Scottsdale Real Estate

One of the things to keep in mind when observing the housing market, is that price is affected by many factors. Keeping an eye on both national and local factors is critical when looking to get a good idea of the future of the housing market. To this end, there are organizations which assess and report trends in the housing market. The National Association of Home Builders (NAHB) releases monthly assessments of homebuilder confidence. The NAHB homebuilder confidence index is a look at how optimistic homebuilders are sales of single family houses in the near future. So, what does it all mean, and why is it happening?

The index is compiled through survey of home builders. They are invited to rate their current sales as well as what they expect the next 6 months to look like. Their scores are compiled into an aggregate rating, with scores above 50 being positive, and scores below indicating negative sentiment. Currently, the score is 71, indicating a lot of confidence about the future of the housing market.

While the index jumped after the election which cemented Donald Trump as the president, it slid in the first two months of his presidency before jumping again in March, this time to the highest level in 12 years. The changing political climate is a major factor in the home market. So, a large part of the rise is that builders believe changes in the laws and regulations governing housing will change to affect them positively. One of the main factors is that Donald Trump has sworn to repeal and remove many of the environmental regulations on the construction of new houses. As builders have seen congress and the president moving in this direction, they understand that less regulations will mean cheaper construction.

What this means, is that we could end up seeing a stronger home market in the next few years. While it is important to keep an eye on a number of market factors, this one suggests that there could be increased construction and sale of homes. While the housing market has largely recovered from the Great Recession, many homeowners and businessmen stand to profit if the housing market goes through a boom.  However, we will have to wait and see what surprises await us in the coming years. While things look good now, it remains to be seen whether or not these confident expectations will be met.

Recent trends have seen Scottsdale real estate interest rates rise slightly over the past couple of months. While prospective home buyers may feel disillusioned by rising rates, let's take a look at what it may mean for them and the possibility of becoming homeowners.

As mortgage rates increase, naturally, the amount of home you can purchase decreases. In other words, the higher the interest rate, the higher the payment — and perhaps the lower the mortgage amount must be to be affordable. Borrowers need not be completely dismayed however, as there is flexibility among mortgage lenders and their qualification guidelines. Let's take a short revisit of the rate fluctuations since the presidential elections of this past November and review how interest rates have affected home affordability. How will recent Scottsdale real estate trends affect the housing market?

Scottsdale real estate interest rates have risen slightly over the past couple of months.

A Recap of Scottsdale Real Estate Interest Rates and the Outlook for the Future

Between the election on November 8 and Christmas of 2016, Scottsdale real estate interest rates went up .75%. The rate increase was fueled in part by the feeling on the part of the American public that the new administration would enact policies of infrastructure spending, tax cuts, and a certain amount of deregulation that, once enacted, would be inflationary. In addition the skyrocketing gains in the stock market pushed the bond yields downward, and since mortgage rates are very closely tied to the US Treasury bond rates, mortgage rates had nowhere to go but up.

Most savvy economists felt when interest rates rose, they would also level off in time. And, while that is happening, it is still volatile at best. Interest rates go up and down literally daily in response to investors reacting to policies of the new administration. When investors exhibit concern that post-election inflation will continue to occur, the rates go higher. Conversely, when investors feel inflation will be softened by certain policies, delays in action, or hindrances, rates will come down.

The bottom line for interest rates is the post-election peak seems to be over, and the net result is an interest rate increase of roughly .5% since the election.

Experts predict continued rate volatility as stock market investors and the Federal Reserve work to gauge interest rate movement as part of the new government administration. Here's how that volatility is expected to impact housing activity.

The Effect of Scottsdale Real Estate Interest Rates on Home Affordability

According to experts, a $350,000 home purchase on which a prospective borrower plans to put down 20%, a rate increase of .5% reduces the affordability by roughly $17,000.

While such a decrease in affordability may tend to make a prospective homebuyer look for a lower-priced home, there are other alternatives — especially if you're familiar with how most mortgage lenders operate.

