Appraisals are coming in short of contracted price even though demand is surpassing supply in Phoenix, AZ.

By
Real Estate Agent with United Brokers Group/Carver Home Team

We are definitely in flux and ever changing!  The number of “Active” properties for sale that you can readily purchase and make an offer on isn’t 27,400 as reported in the Arizona Republic this past weekend…it’s actually lower.  The real number is 19,400. The 27,400 includes homes that are in AWC status or Active With Contingencies.  These homes are already under contract and the seller has accepted an offer.  Any offer made on a home in AWC status would be a backup offer.

Homes are put into AWC status for many reasons but the main reasons right now are lack of inventory and market volatility.  Realtors thrive on advertising listings and when there isn’t enough listings to advertise the ones under contract don’t go to pending status.  Also any Realtor worth their salt knows that if you’ve got a short sale or an issue house you may most likely lose the first buyer and have to go on to the 2nd offer hence the AWC.

We have always been a region of micro-markets but it is even more fractured right now.  For instance in Ahwatukee we are experiencing appraisals coming in short of the contracted price.  The Phoenix metro area is still considered a class 5 declining market so areas like Ahwatukee (85044, 85045, 85048) where there are only 162 single family homes for sale (Active) in the MLS under $300,000 which equates to 1.66 months of inventory are being penalized.  In other words if we were to stop listing homes we would go through the current inventory that fast BUT appraisals are coming in short which doesn’t compute with the numbers.

Bottom line Ahwatukee in that price range is trying to bust upward but it’s not being allowed to do so by government and banking institution intervention.  If we had more cash sales in this price range we’d have more comps that didn’t rely on appraisals and that would start pushing prices up.  For example homes sold in Maricopa haven’t had a problem appraising because a very high percentage of the sales are cash.

The Luxury market is a different animal as well.  We’ll say the luxury market is $500,000 and up in Ahwatukee.  There are currently 48 Active listings and 8 months of inventory and average days on market of 169.  But segment that by just looking at $500-750K and these are the numbers…20 Active listings and 6.6 months of inventory and average DOM at 148.

The other factor in our market is strong demand.  It is rare that there aren’t multiple offers on a property if it is priced correctly and it goes relatively fast.  Drill down farther into that $300K and under in Ahwatukee and you’ll see that DOM is at 89 days for all sold listings but break it out and you’ve got the following differences.

 

Listing Type                                        Days on Market                         $ per sq ft sold

 

Traditional Non-Distressed                         60                                                   $111.09

 

REO/Bank Owned                                        58                                                   $90.47

 

Short sales                                                     154                                                   $92.81

 

Interesting, no?

This is happening everywhere as I see posts from California and Florida experiencing the same thing.  And in Phoenix even though the supply of homes is very low hovering at or below 3 months and demand is high with multiple offers the Phoenix Metro Area including Maricopa and Pinal counties are still considered a class 5 declining market by Fannie, Freddie, FHA, VA and many other financial institutions.

Non distressed properties are going under contract within hours or days of going on the market receiving multiple offers yet appraisals still continue to come in low and below contracted price. This practice by the government backed institutions and lenders is killing our chances for recovery and needs to stop. Contact your local congress person and urge them to have the declining market badge removed so we can get to a healthier real estate market.

If you’d like more information on your local real estate market in the Phoenix Metro Area give Dean Carver a call at 480.710.4608 or email at dean@carverht.com.

 

 

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