Redfin's Free Market Trends Class - Phoenix

Slide 1 of 72

What the Sell? Phoenix Real Estate Trends

May 16, 2013 Tempe, AZ

Follow: @RedfinPhoenixLike: http://www.facebook.com/RedfinPhoenix

Slide 2 of 72

Agenda● A little bit about Redfin● National Trends● Local Trends● 2013 Predictions● Buyer relevant trends● Financing tends● Seller relevant trends● Redfin resources

Slide 3 of 72

7 Most Common Questions1. How fast are homes selling?2. How much will the seller come down on the price?3. Why are the REO’s listed so high?4. Where are short sales?5. Where are prices headed?6. Is this a buyers market or sellers?7. Are new homes a good deal?

Slide 4 of 72

A Little Bit About Who We Are● Redfin is a real estate brokerage that has helped over 20,000

people buy or sell a home; 97% would refer us to a friend.

● Customers, not commissions● Informed decisions● The right home for the right price

● No obligation● Get back a portion of our commission

Slide 5 of 72

National Market Trends

Slide 6 of 72

National Market TrendsThe key metrics across Redfin’s markets:

● Home sales rose 25% from February, but were barely up from 2012, rising just 0.9% year-over-year, the smallest gain in 14 months.

● The number of homes for sale declined 31% from March 2012 to March 2013 (a slight improvement over the 32% drop in February), and were flat month over month.

● Home prices in March increased 15% year over year, and rose 6% just since February.

● The percentage of listings that were under contract within 14 days of their debut inched up yet again from 33.2% in February to 34.8% in March, the highest point on record.

Slide 7 of 72

National Market Trends

Slide 8 of 72

Yesterday’s prices were a historic joke.

...and not a very funny one.

Slide 9 of 72

0.00

50.00

100.00

150.00

200.00

250.00

Phoenix 20-City Composite

Case-Shiller: Phoenix Area v. 20-City

Slide 10 of 72

Case-Shiller – By the Numbers Phoenix AreaUp 23.0% year-over-yearPeak was July 2006Down 43.7% from peakCurrently at May 2004 prices

20-City CompositeUp 9..3% year-over-yearPeak was July 2006Down 29.0% from peakCurrently at September 2003 prices

Slide 11 of 72

Local Trends

Slide 12 of 72

Local Trends – Recent and Current● 2012 Prices increased 15-47%● Inventory increased 20% from Mar12-Mar13● New home sales and prices increased● Inventory type has changed (REO & SS vs. Trad.)● Interest rates stayed low in 2012● Bidding wars● Homes sold quickly – 43% sold in under 2 weeks● Rental prices increased● Short sales are a bigger mess● New agents and returning agents● New lenders and returning lenders

Slide 13 of 72

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Paradise Valley

Fountain Hills

Peoria Cave Creek

Scottsdale Chandler Gilbert Tempe Mesa Glendale Avondale Phoenix

Median Sold $/sqft Year over Year

Slide 14 of 72

‐

10,000 

20,000 

30,000 

40,000 

50,000 

60,000 

70,000 Jan‐03

May‐…

Sep‐03

Jan‐04

May‐…

Sep‐04

Jan‐05

May‐…

Sep‐05

Jan‐06

May‐…

Sep‐06

Jan‐07

May‐…

Sep‐07

Jan‐08

May‐…

Sep‐08

Jan‐09

May‐…

Sep‐09

Jan‐10

May‐…

Sep‐10

Jan‐11

May‐…

Sep‐11

Jan‐12

May‐…

Sep‐12

Jan‐13

Number of Active Listings

# of Active Listings

Slide 15 of 72

17,000 

18,000 

19,000 

20,000 

21,000 

22,000 

23,000 

24,000 

Number of Active Listings12 Months

# of Active Listings

Media Says: 1% Drop in Inventory from Mar12 to Mar13

Slide 16 of 72

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Active Listings vs. UCB – The Real Count

