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If you
worry that the Kyrene Corridor housing
market may continue to cool down,
consider this: Phoenix remains among the
nation's top five metro areas in terms
of net in-migration, averaging 130,000
people, or up to 40,000 new families, a
year.
That,
coupled with an unemployment rate of
less than five percent, means that home
sellers need have little long-term
concern that their investment will go
sour.
It doesn't
mean that today's prices are as high as
we'd like.
"Right now
there is a huge oversupply of resale
homes," says Jeff Lucas, owner-broker of
ERA Lucas real estate offices in south
Tempe and west Chandler.
"When I
ran the numbers last week, there were
38,000 active resale listings; a year
ago there were less than 5,000," said
Lucas.
That
translates to a 700 percent increase, he
says, a jump that represents a record
high for Valley home listings.
The larger
inventory means that prices are lower,
negotiation is again fashionable, and
resale homes are staying on the market
60 to 90 days rather than being sold
virtually overnight. Price reductions of
10 percent--$40,000 to $50,000 on a
typical sale--are not uncommon.
It also
has changed the seller's modus
operandi, suggests Lucas. Homes need
to be market ready with fresh paint, new
floor coverings and other upgrades. And
the seller has to be attuned to prices
in the immediate market area, which
typically have been declining.
While the
flood of new listings represents a
reversal of last year's market, in which
values went up as much as 50 percent,
buyers with homes purchased during that
super-heated period can still count
their blessings.
"If you do
the math, even if average prices drop by
10 percent sellers still have realized a
net gain of 30 to 35 percent," Lucas
says.
"While
putting a home up for sale now may
require some concessions, the seller has
still gained a handsome sum."
There's
also good news for buyers who bought
investment homes and plan to hold them:
the rental market is gaining momentum.
Because of
an increase in apartment-to-condo
conversions (more than half of the
former apartment complexes in Scottsdale
have been converted), apartments are
becoming scarcer.
The same
trend has been spreading to the
southeast Valley, where properties at
Ray and McClintock, Kyrene and Elliot
and Dobson and Ray are among those
switching to owner-occupied status.
The
conversion trend, which Lucas calls the
newest niche in affordable housing,
results in a shortage of apartments, a
phenomenon which naturally drives up
rents.
It seems
to be a case where everybody wins.
"For
someone just out of school and trying to
get their (financial) legs under them, a
sale price of $150,000 to $250,000 can
be the perfect solution," Lucas says.
With five
to 10 percent appreciation a year, a
condo could represent an otherwise
unavailable opportunity.
Likewise,
he says, the trend means that investors
with one or two properties probably will
see an increase of 10 percent or more in
rents.
Another
spin-off of current market conditions,
according to Lucas, is the growing
affordability of homes in such outlying
areas as Queen Creek, Maricopa and
others.
Part of
the cause, he says, is the cost of gas.
"People
who bought in the fringe areas and also
bought a big SUV are getting a double
whammy," says Lucas.
Thus, he
says, they're desperately seeking
alternatives.
"These are
very weak markets right now, and there
will be some good buying opportunities
for investors who want to hold their
properties for three to five years."
So what
advice does Lucas offer the typical
buyer?
"Unless
there's a lot of urgency, better values
may be available three to six months
from now," he says. The buyer's only
real risk is that interest rates may
continue to go up (they have increased
one percent in the last year). But that
seemingly doesn't worry some buyers.
"People
get the sense the market is soft, and
they're waiting because they think if
prices are declining, they'll be able to
buy for even less six months from now." |