For decades, mortgage lenders have used a debt-to-income (DTI) ratio in their qualification guidelines. A DTI compares the relationship of your total monthly recurring debt to your gross monthly income. Mortgage lenders typically like to see a DTI of 43% or less.

Borrowers earning, say, $65,000 annually with monthly obligations such as an auto loan and credit card bills totaling $615 per month may have qualified for the $350,000 home mentioned above. However, at a slightly higher interest rate of .5% more, they may not. Here’s why: At the income and debt totals currently, the DTI ratio was less than 43%. With the rate increase, it’s climbed to over 44%. At first glance, the only solution is to work to reduce the purchase price down to $333,000 (the original $350,000 less the $17,000 by which the affordability was reduced.) That would reduce your DTI back to a level less than 43%. However, let’s consider an alternative.

Increasing Home Affordability

Rather than trying to get the price reduced by $17,000, most experts recommend lowering your other recurring debt. As an example, a monthly credit card payment of $125 with a remaining balance of $3,125 can be reduced to roughly $45 per month by paying down the balance by just $2,000. Honestly, that may be a much easier solution and a much softer sell than trying to get the seller to come down $17,000.

Analyzing Scottsdale Real Estate Interest Rates and Trends to Make the Best Decisions

It’s important to keep an eye on interest rates and other changes in the marketplace. Remember, in much the same way that the old adage, “All real estate is local,” all mortgage lending is individual. What that means is every situation is different and everyone’s DTI is comprised of components that may be changed slightly to improve the qualification percentage. Don’t make the erroneous assumption that rising rates will always reduce the price a borrower may qualify for.

See more articles pertaining to the latest Scottsdale real estate interest rates and trends in the section of articles on Scottsdale Real Estate just below Scottsdale Real Estate Categories in the column to your right. And remember, we also post tips daily on Facebook and Twitter. Check us out there as well.

The Scottsdale real estate outlook includes an update on what millennials have been doing lately. In recent years, millennials have been largely thought of as a generation of renters. They’ve unfairly received this moniker because of a number of factors, none the least of which is that home prices throughout the U.S. have consistently grown faster than wages. However, an improved and lowered cost of living combined with better job growth and rising incomes has led and will lead to many millennials beginning to buy houses.

Four areas in the Scottsdale real estate outlook designed to attract millennials.

According to real estate market research findings, last year nearly half of the total number of homebuyers were first-timers – and the majority of those were younger Americans aged 18 to 35 – millennials, by definition. All indications are for 2017 the percentage of millennials entering the housing market will continue to increase.

During the third quarter of 2016, the U.S. Census Bureau reports that home ownership was at 63.5%, slightly higher than the second quarter in which the 62.9% home participation rate was the lowest in 51 years.

Let’s examine four areas in the Scottsdale real estate outlook designed to attract millennials as they enter the home-buying market.

More and better amenities.
Millennials have come to expect and appreciate added extras in the apartment complexes in which they were living. It’s natural for them to want to have some of the same perks in the home or neighborhood in which they are thinking of moving. Examples are having larger bandwidth capabilities for social media and streaming music and videos and equipping homes with programmable thermostats and built-in USB outlets.

More search technology.
Millennials have also relied heavily on available resources in this information age. Today’s prospective homeowner almost always begins his search online. As such, they will continue to expect to be able to perform a variety of services remotely – either via an app or some other process – allowing them to negotiate and sign documents without leaving their homes or jobs.

Greater full-service offerings.
Given the number of millennials entering the housing market, the traditional role of a real estate agent is starting to change. The information age has provided consumers with a wealth of information about homes for sale. The missing piece seems to be how to aggregate or compile that information. Many real estate firms have chosen to provide better full-service offerings by not only assisting in finding or selling a home, but in addition, putting the client in contact with contractors or others to make the moving process smooth and easy for all involved.

