Through my own experiences with clients and in discussions with other Realtors, it is clear that the Phoenix real estate market has entered a peculiar phase. My own sense is that this phase is a transition.
What we are seeing is that the number of foreclosures has tightened quite substantially. Foreclosures represent the most obvious target of attention for prospective buyers given low pricing and the relative simplicity of transactions as compared to short sales. As a result of the pitched demand that we have seen over the past two months, the availability of foreclosures has been limited as well as the competition to purchase a good foreclosure has been strong.
For instance, a property in Maricopa that I put an offer in for had 18 initial offers. It’s now not unusual to see a Phoenix foreclosure have not two or three offers but easily four or more. In addition, a tactic I employed earlier than just about most Realtors, the escalator clause, is now likely being used by as much as a third of Realtors.
As the foreclosures have gotten harder to find and win, many buyers have been paying increased attention to normal homeseller properties. This is an unusual phenomenon and it is why, I believe, a Chandler home, I have listed began to see increased traffic and showings leading to an eventual contract. It is for this reason that I am consulting my normal homesellers to position for what may be a window of opportunity to sell their homes before additional foreclosures arrive.
Now, one has to ask, “What about short sales?” What we are seeing is a tendency on the part of buyers and Realtors to avoid short sales in many instances. This is due to the potential difficulties and frustrations inherent with these transactions as well as the uncertainty of when any deal may close. For these reasons and the fact that a short sale simply doesn’t work for buyers under a tight timeline, buyers are avoiding short sales. Hence, the increased attention being paid to normal seller transactions.
I have worked on a number of short sale transactions for clients, especially with respect to buyers. Though I have always been open to working short sales for clients, I more recently have found them to increasingly uncertain and frustrating. Many of these transactions never get to close. And though many Realtors will tell you they have a 100% success rate with getting short sales closed, my estimation is that these figures do not hold water. I am simply seeing too many that fail to close.
So, the market appears to be in a strange place at the moment, one that I don’t believe will hold. There is an expectation that a new wave of foreclosures is coming in the July timeframe. This wave should work to dump more inventory on the market in a short amount of time.
My expectation is that buyer demand will work to initially absorb much of any new inventory but that eventually the inventory will be too great and buyer demand will slow. Inventory will rise until a point that it begins to slow and buyer demand works to take in this inventory. We may see prices dip again given the changing market but to what extent is highly debatable.
For the moment, this market has the characteristics more of a seller’s market than a buyer’s market. However, new inventory will again change this. Buyers will have to put their best offers forward in more creative ways to ‘win the deal.’ Sellers, especially normal non-distressed sellers, have an opportunity to price their Phoenix homes well and potentially get a contract before the market again shifts.
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