Market update June 2015

For Buyers:
The month of May continued to be extremely competitive and frustrating for buyers under $300,000 where there is little for sale within the most populated areas of Maricopa County.  It was a better experience for those buyers looking over $300,000 and those in the outlying areas where inventory is more abundant.  For frustrated buyers, the summer may be a welcome relief as many people take off when the temperatures rise.  Don’t expect much relief from sellers however; the inventory shortage in single family homes under $300,000 continues.  There are very few listings in this price range going on the market to replace what has sold.
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The areas with the least amount of supply for a growing demand include:  the West Valley, South Phoenix, South Scottsdale, and the Southeast Valley, close to freeway access.  All of these areas are expected to show a higher annual price appreciation over the next 3 to 6 months.
The areas with the most inventory to choose from are either higher in price, farther from town, or both.  They include most of Scottsdale (especially North Scottsdale), The Biltmore, Central Avenue, Downtown Phoenix, Gold Canyon, Florence, Coolidge and Casa Grande.


For Sellers:
Sellers have more control in negotiations this year than they did in 2014, especially if their property is under $300,000 and convenient to the freeway system.  However, be prepared as many buyers in this price range do not have significant cash to cover the difference between the agreed price and an appraisal that may fall short.  As a result, appraisal practices will be more influential on appreciation rates than they have been in the past when cash buyers were more abundant.  Expect more conservative and sustainable price increases.Despite the frenzy of activity, at least 31% of all closed sales in May under $300,000 included seller-assisted closing costs according to MLS records.  To put it in perspective, during the last seller’s market in July 2013, only 14% of closings under $300,000 involved seller-paid closing costs.  This is because there were more investors purchasing for cash than there are today.  Many buyers are writing contracts for over list price and offsetting that increase by having the seller pay closing costs.  As a result, a large chunk of the “appreciation” in price isn’t true appreciation at all since it’s eaten up by the cost of the sale.  Many appraisers are aware of this practice and are adjusting their appraisals accordingly.

The luxury market over $500,000 is starting its seasonal decline.  Between May and August, listings under contract will typically decline between 35% – 40% as the temperature rises.  It’s been a very good season thus far; May had the highest number of sales over $500,000 in 7 years!  The higher number of listings in escrow gives us an indicator that the summer slow season should still be better than last year for closings.

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