Actives UCBReality: 20% INCREASE in Inventory from

Mar12 to Mar13

Slide 17 of 72

Months of Supply

0

2

4

6

8

10

12

14

16

18

Queens County Nassau County Suffolk County

Months

Supply of Inventory

2011 2012

Slide 18 of 72

$‐

$20 

$40 

$60 

$80 

$100 

$120 

$140 Sep‐10

Oct‐10

Nov‐10

Dec‐10

Jan‐11

Feb‐11

Mar‐11

Apr‐11

May‐11

Jun‐11

Jul‐1

1Au

g‐11

Sep‐11

Oct‐11

Nov‐11

Dec‐11

Jan‐12

Feb‐12

Mar‐12

Apr‐12

May‐12

Jun‐12

Jul‐1

2Au

g‐12

Sep‐12

Oct‐12

Nov‐12

Dec‐12

Jan‐13

Feb‐13

Mar‐13

Apr‐13

Avg $/sqft for 3 Bedroom HomesBy Listing Type

Traditional

Lender Owned

Short Sale

Slide 19 of 72

-10%

0%

10%

20%

30%

40%

50%

60%

70%

How are Home Buyers Paying for Homes?Cash vs Conv. vs FHA

CASH FHA Conv

Slide 20 of 72

Multiple Offers

of homes sold Jan. – Apr. in Phoenix

were ALL-CASH deals

Slide 21 of 72

Multiple Offers

of Redfin offers faced competition(October 2012 – April 2013 Phoenix)

Slide 22 of 72

Homes for Sale by Listing TypeShort Sales, 5%

Lender Owned, 7%

Traditional, 88%

Slide 23 of 72

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%Jan‐08

Mar‐08

May‐…

Jul‐0

8Sep‐08

Nov‐08

Jan‐09

Mar‐09

May‐…

Jul‐0

9Sep‐09

Nov‐09

Jan‐10

Mar‐10

May‐…

Jul‐1

0Sep‐10

Nov‐10

Jan‐11

Mar‐11

May‐…

Jul‐1

1Sep‐11

Nov‐11

Jan‐12

Mar‐12

May‐…

Jul‐1

2Sep‐12

Nov‐12

Jan‐13

Mar‐13

Single Family Home Sales % of Total by Type 2008‐2013Entire Phoenix Valley Source: ARMLS

TraditionalLender OwnedShort Sales

Oh &*$Where is

this going? Comfortable Chaos Recovery

Slide 24 of 72

What’s Coming in 2013?● Smaller increase in values (5-7%)

►Scottsdale 4%►Gilbert 8% ►Phoenix 12%

● Increased interest rates● Fewer FHA loans and fewer cash buyers● Different type of bidding wars, its not about the money this time● Home inspections will be the new deal killer● Pre and post possessions more common● New Agents = Chaos● Short Sales less desirable● Lender Owned homes, more time to dabble

Slide 25 of 72

Lender Owned (REO’s)What are they up to?

Slide 26 of 72

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Lender Owned Price DropsDrop From Original List Price

Drop from Final List Price (negotiations)

Slide 27 of 72

-

10

20

30

40

50

60

70

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Lender OwnedAverage Days on Market

Average Days on Market

Slide 28 of 72

0%

5%

10%

15%

20%

25%

Chance an Lender Owned will sell for above or below list price

% of total

Slide 29 of 72

REO Take Aways● There are fewer REOs selling ● REOs are being listed much higher than the market value. ● At the same time, banks are still tight on negotiations. Just

because they over priced the home doesn't mean they will come down that much more during negotiations.

● You can make an offer and roll the dice the appraisal will drop the value, but its not a wise decision

● Mysterious multiple offers after 30+ Days on the Market

Slide 30 of 72

Traditional Sales

Are they over priced?How much will the Sellers come down?

Slide 31 of 72

Traditional Sales● Two Types

►Flipped►Owner Owned

● Priced comparably● Priced at the top of the market● Tough on negotiations● 19% sell in the first two weeks● 43% sell in the first 30 days● Multiple offers during 1st week on the market

►Unlikely after the 1st week

Slide 32 of 72

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

1-7 8-14 15-21 22-29 30-44 45-59 60-89 90-119 120-149 150-180 180-364 365+

Days on Market vs Price DropsAvg of Total Price Drop

Avg Price Drop Before Accepted Contract

Avg Price Drop During Negotiations

Slide 33 of 72

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1-7 8-14 15-21 22-29 30-44 45-59 60-89 90-119 120-149 150-180 180-364 365+

% of Sales Compared to Days on Market

% of Sales43% of Homes Sell in the first

30 days

Slide 34 of 72

DOM vs. Price Drop Takeaways1. Sellers rarely come down more than 3% during negotiations unless

the home has been on the market longer than 60 days

2. Homes on the market 60-365 days only come down and average of 4% during negotiations.

3. If a home is over priced by more than 10% when it hits the market, it most likely won't sell. On average, homes on the market for 6 months before accepting a contract only come down an average of 9.4% (includes price drops and negotiations).

4. Bottom line, if you want the seller to come down more than 3% when negotiations start, the seller most likely won't accept your offer. Save yourself the time and find another home.

