Arizona’s real estate market continues to skyrocket with record high home prices and extremely low inventory. There are currently 4,070 homes listed for sale in the Greater Phoenix Metro Area compared to almost 11,000 this time last year and 20,000 in 2019. Supply may be down 78% from 2017, but that’s not stopping people from out of state from eyeing the area. Halpern Residential’s internal SEO team found Google searches for ‘Arizona Real Estate’ in the last 30 days were off the charts in several states including California (218, 340), Washington (53,130), Illinois (43, 500) and Colorado (41,190).
Buyers, fueled by low mortgage rates and a desire for a change in their living space, are bidding aggressively to score a home in a market with limited supply and frenzied demand. If you’re planning to purchase during the spring home-buying season, put your game face on and be ready to strategize. Here are 5 tips to navigate the Phoenix market that’s stacked against buyers:
1. Expect to pay over asking price: In a seller’s market, think of a home’s list price as a starting point. Halpern Residential has seen several homes in and around median market price sell for $10,000 to $50,000 over asking price in the last year. When building a budget, keep that in mind and figure out just how high you’re willing to go.
2. Get pre-approved for more than you expect: You should always get pre-approved for a mortgage before making an offer because it lets sellers know that you’re a serious buyer. It’s a really good idea to get approved for $50,000 more than you expect to spend because bidding wars are very common in today’s market. If you’re pre-approved for $600,000 but you’ve bid $650,000, the seller might wonder if you’ll be able to close and their agent will likely confirm your ability to do so with a call to your lender or banker
3. Cash wins: The more cash you have, the better. From a lender’s standpoint, you pose less risk to the bank. From a seller’s standpoint, you look more stable, and they feel as though small things that come up in the inspection aren’t going to rock you because you have the money available to not sweat the small stuff. Putting more money down also puts you in a better position as far as strength of offer, lowering appraisal risk, and may also get you a better interest rate. If you are paying cash for the home, expect to be in a great competitive position, but don’t expect to get a deal. Cash reduces risk for sellers because both the appraisal contingency and financing contingency are removed from the contract, but sellers know they don’t have to give the home away from a financial standpoint.
4. Speed to lead: When you see a house that you like, you have to take action on it right NOW! Since the beginning of March, half of all contracts were accepted within 6 days of a home being listed, so getting in and getting your offer ready quickly is key to your success. Also, make sure your agent is aware of other offers, when offers are due and what the competitive landscape looks like.
5. Consider reducing risk for the seller: When you’re shopping for a home in a buyer’s market, you can fuss over things like closing costs and repairs. But this is another area where the power has shifted in favor of the seller. Many buyers are sweetening deals for sellers by waiving appraisal contingencies, purchasing homes “As-Is” and by utilizing tools such as escalation clauses to improve buyer financial positions without bidding against oneself. Many of these techniques allow non-cash buyers to level the playing field against cash buyers by reducing elements of risk associated with financed buyers.
Additionally, be ready to submit at least five times the number of offers you would’ve a year ago. With consistent demand and limited inventory, the Phoenix housing market isn’t expected to change in the next six months. It’s best to navigate the raging real estate market with an agent who has your best interest in mind, is extremely familiar with the area and can aggressively and intelligently negotiate a deal while keeping you safe.
Trevor Halpern is the No. 1 independent agent at Phoenix-based North&Co. and the founder of the Halpern Residential real estate group. As a Phoenix native, Halpern’s deep knowledge of both people and property has allowed him to create client success in all areas of town.