.

WE’RE HERE TO HELP

Ready to calculate your personal net worth? Contact us for an easy-to-use worksheet and to find out your home’s current value. And if you want to learn more about growing your net worth through real estate, we can schedule a free consultation to answer your questions and explore your options. Whether you’re hoping to maximize the value of your current home or invest in a new property, we’re here to help you achieve your real estate goals.

The above references an opinion and is for informational purposes only.  It is not intended to be financial advice. Consult the appropriate professionals for advice regarding your individual needs.

Sources: 

  1. National Association of Realtors - https://www.nar.realtor/newsroom/housing-market-reaches-record-high-home-price-and-gains-in-march
  2. Forbes - https://www.forbes.com/advisor/investing/what-is-net-worth/
  3. The Washington Post - https://www.washingtonpost.com/business/on-small-business/your-net-worth-is-americas-secret-economic-weapon/2020/08/20/70df5b92-e2d4-11ea-82d8-5e55d47e90ca_story.html
  4. Bloomberg - https://www.bloomberg.com/news/articles/2021-04-09/home-prices-soar-in-frenzied-u-s-market-drained-of-supply
  5. Federal Reserve Economic Data - https://fred.stlouisfed.org/series/MSPUS
  6. Propmodo - https://www.propmodo.com/what-the-growing-short-term-rental-market-means-for-multifamily-real-estate/

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.
  • Visit our blog at NextHome Valleywide News for a monthly Phoenix Market Update.
Posted in Real Estate Trends