By Mike Bodeen · 11 July 2016
Buyers and Sellers Markets
These days, the best buys are as much priced based as geographically based. If we divide the single family luxury home market into 3 price ranges, we can get a good picture of buyers and sellers markets:
$500,000 to $1 million
$1 million to $2 million
Over $2 million
We’ve reported for well over a year now that the Phoenix/Scottsdale metro real estate market is a very hot market under $300,000 – this price range is without question a seller’s market. The market between $300,000 and $500,000 is also doing well, though we do not characterize it as very hot, but strong, this is a more balanced market. The market between $500,000 and $1,000,000 is doing okay, but we consider it a soft market, leaning towards a buyer’s market. Once we get over a million, it then turns solidly into a buyer’s market and the higher you go, the more it benefits buyers.
Why the disparity? For one thing, availability of funds. Under $280,000 buyers are able to secure FHA financing with just 3.5% cash down and less than stellar credit. Up to just over a half million dollars, buyers can get a conventional loan with 20% down at the best rates. A loan amount over $417,000 however, is called a jumbo loan and is costlier and scrutinized more closely by lenders.
Cash transactions currently represent 19% of all purchases in Maricopa County. Most of these cash purchases are under $300,000 purchased by investors.
There is an affordable niche market that has some good opportunities if you have 20% down or more. That is the price range between $325,000 and $400,000. Buyers can’t get into this range without the 20% down which is a lot of dough for a lower price home so homes have tended to take longer to sell. (Caveat on this one: Some banks are now starting to loan at higher amounts with low downs if a primary residence and EXCELLENT credit, and if this continues then we could see this price range take off)
Price Range / Annual Change in Active Listings / Annual Change in Quarterly Sales Rate / Annual Appreciation in $/SF / Comments
$500,000 to $1 million: +17% / +16% / +0.7% / Demand has risen almost as much as supply – reasonable market for sellers
$1 million to $2 million: +18% / -1% / -1.2% / Significant rise in supply is not matched by a rise in demand – poor market for sellers
Over $2 million: +10% / -14% / -2.9% / Significant rise in supply and an even more significant drop in demand – very poor market for sellers
With the higher amount, until recently the problem was mostly excess supply, but in the second quarter demand dropped for homes over $2 million compared to the same period in 2015.
The ZIP codes with the weakest price trends for luxury homes (based on the second quarter prices for 2016 versus 2015) are:
Phoenix 85016
Phoenix 85021
Queen Creek 85142
Paradise Valley 85253
Scottsdale 85255
Scottsdale 85258
Scottsdale 85259
Scottsdale 85260
Scottsdale 85262
Scottsdale 85266
Chandler 85286
Cave Creek 85331