Say goodbye to the “hard sell.”
With the focus more on full-service, as mentioned above, one of the changes in the Scottsdale real estate outlook will likely be that real estate agents will be able to concentrate less on the actual sales process and more on building relationships with their clients. Some real estate firms actually have prospective clients – both buyers and sellers – meet with a customer service manager first before they’re assigned to an agent. The firms report that this first point of customer interaction enables the prospective buyer or seller to do their fact-finding from a completely impartial source – without feeling like they were being “sold” anything. It’s more of an information exchange designed to make their prospective clients feel at ease in the early stages of the process.

As the Scottsdale real estate outlook continues to evolve and more millennials and other prospective purchasers enter the home buying arena, more changes are likely to occur. New homes currently under construction will probably have more open areas where families can be together in the same room enjoying the same activity, but yet be able to stay connected to their friends and others via their smartphones or tablets. In addition, homes will likely be built with smart-car garages equipped with electrical outlets for hybrid automobiles. Energy-efficient homes will become the norm as builders will attempt to woo millennials interested in being more environmentally conscious and more focused on sustainable, clean energy solutions.

The challenges in the Scottsdale real estate outlook continue to be basic housing shortcomings we’ve heard and read much about in the last 18-24 months. The number of available affordable housing units for sale still continues to lag behind normal levels. With this low inventory comes the added pressures of existing homeowners who would have normally been ready to sell and move up into a bigger, better or newer home, who have decided not to sell – simply because there are fewer homes available for them to choose from, too. Added to that dilemma is the continued rise in home prices. Most experts expect home prices across the U.S. to increase between 4.50% to 5.5% during 2017. So, the homes that are available for purchase will likely be more expensive than ever – the limited supply will probably continue to fuel what will be a seller’s market.

In addition, interest rates – mortgage rates in particular – are expected to rise during 2017. We’ve seen a slight uptick in rates since the presidential election, as a result of the growth of the stock market. Analysts say interest rates will continue to rise throughout 2017, but longer-term mortgage rates will probably not exceed 4.5%. While those rates are higher than the near-record rates of the previous 12-18 months, comparatively speaking an interest rate of even 4.5% to 5% is still a very good, affordable way to borrow money for the purchase of a home.

Despite the challenges on the horizon of the Scottsdale real estate outlook, 2017 looks like it has the potential to be a good year. The coming spring selling season will be the first test. If that’s successful, it could set the stage for a continued optimistic feeling on which the rest of the year will be based.

See more articles pertaining to the Scottsdale real estate outlook in the section of articles on Scottsdale Real Estate just below Scottsdale Real Estate Categories in the column to your right. And remember, we also post tips daily on Facebook and Twitter. Check us out there, too.

In examining Scottsdale real estate trends, at first glance some statistics are difficult to understand. For example, when it comes to homebuilder confidence in the December report recently released by the National Association of Home Builders (NAHB) the number reflects the highest confidence level since 2005 – a period of 11 years! In addition, the one-month move was cited as the largest in 20 years – attributed, in part, at least to the post-presidential election optimism on behalf of many NAHB insiders. Confusingly, just a day later monthly reported statistics on home construction published by the U.S. Census Bureau showed a drop of nearly 19%. The bottom line, at least on the surface, is the nation’s homebuilders are very happy and extremely optimistic, but not enough to build more single-family homes in the current market. As mentioned, the numbers – and the concepts – seem difficult to understand. Let’s take a closer look at what may be at the root of the confusion.

New home construction as it pertains to Scottsdale real estate trends

Experts say the two sets of numbers – builder confidence and home construction – once tracked closely together. However, in 2012 during the depths of the worst housing crash in history, the numbers seemed to distance themselves from each other – having less correlation than they once did. While builder and consumer optimism started its steady recovery, the actual homebuilding market continued to suffer. Some experts offer the theory that it was simply the result of a basic business psychology – and a little human nature. Homebuilders, because they are entrepreneurs at their core, were more optimistic during the recession than the market may have reflected. This optimism, some argue, is necessary and expected – homebuilders lacking optimism about the market’s future would’ve had to consider another profession for their livelihood. Simply put, it’s difficult – if not impossible – to be in a business and not be one of its biggest supporting cheerleaders. Still, too, some insiders say the monthly builders' sentiment published by the NAHB is slanted more towards the smaller, custom homebuilder and, as a result, the data is somewhat skewed. The NAHB website cites its surveys as being comprised of three component parts:  current sales, expected sales over the next six months and current buyer traffic. The NAHB says the survey is a “weighted average of separate… indices for these three key single-family series.”

