Scottsdale housing market

The Scottsdale housing market deserves an analysis of what's happened so far this year – and what we can expect in 2017. With the end of the year quickly approaching, let’s take a look at some of the important facts impacting the real estate market this year.

Refinancing is on the decline.

It took the better part of the entire year, but it appears most people that can refinance already have done so. With rates at or near historic lows, borrowers flocked to their mortgage lenders to pay off loans with interest rates as high as 5%-7% in favor of those averaging in the 3.00%-3.5% range. Refinancing, according to mortgage experts, were the the largest growth stimulators for most banks and lending institutions. Since rates just can’t get much lower, it’s doubtful that refinancing will continue to be as popular as it was in 2016.

Buyers are attracted to new homes.

Many in the Scottsdale housing market are choosing to purchase newly built single family homes instead of existing ones. With home inventory levels down in the Dayton Ohio housing market,

Despite the homeowner participation rate at a record low during much of 2016, many homebuyers chose to purchase newly built single family homes instead of existing ones. With home inventory levels down in the Scottsdale housing market, homeowners were slower to perform the necessary upgrades to their homes and put them up for sale. This created what economists describe as a “self-fulfilling prophecy” of continued lower inventory and a supply unable to keep pace with demand. The effect was especially detrimental to the starter home market, where first-time homebuyers usually begin their search.

Homebuyer confidence continues to remain robust.  

As we’ve seen in recent years, millennials are very careful with their money. As such, many of them have put off home buying until they are able to save for a down payment, or until they are confident with their career choices and the city in which they live and work. However, these fiscally conservative young adults increasingly do want to own their own homes. The proverbial “catch” is they want to do so on their own terms. Remember, this segment of the population is accustomed to renting and they have grown used to the short-term flexibility and expectations that go hand-in-hand with renting an apartment or home. Surveys show more than 85% of millennials plan to stay in the homes they purchase for less than seven years. So, mortgage terms and the ability to sell their homes in a few short years are important factors to them.

Low interest rates prevailed.

Probably the biggest advantage the Scottsdale housing market experienced in 2016 was the consistently low interest rates. Steadily improving consumer confidence combined with reportedly lower jobless rates have given the Federal Reserve little reason to raise interest rates, at least for the time being. Experts say the downside of lower interest rates is that new home sales – which have come to expect and almost take for granted low mortgage rates – will suffer slightly. As is normally the case with a rate increase, even a slight one, potential home purchasers typically are slower to make a move. On a more positive note, however, rising rates usually mean home sales prices will either level off or decrease somewhat.

Remember, all real estate is local… and that’s a good thing.

During 2016, it was reinforced over and over again that it’s difficult – and even dangerous – to lump the real estate market into one large basket. Each individual market is different because each region of the United States is different in terms of the economic influencers in a certain community or state. While some markets may be experiencing very good sales and higher sales prices, others may be lagging behind – negatively influenced by the closing of a large manufacturing facility or the damages cause by a flood, a hurricane or other natural disaster. In addition, the housing market in a state or region that employs a large number of millennials, for example, can be impacted negatively because the average length of time they stay on a job is 2.8 years.

With what we’ve experienced and learned in the Scottsdale housing market in 2016, what can we expect in 2017?

While many factors could come into play between now and the first of the year, it appears to many economists that home prices have probably peaked and will likely go down slightly – for these main reasons:

What goes up must come down. That's usually a “given” in the real estate market. In the long run, home values usually rise. However, if we look at the manner in which prices have risen during the past year or so, a number of the hotter markets will likely experience a correction, causing prices to stabilize or dip.

Interest rates will go up.  After all, interest rates can’t stay this low forever, right? So, expect an increase – even a slight one – sometime in 2017. And when rates rise, home prices will decrease.

Home inventory will increase. Analysts expect new construction to shift from multifamily units to single-family homes, making the Scottsdale housing market less competitive in the process.

Affordability will be a hot topic. It always is, but affordability will become even more important if inventory increases and interest rates go up.

How will the elections affect the Scottsdale housing market? The answer is yet to be determined and few discernible changes – if any – will likely not occur until late in the first quarter of 2017, if then. While both candidates have referenced the housing collapse of less than a decade ago, neither has provided a clear policy outlook for how to avoid a similar occurrence in the future. Look for continued government regulation and housing safeguards to protect the industry. However, as always, there will have to be a balance in order to keep home ownership affordable and popular without repeating the mortgage sins of 2008.

See more articles pertaining to the latest Scottsdale real estate news 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 as well.

In the Scottsdale housing market and others throughout the country, as spring approaches so does a feeling of optimism for many looking to buy. Historically, for a variety of reasons, the coming of spring signals the start of the housing market's activity. However, with home inventory at considerably lower levels than most real estate professionals would like to see them, a home search promises to be a challenging and lengthy task.

