US urban housing prices continue to rise at breakneck pace, not least due to chronic shortages of inventory in almost all categories. So on the surface it seems like a rush of new buildings could be a simple and straightforward solution. But even in a city like Phoenix, Arizona – the latest data from realtor.com shows it has the third highest new construction rate in the pipeline of any major U.S. city, with builders filing 8,614 permits up 9% annually – a sudden die Injecting new homes into the market can only be a drop in the ocean. Local real estate experts say this will do little to alleviate tight market conditions for buyers. “What we hear from agents is that these new homes are being bought before they’re even finished,” said Daryl Fairweather, chief economist at Redfin. “I do not think so [new construction] will really make the difference. New homes make up less than 10% of the total number of units, so a sharp increase in construction activity will help a little, but it won’t change the market dynamics significantly. ”More: A weak dollar will help foreigners get US homes cheaper – but it will gives more to good business than currency and given the broader market conditions for new buildings (backlog of demand, persistent supply problems for important materials such as wood and concrete), a high number of permits submitted is hardly a guarantee of an immediate increase in new, ready-to-move-in apartments. “I don’t think there’s going to be this huge spate of new builds that will change the dynamics for a place like Phoenix,” said Lloyd Fox, owner and designated agent for Long Realty / Luxury Portfolio International in Scottsdale, Arizona. “Many of the home builders are currently unable to meet demand due to supply chain dynamics. Some people cancel their contracts or ask if they can wait another six to twelve months for their house to be delivered. ”In other words, a market with a relatively high rate of new build will continue to suffer from the same shortage of supply that cities across the country do are faced. “Phoenix is the best of the bad, so to speak, in the sense that it keeps up better than most of the others [cities], but builders everywhere are really struggling to keep up with demand, ”said Danielle Hale, chief economist at realtor.com. (Mansion Global is owned by Dow Jones. Both Dow Jones and realtor.com are owned by News Corp.) More: These luxury markets will get a boost after vaccination Meanwhile, buyer demand continues unabated as supply shrinks. “Right now we have approximately 4,500 active homes in the MLS for all of Phoenix,” said Wendy Walker, executive director of The Agency’s Scottsdale office, using an acronym for Multiple Listing Service. “We usually sell between 20,000 and 22,000 in the April high season. We see buyers from higher priced markets like Los Angeles, San Francisco, Seattle and Chicago come here and pay cash, and I don’t see that change. ”All of this means buyers who might have been considering the To plan the market until the new building calms down prices, would be better served by a move and a quick entry, before prices continue to rise and interest rates may rise. More: When Time – or Control – Is Critical, UK Homeowners Should Consider Auctioning Low Interest Rates Contribute To Dramatic Price Hikes While Covid-related demand helped spark the current sales craze in 2020, it has also been historical Low interest rates more causes buyers in the market, a dynamic expert is unlikely to change without a significant increase in current prices. (The average rate on a 30-year fixed-rate mortgage was 3.05% on May 13, according to Bankrate.) “The pace of the market is really not slowing,” said Leslie Jenkins, an agent for Russ Lyon Sotheby’s International Realty Scottsdale. “We see that contracts are entered into without contingency, no inspections are carried out. People just want to buy, and prices go up accordingly. “The average price for single-family homes in Phoenix is up 8.4% year over year in the first quarter, Fox said, adding,” There are several bids people overpay the list price. ”The list price data is even more dramatic. In the week leading up to May 1, the average offer price in the greater Phoenix area rose by 18.3% over the same period last year according to realtor.com. From Penta: Basquiat’s ‘Skull’ Painting Sells at Christie’s for $ 93.1 Million “This pace is unsustainable. But lower interest rates have made things more affordable than people think, ”said Fox. Even if price growth eventually slows and interest rates rise significantly over the same period, “the monthly holding cost will be much more desirable for people joining now than for buyers joining in a year and a half or two”. Years. “Even if prices in Phoenix cool after the current growth period, they will almost certainly settle at a higher balance than is currently available to buyers.” I’m not saying [price growth] will continue at the pace it is at, but I don’t see any devaluation anytime soon, ”said Ms. Walker. “It’s been less than a year since we’ve been in this kind of active environment, and I don’t see that change in the blink of an eye.” More: This is the best time to get your home for homeowners in popular vacation markets for rent. Navigating A Strategy Game For buyers who choose to brave the current market and gain a foothold in Phoenix, success may depend not only on the size of an offer, but a smart approach to strategy. “Buyers have to be aggressive now,” said Mr. Fox. “I think the market we have right now is the market we’ll see in six to eight months. It won’t change, it just gets more expensive. “Unsurprisingly, all-cash deals are often the most effective way to beat the competition, but they are hardly the only option and don’t necessarily mean access to funding “You can buy cash and take out the loan [the property] later, ”said Ms. Walker. “I have a lot of customers who are doing this right now. You can also remove the funding gap if you have cash but just want to get a loan. ”(This is a tactic best for wealthy buyers with established relationships with their bank or lender, noted Ms. Walker.) More : Sometimes it’s best to end a bidding war even if you can go higher. “I just made a sale that had seven offers, mine wasn’t cash and a lot of it was,” added Ms. Walker. “We could get it by removing all contingencies and getting really strong, a few hundred thousand dollars too much.” Flexibility with the seller’s circumstances – be it taking over furniture or being allowed to stay in the house until they find a new property to move into – can also be a selling point, Ms. Walker said. Backup offerings have also become a more viable strategy than usual. “In addition to this growth market that we are seeing, there is this panic-driven flight where sellers take the highest but not the best deals or buyers step in and decide they don’t, more contract cancellations are possible still at work, ”said DeVon Connors, an agent at Coldwell Banker in Phoenix. “Often people are reluctant to offer a replacement, but there is no risk to the buyer, they can find another home in the meantime with prior notice,” added Ms. Connors. “But on the seller’s side when his first buyer [falls through]”They have to give the executed backup offer the highest priority, they can’t just put it back on the open market and create another frenzy.” And instead of completely foregoing contingencies that can be financially risky, Ms. Connors said at one recent deal: “We had a shortened due diligence period and made sure the sellers understood that our buyers were real end users who were very knowledgeable.” More: In hot US markets, second home hunters should consider now buying a ‘placeholder’ and topping up later. The whole package of our buyers’ willingness to be aggressive and the desire to live there full time made sellers feel like this was going to be a real, solid transaction, ”added Ms. Connors added. The exact strategy required will inevitably depend on the specifics of the deal, but the general message from the Phoenix market experts is clear: if you wanted to get in, don’t hold your breath to let prices regardless of the potential for new home inventory all over the place Line. “If you’ve searched and are ready, now is the time,” said Ms. Hale. “When prices are high, it’s hard to buy, but the best a buyer can do is buy a home that they’ll want to live in for a long time with a permanent mortgage payment. That will protect you from whether the value of the home goes up or down. ”For a more in-depth analysis of the luxury lifestyle news, click here
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