Good news for sellers: Johnathan Smoke, chief economist of Realtor.com, is forecasting there’ll be a strong demand for new and existing homes this spring.
Although the Valley as a whole isn’t experiencing the listing shortages that other cities are—there’s been a 26 percent increase in the number of listings in the first quarter of 2016 versus the first quarter of 2015, according to the Cromford Report—the reasons Smoke believes the market will sizzle this spring apply to Scottsdale.
First and foremost, the economy keeps growing.
“After a turbulent start to the year, the financial markets shook it off and ended the quarter up,” he says in an article for Realtor.com. “Meanwhile, 215,000 jobs were created in March, capping off a strong first quarter for employment and labor force participation growth.”
Local indicators back this up. According to the Economic and Business Research Center at the University of Arizona, the state’s year-over-year job growth was 3 percent in both January and February. That’s better than the 1.9 percent posted for the U.S. in February. Job growth in the Phoenix metropolitan area specifically was 3.5 percent.
Smoke also notes that consumer confidence has mostly recovered after taking a dip in February.
“The number of consumers who say they plan to purchase a home is at its highest point in eight years, reflecting that strong confidence, but also significant pent-up demand for home purchases that were delayed or unresolved in 2015,” he says.
He also reports that the “latest signals from the Federal Reserve indicate a less aggressive stance on trying to increase interest rates in the near term, so rates may indeed stay low.” He predicts they will remain under four percent for a 30-year fixed loan.
Smoke also cites the average 30-year fixed conforming rate, which ended in March almost 40 basis points (a basis point is 0.01 percentage point) lower than the end of 2015. He says that lower rate translates into more buying power and/or can make it easier for some people to qualify for a loan in the first place.
Unfortunately, there aren’t enough homes to buy, Smoke says. Although listings have increased in February and March, there still aren’t enough homes to meet demand.
Here in the Valley, that trend holds true to a certain extent. There were 1,538 new homes added to the ARMLS listings during the first quarter of 2016, an increase of 26 percent over the first quarter of 2015, according to the Cromford Report.
The report also indicates strong growth in the number of listings for the $225,000-$600,000 and the $800,000-$1 million ranges. However, because there are more active listings, especially in the $400,000 and up range, buyers have more choice and more negotiating power.
Most Scottsdale properties are over the $200,000 price point, however, it’s worth noting that there is a shortage of homes available below $200,000, so sellers have most of the negotiating power in these transactions.
In addition to the strong local economy, Scottsdale has another factor in its favor. Recent Census Bureau population estimates indicate that the Phoenix metropolitan area had the fourth largest population increase in the nation.
The bottom line is that consumer confidence is up, so more people are looking to purchase a home, which is great news for sellers. If you’re one of those looking to buy there’s good news for you, too: you may have more choices in that $400,000 and up price range, as well as a little more negotiating power.
Want to discuss how they may affect your particular home’s sale or which home you’d like to purchase? Feel free to give me a call anytime to chat about Valley growth.