Inventory Low in Scottsdale Housing Market

With the supply of homes on the market scarce, real estate experts expect demand to continue to rise. Home prices remain on the upswing – not as a result of rising incomes, but simply because of the age-old economic principles of supply and demand. Homes in short supply meet demand at its peak, resulting in a proverbial seller's market enjoying higher sales prices.

While prices continue to rise, some economists say the pace is slowing a bit. Still, the growth in home prices should encourage additional activity in new home construction. Aggregate housing starts have remained above the annual rate of 1 million starts per year for the past eleven months. In addition – and more importantly – single family housing starts have exceeded 700,000 units per year since June 2015. So, in spite of the lagging inventory of homes on the market, housing investment continues to be a positive factor in the growth of the gross domestic product of the U.S.

Homes in or near urban centers are expected to fare the best. The demand to be close to the city or metropolitan areas creates a veritable buying frenzy. Tight inventory will lead to multiple offers as prospective buyers look to purchase – often before the homes officially reach the marketplace.

The prognosis for some buyers isn't quite as rosy, however. Zillow Chief Economist Svenja Gudell says, "There are a lot of economic forces at work behind the scenes that will have a big impact on housing as we enter the busy home-shopping season. Low inventory is a factor in almost every market, so buyers should be prepared for a limited selection in the months to come.

Some home buyers won't find exactly what they're looking for. Those home shoppers will be faced with an uneasy dilemma. Will they be forced to settle for something that doesn't meet their expectations or needs? Many buyers are hesitant to make a purchase for fear they may get stuck with a house they can't easily resell. In addition, they dread "buyer's remorse" that may set in once they realize they made a bad decision by buying something they really didn't fall in love with.

As a result, renting is always an option. Some prospective first-time buyers have put off buying for a variety of reasons. Chief among them are a lack of a sufficient down payment, fear of taking on additional debt on top of student loans, an ever-changing job market and rising home prices. Plus, statistics have shown that younger buyers are less apt to buy "fixer uppers" at today's prices, primarily due to the cost involved to improve the property to meet their needs.

For those in the Scottsdale housing market looking to buy but possibly deciding to rent until they find their dream home, they're faced with another dilemma: rising rents. The question many will have to ask themselves is, "Does it make better financial sense to buy or rent?" Most real estate analysts say that depends on the old adage of "location, location, location." In some markets throughout the U.S., homeowners can reach the break-even point in less than two years. What that means is home buyers can spend as much to own as to rent, taking into consideration mortgage rates, down payments and taxes. In pricier markets the break-even period may take longer – often between 4-5 years.

Some home buyers remain bullish on buying instead of renting – even though they may not find exactly what they want. They view home ownership as an investment, preferring to buy and hold the house as it appreciates in value. This segment of the Scottsdale housing market is less likely to rent. They consider renting tantamount to throwing money away without building equity in an investment. And, with mortgage interest rates near record lows, buying probably makes better sense for many.

Other factors will impact the Scottsdale housing market this spring. Global economic volatility continues to contribute to an ever-strengthening U.S. dollar. This will ultimately have an effect on demand from foreign purchasers, resulting in keeping interest rates low.

In addition, some U.S. economists warn that continued single-family residential investment as a major component of gross domestic product is worth watching and tracking. Historically, the investment component has been a high-ranking monetary indicator that tends to peak just before the beginning of economic recessions. This has been cited as a reason that some financial analysts point to a "mild to moderate" recession by the third quarter of 2016.

 

See more articles pertaining to the Scottsdale housing market in the Scottsdale Real Estate News section of our site below Scottsdale Real Estate Categories in the column to your right. You can find information there on a variety of topics ranging from home buying and home selling tips to home improvements, home inspections, mortgage financing, homeowner's insurance and much more.

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The Scottsdale housing market can expect a continuation of many of the factors it experienced in 2015. Zillow recently released their 2016 predictions for the housing and real estate markets. Let's take a look at what we can expect.

Scottsdale Housing – Challenges Ahead

According to Zillow, many of the recent market trends will linger longer. Some will turn into challenges facing prospective home buyers.

Affordability will worsen.
While many Americans have known this for awhile now, home ownership simply might not be a reachable goal for some.

First time home buyers will be older.
In 1975, the median age of a first time home buyer was 29. Today, it's 33. This trend is expected to continue as millennials delay important life decisions such as getting married and starting families. In addition, many young people will continue to have a hard time moving from being renters to prospective home owners. The available inventory of starter homes remains low and many millennials have been unable or unwilling to save money for a down payment.

 

Home price growth will still outpace income.
While home values will grow at a slower rate than they did in 2015, they will still rise. Experts predict a return to increases of around 3.5%, which is the historical average. Home affordability is expected to get worse because income growth has remained stagnant — especially at the bottom end of the job spectrum. It is expected that the bottom third of working Americans will be priced out of home ownership.