Some experts familiar with both the NAHB and other independent surveys say with different weighting the findings can favor the larger-volume nationally-known builders. One such survey, published by a well-known real estate consulting firm issued this opinion:  “We asked the same three questions that the NAHB asks at the same time of 311 homebuilders overseeing 11 percent of all U.S. new home sales. Builders told us sales and expected sales are better than average, and traffic is slightly worse than average. Since the builder responses were virtually identical to the responses last month and last year, and this survey is weighted 59 percent to actual sales rather than sales expectations and buyer traffic, (we are) surprised by the sharp increase in the [NAHB] index.”

Homebuilder confidence as part of Scottsdale real estate trends, as it turns out, cannot only be portrayed in different ways, it is also very subjective. For example, one expert contends, if you consider the results of the NAHB survey and include surveys from businesses asking them if conditions are the same, worse or better in the face of the recent presidential election, you may find that the results are indications of the “direction” of change, not the “degree" – in other words, qualitative and not quantitative. Quantitative analysis can only be measured after the fact and typically has little to do with theory or anticipated results.

So, as it relates to Scottsdale real estate trends, there seems to be a much higher demand for housing compared to the existing supply of homes for sale in inventory. This fact on its own makes homebuilders more confident. It’s always nice to know any product you are manufacturing has both a built-in demand and one that is underserved. Of course, this trend has been in existence largely since the start of 2016 or earlier. But even more telling is that the overall U.S. economy has and is continuing to improve – and a number of business sectors throughout the nation are very optimistic that a Trump administration will mean great improvement. With that, the nagging question still remains:  “If all that’s true, why aren’t homebuilders constructing more houses than ever before as part of Scottsdale real estate trends?” The answer, as usual, boils down to the basics. Check them out:

Homebuilders continue to be thwarted by a myriad of new regulations that end up costing as much as 25% of the price of a newly constructed home. In addition, labor shortages – nothing new in the new construction industry – continue to weigh heavily on homebuilders’ abilities to gear up to the degree they’d need to to meet the existing demand. Ironically, the labor shortage – primarily because it relies on a large number of immigrant workers – may continue during the upcoming Trump administration. Other factors holding builders back include the high costs of land and building materials – with little relief in sight – as there are fewer finished, construction-ready lots in the neighborhoods and subdivisions in which buyers want to live or move into. Then, there's the whole feeling of cautious optimism that comes as a result of previous housing industry setbacks – and most homebuilders are very cautious after enduring the severe housing crash of a few years ago. Lastly, as a homebuilder operating purely on a business level dealing with supply and demand and the proverbial bottom line of making a profit, by building fewer homes in a market – largely called a seller’s market – they can command a higher sales price for the homes they build, and that's one of the Scottsdale real estate trends that's hard to ignore.

See more articles pertaining to Scottsdale real estate trends in the section of articles on Scottsdale Real Estate just below Scottsdale Real Estate Categories in the column to your right. And remember, we also post tips daily on Facebook and Twitter. Check us out there, too.

Much of the real estate news over the past 12-18 months has centered around an improving U.S. housing market that’s finally on the way to recovering from the last recession. Sales prices and home values have grown steadily during that time, while home inventory levels have been near historic lows. New home construction, though brisk, has struggled to keep pace with growing demand. As we prepare for the end of another calendar year, many analysts are asking the question, “Is the Scottsdale real estate seller's market over?”

Let’s take a more in-depth look into answering that question.

Is the Scottsdale real estate seller's market over?

