Facing the Harsh Reality of Arizona Housing Market 2021
It’s Wednesday, 12:53 a.m. and I’m awake. More than likely, my buyer clients are as well. Not due to late day caffeine intake or exuberance about specific positive life moments. Collectively, we are exhausted. A byproduct of today’s Arizona housing market 2021.
Futile attempts at success can wear on optimism.
Trying to find a property to make an offer to purchase has gone beyond the process of normalcy. In fact, looking for a home to call your own requires feeling comfortable stepping out of your comfort zone. Doing what you never thought you would. Acting in a manner that is unbecoming but necessary in a now dog-eat-dog residential property purchase world.
The market is wicked good for sellers, and downright “fugly” for buyers. Here’s why.
Arizona Is the Wild, Wild West
People have hung up their snowshoes in the Midwest and East coast to find refuge here in the Arizona sunshine for the COVID winter and spring. This gives them a taste of what life is like in the Southwest, in addition to the freedoms that Governor Doug Ducey kept in place as best he could.
Many businesses, that would have been shut down in other states, are alive here. Patrons have accepted many of the health and safety protocols, engaging in a social life as much as possible. The result, Maricopa County is drawing in record numbers of people from seasonal guests and relocationers. Scottsdale is number 1 for U.S. remote worker location preferences, while Gilbert is number 4.
The elevated influx of residents is driving home values through the roof. Supply cannot keep up with demand. New housing starts cannot keep up with demand. Rental availability cannot keep up with demand.
This is the recipe for on-the-edge ethical behaviors in real estate. Because for every consumer shopping for a home that can’t secure one, there is a Realtor who cannot secure a commission.
The Changing Home Shopping Experience
As if 2020 didn’t pose enough challenges in our livelihood, it completely disrupted the way we view housing. Where we live is everything.
The tease for increasing interest rates is on. Would be homebuyers are watching their online bank accounts (or snail mail) for Uncle Sam’s 2020 tax refunds. With them rests a future down payment or the funds needed for closing costs to go through with a property purchase.
Month-over-month, home value escalations are beyond imagination.
Maricopa County home value increases are:
- December 2020, up 10% on average
- January 2021, up 17% on average
Getting back to my recent insomnia. I’m solutions oriented, which is why I want to find answers to what is causing my mental agitation and the added stress of current clients.
Turning the idle computer back to active, I logged in to the Arizona MLS (multiple listing service) to canvas the most up-to-date available listings on the market. This wasn’t about me doing a particular property search but more about getting an overall climate of market conditions.
The following is the only criteria I used for the search:
All of Arizona
Single-family residences (EXCLUDES patio homes, townhomes, condos, lofts, gemini homes, and manufactured housing)
3 bedrooms
2 baths
What did the available inventory for the entire state show? 2,660 active listings. That. Is. All.
It’s Not You, It’s Them
If you or anyone you know is actively looking to purchase in today’s Arizona housing market 2021, stories of submitting multiple offers, highest and best, to no avail are commonplace.
Even when you believe you are pushing personal parameters of comfort in the terms and conditions being offered, still the ultimate end is a “Thank you, but someone else is better.”
But how can that be when your offer is $10-, $20-, or $30-thousand over asking price? Just how far on the edge of reason are you willing to go to get a home?
1. Would you remove the appraisal contingency? (If you are using a home loan for a purchase, the contingency is in place for your protection and the bank.)
2. Would you remove the home inspection period? (Bad idea as you need the right to know exactly what the condition is of the property.)
Unfortunately, there are buyers who are doing one, or both, of the above modifications to the standardized Arizona residential purchase contract to be awarded the offer acceptance.
While that may be the process for them it’s not in the realm of possibility for you. So, you’re left holding the proverbial bag of nothing while doing the walk of shame without a contract to call your own.
What can you do? What should you do?
Stay Focused and Pay Attention to Market Indicators
It’s easy to get caught up in the frenzy of today’s Arizona housing market: the intrigue, the drama, the want despite the need. For every month that goes by without being in escrow is another 30 days that market value ticks upward. You will pay more for the same home month-over-month-over…. And mortgage rates are beginning to tick up as well.
Know Your Plan
Strategize for the short term; step back and defer to your long-term plan. Pivot as the market shifts so you don’t lose sight of where you want to be though how to get there may change. Stay fluid and keep a lid on your risk.
Trust Your Intuition and Defer to Industry Knowledge
If something doesn’t feel right (about a property or the deal itself) give yourself a second opinion. Buying a home can be heady stuff and one of the biggest decisions you’ll have to own, literally and figuratively. Feelings of ambivalence are to be expected but always consider the source. 1. Are you questioning the purchase due to an overall sense of fear?
2. Rethinking moving forward because of something your best friend said or your mother implied that left you with negativity?
3. Is the homebuying process different than you anticipated and you’re feeling “so over it”?
4. Numbers 1-3 are emotional noise. Put it in a suitcase and send it away.
Now, examine the fundamentals of your purchase and let those guide your decisions. Even in a hot sellers’ market, there are specific signs to look for in a good real estate buy—even if you have to pay over asking price to get it.
At some point the market will be less spicy. Moderate. One day, the Arizona housing market may cool and be deemed “flat”. If your Realtor isn’t reminding you of the cyclical part of the industry, find another agent to represent you.
It isn’t a Realtor’s job to tell their clients what they want to hear. We share what is today, what the trends may indicate, and can offer possible actions to take to help mitigate unnecessary risk. But the home buying decision rests on you, the buyer.
Ask yourself, perhaps, the most important question of all: What is the most redeeming value of the property?
Top Tips for Buying in the Arizona Housing Market 2021
Ask yourself the above question (in bold) again. Before answering, make sure your response HAS NOTHING TO DO WITH IT BEING A HOT MARKET.
Now, do you believe the value in your property of choice is in the:
Neighborhood
Proximity to school
Proximity to major arterial roadway
Distance to major business community
Amenities
Amount of land
Based on the aforementioned bulleted list, would the value you see in the property convert to the next buyer? If the market slows is the property still of good value?
There is more to home value than dollars. It has to make sense.
Speculation Starts with Questioning Housing Motives
Deciding on a home purchase is the culmination of many events that start with an idea and a premised outcome, dotted with various right reasons.
The right reason to buy may not be the same for every person. However, if a homebuyer is in the hunt to secure property strictly for the sake of riding the current wave of value escalation: buyer beware.
Timing is everything. There are no guarantees.
He/She/They Who Have the Most Options, Wins
Consider the current Arizona housing market like a big puzzle. Your would-be home is made of many pieces. Put the pieces before you, strewn across a table. You don’t want to force them to fit.
The same goes for your actual home purchase. Don’t let the extra noise of the crazed market sway your better judgment for the sake of securing a property. If it’s meant to be, it will be.
For buyers who can’t compete in this market from lack of down payment funds, closing costs, or simply being outpriced, take the time to reassess and reconfigure your plan. The shortfall could be a blessing. Perhaps there is a new job or promotion on the horizon that makes your buying power stronger. A new subdivision could break ground in the part of town you prefer, but it’s six months down the road and you don’t even know about it yet.
Trust the process. Prepare for tomorrow. Hope lives in planning today.