Slide 35 of 72

Changes in the New Construction Industry

Slide 36 of 72

What’s New with New Homes?● Technology● Green building

►HERS index (Energy Star)►SRP Powerwise►Solar panels►CFL lightbulbs► 14-SEER HVAC► Low-E glass►Spray foam insulation

● Is it effective for the owner?► Est. Annual Savings: $1,000+ ►Caution with solar

● Is it cost effective for the builder?

Slide 37 of 72

Construction Boom● Cause and Effect of New Construction Boom

►Prices increases: 34% in 12 months► Increased sales: 85% in 12 months►Build time takes longer►Quality becomes a concern►Material shortage► Labor shortage► Lotteries► Tough Negotiations

● Why?►Shortage of resale homes►Recent resale price increases

Slide 38 of 72

Top 5 Builders in Sales1. Pulte Homes2. D.R. Horton3. Meritage Homes4. Shea Homes5. Blandford Homes

Slide 39 of 72

Buyer Trends

Slide 40 of 72

Buyer Trends● Multiple offers, do they still exist?● How to present a strong offer

►Minimal added verbiage►Make it easy to determine the net price►30 Day closing►DocuSign►Fast turn arounds with paperwork►Use a local lender

● Investor competition►Does it exist?

Slide 41 of 72

Buyer Trends Cont.● Who are the new sellers

►What are they thinking►Why are they so firm on the price

● Pre/Post possession and lease backs►What to consider

● Home inspections ►The new deal killer►Second round of negotiations

● Inspection Negotiations►You can only ask for repairs, not concessions►Only ask for work you would do if you were in their shoes

Slide 42 of 72

Financing Trends

Slide 43 of 72

Financing trends● Rules, Rules, Rules● Mortgage Lending in America● Fannie, Freddie, HUH?● Bye Bye FHA● USDA● VA● Condo Life, How hard is it to achieve● Private vs Government – MAIN EVENT! ● Rates● Questions

Slide 44 of 72

Who makes the lending rules● Government Oversight

● Wall Street

● Servicer Companies

● Warehouse Lines

● Lenders

● Etc, etc, etc

Slide 45 of 72

Who makes the lending rules● Government Oversight

► Dodd/Frank -The Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111–203, H.R. 4173) was signed into federal law by President Barack Obamaon July 21, 2010.[1] Passed as a response to the late-2000s recession, it brought the most significant changes to financial regulation in the United States since the regulatory reform that followed the Great Depression.[2][3][4]

It made changes in the American financial regulatory environment that affect all federal financial regulatory agencies and almost every part of the nation's financial services industry

*Dodd/Frank: http://en.wikipedia.org/wiki/Law_of_the_United_States#Federal_law

Slide 46 of 72

Who makes the lending rules►MDIA – Federal Reserve ►RESPA - Effective July 21, 2011, the Real Estate

Settlement Procedures Act (RESPA) will be administered and enforced by the Consumer Financial Protection Bureau

►TILA / Reg Z - FDIC ►ECOA / Reg B – FTC / CFPB ►HOEPA ► Higher-Priced Loans

Slide 47 of 72

Who makes the lending rules● Wall Street

►Mortgage Backed Securities

● Loan Servicers

● Warehouse Lines

● Lending Companies

TREND: Probably see more government oversight and regulation of mortgage activities. This is a balancing act by the government, Keep restrictions strong enough to protect consumers but lose enough to allow for economic growth.

Slide 48 of 72

Lending in America

• Depository Bank

• Mortgage Bank / Correspondent Lender

• Mortgage Broker

• Private Money

• Wall Street / Hedge Funds

Slide 49 of 72

Lending in America – Depository Banks● Wells Fargo, Chase, US Bank, Bank of America

● Credit Unions

● Employ Loan Officer’s, Underwriters, Processors, Compliance, etc

● Heavy compliance – CFPB, Basel III, SEC, etc etc

Slide 50 of 72

Lending in America – Mortgage Bank● Peoples Mortgage / Correspondent Lender

►Employs Loan Officer, Underwriter, Processor, Compliance

● Warehouse Line

● Buyers of mortgages – Depository Banks, Hedge Funds, Wall Street

● Different Guidelines (and Same)

Slide 51 of 72

Lending in America – Mortgage Broker● Middelman

● Brunt of mortgage meltdown blame

● Strict guidelines

● Discloses Fees Differently

Slide 52 of 72

Lending in America – Other● Private Money

● Hedge Funds

● Wall Street Companies

TREND: As we see the market tighten with guidelines the goal of the government is to get private money back into buying mortgage. They may buy from depository banks, mortgage banks, and mortgage brokers

Slide 53 of 72

Fannie Mae and Freddie Mac● Fannie Mae - http://www.fanniemae.com/portal/about-

us/company-overview/about-fm.html

● Freddie Mac -http://www.freddiemac.com/corporate/company_profile/

● Prior to 2008 they were private companies with implicate backing by federal government.