The simple answer is “yes and no.” According to nationwide data, experts say the Scottsdale real estate seller's market news making headlines next year will be that the real estate market in 2017 will be very similar to what it was in 2016. Case in point: a nationally recognized real estate website took a survey of prospective homebuyers and reported that 52% are first-time buyers – an increase of 19% from the previous year. Real estate professionals say they, too, expect a larger number of first-time buyers entering the market next year, but express caution that with those new buyers comes challenges to both the real estate market and the buyers themselves.

What has caused the forecast for more first-time homebuyers to be looking into the 2017 market? Several factors:  A seemingly stronger job market and continued lower interest rates seem to be the real motivators. Plus, rents have risen almost as steadily as home values, prompting a number of first-timers to consider buying as a more sensible financial decision than renting.

The influx of first-time buyers will bring challenges – some of them of very real concern. Low home inventory is expected to continue to plague the delicate balancing act of supply and demand. Some experts say to absorb the expected 19% increase in first-time buyers, the market needs a minimum of six months of supply. However, the market has had 49 consecutive months of less than six months home supply. So, experts say, the Scottsdale real estate seller’s market will probably continue, as well as throughout the nation as a whole – with some areas or regions seeing slight shifting to the contrary.

So, where will seller’s markets continue?
Cities throughout America where the population continues to increase at a steady pace are the likely candidates for seller’s markets to continue. In these metropolitan areas, housing simply won’t be able to keep up with demand. When that happens, the fewer available homes on the market become more valuable and the seller’s benefit.

In some markets, real estate professionals report a slight increase in housing inventory which has caused asking prices to be more reasonable. In addition, some sellers are offering more concessions in negotiations such as paying partial closing costs or repair allowances. However, some of the increased inventory is artificial, in a sense, because those sellers aren’t committed to selling – they are simply testing the market to find out what level of interest there may be in buying a home at a certain price point. The result, experts say, is a dilution of the so-called Scottsdale real estate seller's market due to a perceived glut in inventory.

What about buying power and financing?
As always, chances are if a buyer qualifies for a mortgage loan he should still be successful in buying a home in most markets – even in a seller’s market. Experts recommend using some strategy in planning your purchase. Here’s why.

According to the website survey referenced above, over half the home shoppers responding planned to purchase in seven months or so – in the spring and summer – the housing market’s most popular time to buy. Real estate professionals say if you want to avoid competing offers and not engage in bidding wars, consider buying now or either wait another full year. That way, the market is a little leaner and there aren’t as many buyers – first-timers and others – scrambling for a limited supply of homes on the market. One expert likened the strategy to shopping for Christmas presents in, say, September. You’ll likely have everything available you’re looking to buy – without the hustle and bustle of last-minute shoppers and long lines. Given the existing home supply challenges with low home inventory, which experts say probably can’t and won’t change substantially in 2017, smart buyers could enjoy reasonable prices and less competition by buying this winter or waiting until next fall.

If you’re not ready to enter the market at the present time – because you don’t have a down payment or a lease that doesn’t expire until next spring – remember that the real estate market is cyclical. The market will likely cool off in what has been the most active areas. What that will ultimately mean is homebuyers will probably again have the upper hand one day. One expert had this to say about market shifts.

“Balanced markets don't really exist for a long period of time – they’re really only transitional. It could be six months or a year, but at some point in time even the hottest of markets… head into a buyer’s market.

So, what’s the bottom line?
It’s likely, as experts agree, that the Scottsdale real estate seller's market will feature headlines including slight increases in interest rates as a result of a Federal Reserve move in the next few months. In addition, now that the elections are over there will be less daily concern about a U.S. economy in flux, although we’ll all keep a watchful eye on foreign trade and its impact on the global economy over the next year or two. Lastly, though the home ownership participation rate has been the lowest in decades, it appears to be climbing slightly, giving real estate professionals and economists hope for greater increases in 2017 and years beyond.

See more articles pertaining to a Scottsdale real estate seller's market in the section of articles on Scottsdale Real Estate News just below Scottsdale Real Estate Categories in the column to your right. And remember, we also post tips daily on Facebook and Twitter. Check us out there, too.