Rents will continue to rise.
The rental market is a classic case of supply and demand. There is a high demand for affordable rental units and currently a limited supply. Zillow expects that trend to continue well into 2016.

Suburban areas will grow in popularity.
The affordability crisis will dramatically affect the urban centers. This means people will seek housing in the surrounding suburbs. There they will expect many of the amenities the cities offer – and close access to the urban centers – but with more affordable housing costs.

Get more updates on the Scottsdale housing market and news that affects the market by checking back here from time to time, and by checking out the other articles in our Scottsdale real estate news section of articles under Scottsdale Real Estate Categories to your right.

Until recently the Scottsdale housing market has been missing the segment of the population known as "millennials." That generation has been described as having poor spending and saving habits. Many have finished college and are facing repayment of student loans. On top of that, rents have skyrocketed in recent years – increasing at a faster rate than incomes – making it difficult to save money for a down payment to buy a home.

Millennial Growth in Scottsdale Housing

Until recently the Scottsdale housing market has been missing the segment of the population known as millennials.

A recent report by the Federal National Mortgage Association (Fannie Mae) cites a larger number of millennials are becoming homeowners. The report says with the exception of the last housing boom from 2000-2005, the number of young, first-time home buyers has been dropping for the last 20+ years. The decline began during the Great Recession and that part of the Scottsdale housing market never fully recovered.

New information provided by the U.S. Census Bureau's American Community Survey shows the number of homeowners aged 25-34 fell an average of 300,000 people each year between 2007-2012. The decrease came despite the growth in the younger population during that time.

In 2013, the decrease in the number of young homeowners improved to roughly 200,000 for the year. According to the Fannie Mae report, the number in 2014 was roughly the same as 2013.

So, what does this mean for the Scottsdale housing market?
Experts expect the young adult population to grow between now and 2020. If this occurs, even a small improvement in the ownership rate would grow that market segment. That should affect the housing industry in several different ways.

The construction of new housing would need to adapt and adjust in the size and types of homes, as well as the geographic locations where the homes are built.
Young adults will have needs and expectations that may be different from their older home buying counterparts. Millennials are used to greater technology, for example, and more open living areas.

There will be a growing need to educate, orient and advise first-time home buyers.
Since buying a home will be a new experience for the young adults, many don't know where to start in the home buying process. They may not know there are mortgage lending programs with low down payments and other advantages for first-time buyers in the Scottsdale housing market.

There will be increasing demand for services and technologies designed to help young home buyers.
Millennials are comfortable with online information research and transactions. Making it easier for them to search, virtually "visit" homes and apply for financing will be key in growing the number of potential young home buyers.

We have more information on the Scottsdale housing market under various sections in our Scottsdale Real Estate Categories to your right, and we also publish updates on Facebook and Twitter. Look for us there as well.

The Scottsdale housing market has been anticipating a possible interest rate hike by the Federal Reserve Bank. Analysts say a small interest rate hike will have little effect on housing activity. In fact, there are other components that are more telling that could impact Scottsdale housing.

What to Look for in the Scottsdale Housing Market

Some industry insiders say the only potential threat that may exist as a result of a rate hike would be the effect it has on credit standards for buyers trying to qualify for a mortgage loan.

First time home buyers could potentially see loan qualifications tighten as those credit standards change. The tighter credit policies have typically been implemented to guard against a repeat of the housing crisis from less than a decade ago.

In the years preceding the last housing crisis, the Scottsdale housing market included borrowers that had bought beyond their abilities to repay. When the economy weakened and unemployment rose the market quickly saw how home values were artificially inflated.

There is concern among some analysts that three factors continue to plague the housing industry — despite activity and sales being the highest in the previous eight years.

1. The recent psychological shift among Millenials to become more urban, city dwellers instead of suburban homeowners.

2. The fear that Fannie Mae, Freddie Mac and the FHA are returning to their old ways with low down payment requirements that may lead to higher loan-to-value (LTV) ratios. Still, other real estate analysts say as the younger Millenials have children the trend seems to be changing as they seek better schools and other attractive features of suburban living.

3. The unemployment rate. Jobs are more of a Scottsdale housing market indicator that other factors. Housing is strong where there is lower unemployment. The rule of thumb is a high employment rate, the slower the housing market.

Lastly, the main reason there seems to be little fear that a rate hike may affect Scottsdale housing is in dollars and cents. A 1/4 point rate increase on a $250,000 mortgage only increases the monthly payment by roughly $35. Experts say it usually takes an increase of a full percentage point to make a noticeable affect on consumers.

For more articles pertaining to Scottsdale housing, check out the Scottsdale Real Estate section of our site to your right below Scottsdale Real Estate Categories. Remember, we also post tips daily on Twitter and Facebook. Check us out there too.