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Back to the 80’s? Loan Assumptions, Rate Buy Downs, and Incentives
More Choice for Buyers: Supply Up 22% in 10 Weeks

For Buyers:
The 4th quarter is here, and this is the best time of year to be a buyer in Greater Phoenix! Inventory continues to rise, up 22% in 10 weeks to be exact, and price reductions typically peak in October and November. Most sellers listing in October are motivated to close on their homes before the end of the year, but few are more motivated than builders. New homes make up 22% of active MLS listings and 29% of Maricopa and Pinal County August sales. Builder incentives include not only closing cost assistance but select upgrades and significant permanent and temporary rate buy downs. For perspective, let’s use a $350,000 loan. If a buyer uses the seller’s or builder’s closing cost assistance to buy down the mortgage rate by 3% it would save more than $650/month on their payment. Buying the rate down by 2% saves $450/month.

Builders are not the only ones with incentives, however. Last month, 45% of all closings through the Arizona Regional MLS involved sellers paying buyers’ closing costs with a median of $8,500, about the cost of a 2/1 temporary buy down on a $365,000 loan. Buyers would be smart to consider areas with heavy competition between builders. The cities of Coolidge, Maricopa, Tolleson, and Laveen collectively saw 70% of sellers agree to closing cost assistance with 50% of them paying out $10,000 or more.

First-time home buyers may feel like the difficulties they’re facing in today’s housing market are unique and unprecedented. However, high rates like today bring out tools and opportunities for buyers that only emerge when the market is stressed, and they disappear when the market recovers. Baby Boomers, considered to be the wealthiest generation today, didn’t have it so great when they were in their 20’s and 30’s. In the midst of building their careers, growing their families, and purchasing homes, the economy experienced 4 recessions, 4 rounds of high unemployment, and mortgage rates that soared over 10 years from a low of 7% to 18%; it took another 10 years to get back down to 7%. During that time, home sales were low but home values did not decline, similar to today. Here are some stories about how a few of our Baby Boomers and Gen-Xers purchased their first home:

· Mike, 72yo - first home in 1976 for £9,600 at 8.25%, gifted down payment from family and rent-to-own appliances. Sold it 3 years later for £19,000.
· Tom, 68yo - bought his first home in the 70’s together with 3 friends at 9% as tenants in common.
· Chris, 58yo - first home 1989, paid a distressed seller $4,000 and took over their FHA mortgage payment
· Thomas, over 59yo - first home was a distressed HUD foreclosure he bought for $55K and fixed it up himself
· Michael, 66yo - sold his boat and car to purchase his first home at 8.5%
· Raejean, 57yo - purchased her first home in 1985 at 16.5%
· Kathleen - purchased in 1979 with gifted down payment and 3-2-1 rate buy down
· Kathryn - first home in 1981, interest rates were 18%, but she assumed the seller’s VA loan at 6%
· Nick - bought first home in 1988 with his brother, assumed the seller’s VA loan with $4,500 down and got a roommate to help make the payment, didn’t care about the rate
· Jon - first home in 1981, assumed a VA loan at 10%, seller financed the rest at 10%. Existing rates were 18%

Each one said their decision to buy their first home was a good one in hindsight, even though money was tight and rates were high. Especially today, it’s highly recommended to consult with a Realtor® and a lender who is fully aware of available loan programs, FHA and VA loan assumptions, seller incentives, down payment assistance, and other tools designed to help you on your way to home ownership and building wealth.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2023 Cromford Associates LLC and Tamboer Consulting LLC

Concise Daily Market Snapshot

The table below provides a concise statistical summary of today's residential resale market in the Phoenix metropolitan area.

The figures shown are for the entire Arizona Regional area as defined by ARMLS. All residential resale transactions recorded by ARMLS are included. Geographically, this includes Maricopa County, the majority of Pinal county, and a small part of Yavapai County. In addition, "out of area" listings recorded in ARMLS are included, although these constitute a very small percentage (typically less than 1%) of total sales and have very little effect on the statistics.

All dwelling types are included. For-sale-by-owner, auctions, and other non-MLS transactions are not included. Land, commercial units, and multiple dwelling units are also excluded.

Key Skills You Need Your Listing Agent To Have

Selling your house is a big decision. And that can make it feel both exciting and a little bit nerve-wracking. However, the key to a successful sale is finding the perfect listing agent to work with you throughout the process. A listing agent, also known as a seller’s agent, helps market and sell your house while advocating for you every step of the way.

But, how do you know you’ve found the perfect match in an agent? Here are three key skills you’ll want your listing agent to have.

They Price Your House Based on the Latest Data

While it may be tempting to pick the agent who suggests the highest asking price for your house, that strategy may cost you. It’s easy to get caught up in the excitement when you see a bigger number, but overpricing your house can have consequences. It could mean it’ll sit on the market longer because the higher price is actually deterring buyers.

Instead, you want to pick an agent who’s going to have an open conversation about how they think you should price your house and why. A great agent will base their pricing strategy on solid data. They won’t throw out a number just to win your listing. Instead, they’ll show you the facts, explain their pricing strategy, and make sure you’re on the same page. As NerdWallet explains:

“An agent who recommends the highest price isn’t always the best choice. Choose an agent who backs up the recommendation with market knowledge.”

They’re a Great Negotiator

The home-selling process can be emotional, especially if you’ve been in your house for a long time. You’re connected to it and have a lot of memories there. This can make the negotiation process harder. That’s where a trusted professional comes in.

A skilled listing agent will be calm under pressure and will be your point person in all of those conversations. Their experience in handling the back-and-forth gives you the peace of mind that you’ve got someone on your side who’s got your best interests in mind throughout this journey.

They’re a Skilled Problem Solver

At the heart of it all, a listing agent’s main priority is to get your house sold. A great agent never loses sight of that goal and will help you prioritize your needs above all else. If they identify any necessary steps you need to take, they’ll be open with you about it. Their commitment to your success means they’ll work with you to address any potential roadblocks and find creative solutions to anything that pops up along the way.

BankRate explains it like this:

“Just as important as the knowledge and experience agents bring is their ability to guide you smoothly through the process. Above all, go with an agent you trust and will feel comfortable with. . .”

Bottom Line

Whether you're a first-time seller or you’ve been through selling a house before, a great listing agent is the key to success. Connect with a real estate professional so you have a skilled local expert by your side to guide you through every step of the process.