● Post 2008 became a GSE (Government Sponsored Enterprise)

TREND: We may see these two entities merge and become one. Government is trying to reduce their role in the housing market

Slide 54 of 72

Bye Bye FHA ● HUD – US Department of Housing and Urban Development

►http://portal.hud.gov/hudportal/HUD?src=/about/hud_history

● FHA loans (GSE)

● Cost has risen drastically►Was .55% ►Now 1.25%►Going to 1.35%

TREND: HUD/FHA continue to raise the cost of ensuring a FHA Loan. Great rates but high mortgage insurance. Will probably see a shift to 5% down conventional loans.

Slide 55 of 72

USDA and VA ● USDA?

►United States Department of Agriculture

• Rural Areas

• Special programs

TREND: We don’t see a lot of changes with VA programs. USDA continues to have changes and oversight.

Slide 56 of 72

Condo Life● Special Restrictions

● Condo Questionnaire / Certs►https://www.condocerts.com/

● Typically lower priced

● Property Flips can be a problem

● Must be on FHA Condo Approved List

TREND: Will probably continue to see GSE’s back away and wait for private capital to come back into the market before we see losing of guidelines

Slide 57 of 72

Private vs. Government● We’ve seen continued pressure to entice private money back

to the market

● Probably won’t see any real movement until rates rise.

● Any economic slow down may keep this from happening soon.

Slide 58 of 72

18.45%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Apr

-71

Aug

-72

Dec

-73

Apr

-75

Aug

-76

Dec

-77

Apr

-79

Aug

-80

Dec

-81

Apr

-83

Aug

-84

Dec

-85

Apr

-87

Aug

-88

Dec

-89

Apr

-91

Aug

-92

Dec

-93

Apr

-95

Aug

-96

Dec

-97

Apr

-99

Aug

-00

Dec

-01

Apr

-03

Aug

-04

Dec

-05

Apr

-07

Aug

-08

Dec

-09

Apr

-11

Aug

-12

Interest Rates 1971 - Today30 Yr Fixed Source: Freddie Mac

Interest Rate

Slide 59 of 72

3.00%

3.20%

3.40%

3.60%

3.80%

4.00%

4.20%

4.40%

Interest Rates Past 18 months30 Yr Fixed Source: Freddie Mac

Interest Rate

Slide 60 of 72

Slide 61 of 72

Seller Trends

Slide 62 of 72

Seller trends● Who is your competition?

►REO’s►Flipped homes►Other home owners more desperate to move

● Who are today’s buyers?►Home buyers► Investors looking for the last good deal

● What are buyers expecting/wanting?►Clean, move-in ready►Used to seeing flipped homes► If its not perfect, they will want some other perk

Slide 63 of 72

4 Important Listing Strategies1. Pricing

►Price it to sell in the first 1-2 weeks►Multiple offers draw in top dollar and fewer negotiations►Strong pricing creates urgency

2. Photos►Realistic, quality photos►Hire a professional►Better photos = more visits = more offers = more money

3. Availability►Make the home easy to see

4. Keep it clean at all times

Slide 64 of 72

Time for a quiz…

Slide 65 of 72

Which home are you more likely to visit?

Slide 66 of 72

Attracting the right buyer● Investors

►Want a good deal►Will flip or rent►Do very little work to the home►Price it accordingly for the type of investment property►Remember, investors can get work done for less

● Home Buyers►Make it move in ready►Neutral pain►Very clean►Easy to show

Slide 67 of 72

Best improvements to make● Normally bad advice, but not today1. Cosmetic repairs

► Paint over past repairs2. Roof touchups

► Fix broken tiles, etc3. AC tune up

► $50-804. Minor landscaping

► Improve curb appeal5. Clean the pool6. Remove signs of distress

► Show pride of ownership7. Simple staging

Slide 68 of 72

Good Staging

Slide 69 of 72

...Not So Good Staging

Slide 70 of 72

Redfin resources

Slide 71 of 72

Redfin resources● Offer insights● Stats pages● Forums

Slide 72 of 72

Thanks for Coming!Please fill out the survey that was handed out at the beginning ofclass. We appreciate the feedback!

Check out our upcoming classes and events at http://www.redfin.com/buy-a-home/classes-and-events