North Phoenix Agent Blog

“Absorption rates are a  calculation of how long it will take for all the homes on the market to be sold, or absorbed, based on how many homes are on the market and how many were purchased in the last 30 days.”  - This is courtesy of blogging legend Theresa Boardman from Minnesota.

Think of it this way - if no more houses were put up for sale, and buyers continued buying at the current pace, the absorption rate is the number of months it would take to sell all the available homes for sale.

Why’s this important? Absorption rate is a good indicator of how balanced the market is. Most real estate experts and practicing Realtors agree that a 6 month absorption rate is about ‘normal’.

Absorption rate less than 6 months? It’s a seller’s market. Sellers have the upper hand and are in a position to be choosy about who they sell to, and to demand a little more from buyers: more earnest money, a bigger down payment, a nonrefundable clause for the earnest money, buyer to pay their own closing costs, etc. In extreme sellers’ markets like metro Phoenix experienced in late 2005, homes sell in hours or days for significantly more than list price.

Absorption rate more than 6 months? It’s a buyer’s market. Buyers have time on their side. They can be picky about finding exactly the right house, and take their time making a decision about which house to make an offer on. Buyers can also offer less than asking price and request that the seller pay for negotiables like closing costs and appraisals. In severe buyers’ markets (like much of metro Phoenix has been in for recent months) buyers can also ask for seller assistance towards down payments.

Related Posts

1. How Much Earnest Money?
2. May 2008 - Metro Phoenix at 9 Month Absorption Rate
3. Dec 2007 - When Will it End??

This chart shows the history of sold prices at the Pointe Tapatio for 1600-1700 square foot homes, from 2000 to 2008. Almost all are 3 bedroom, 2 bath, but a few have only 2 bedrooms.

Click to enlarge, but in the thumbnail size it’s easier to see the general trendline, which is UP. While we’re in the middle of the current painful market correction, it’s easy to lose sight of the fact that home prices have increased over time.

Another interesting thing the chart shows is that there’s a lot more fluctuation in sales prices in the period 2005 to 2008 than there was in 2001 to 2003. There’s more ’swing’ in the highs and lows. I think this reflects the general confusion in the marketplace today. Sellers and their Realtors spend a great deal of time and energy choosing the “right” list price. Buyers and their Realtors aren’t sure how much to offer, often because there are so few comps to check.  There’s just a ton of uncertainty in the marketplace today about what a home is really worth.

There’s a lot of noise in the media marketplace today about home values. Too many media outlets are shouting “The sky is falling!” To which I say, “Um, not so much here in North Phoenix.” Our prices are wobbling around a little bit, but the sky is definitely not falling at the Pointe Tapatio.

The sky here is as beautiful as it’s always been, filled with resort like lush palms and stunning mountain views.

Well first up, an open house isn’t going to do diddly-squat if your house looks as bad as the one in this photo. In today’s Valley real estate market, nothing will help a house that looks like this except being 50% (or more) below the last sold comparable property.

But if you’ve got a nice normal house that’s in pretty good shape….. to Open House or not to Open House is a good question. Most sellers want them. Many sellers ask right up front how many open houses I plan to hold. Too often, an open house is the only tangible proof a seller has that their Realtor is working to sell the home at all. That’s a shame.

There are several agents in my office of about 150 who swear by open houses. There’s even a veteran agent who gives classes in how to effectively hold an open house. She swears that even after all these years, most of her business comes from open houses. But I suspect that’s a personality issue and not so much about the open house.

She’s a wonderful, old-time, small-town Arizona type. She reminds me a little of Flo from the old TV show Alice. She’s got a little less attitude than Flo and doesn’t crack her gum at all, but she’s just as Aw Shucks down homey as you can get. Frosted white hair in a cotton candy beehive and all. I think people just respond to her personality and choose her as their agent, regardless of which house they buy.

Just for my two cents worth, I don’t think Open Houses are a great idea and I don’t do them except under very limited circumstances. I worry about the security of it all. Mine and the homeowner’s. When you think about it, an open house is really just a big advertisement that says, “I’m in the house alone with lots of expensive/nice stuff, and I’ll be here for hours.”  Not the signal I want to be sending. Again, just my two cents. I’m kinda smallish and a woman, and so I worry about my safety more than your average 6 foot tall male might.

I also worry about the safety of my seller clients. Do you really want strangers walking in off the street to know what your kids look like (because you’re not taking down those family photos just for an open house, are ya?). Plus there’s the theft angle: I have actually had pharmaceuticals go missing at an open house. Finally, there’s that little subclass of folks who just like nosing around your stuff to see what you did with the house. We call them “Your Neighbors”.

Virtual tours and multiple photos can’t replace the experience of actually walking through a home, but they can come pretty close. I figure that if a buyer liked the online virtual tour enough and is pretty close to being ready to buy, they’ll go to the trouble of calling the listing Realtor and making an appointment.

Not to say I refuse to hold open houses. I’m doing one this afternoon as a markting blitz for a seller who emotionally must sell and fast. We priced it ridiculously low ($159,000 when the same type of home in the same condition sold in Nov 2007 for $215,000). I sent out a blitz of e-marketing about the property, emailed a reporter friend at the AZ Republic, called a bunch of Realtor colleagues, and will hold the home open this Sunday and next. We’re hoping to create a little sense of urgency in the potential buyers. I’ve done it before and been rewarded with multiple offers. I’ll let y’all know what happens this time!

There’s probably as many opinions about open houses as there are Realtors. I’m pretty interested to hear what my readers have to say on the subject. To Open House or not to Open House?

I was watching one of those HGTV shows yesterday. Flip That House, or Sell This House or one of those. A novice investor rehabbed a 1970’s tract home. She did a great job too. She managed an amazing transformation of the entire house. The kitchen was opened up, done in granite, new cabinets and stainless appliances. The baths were both redone with beautiful materials. She really did a great job and added some real value to the home. BUT she went 2 weeks over schedule, about $20,000 over budget and nearly tore her hair out at the end.

Just before the home was staged, the show’s producers sent in 3 real world Realtors to give price opinions. The first one says $519,000; the second says $510,000; the third says $499,000. Presumably they gave this information to the investor seller. In a camera confession, the investor says she’s stretched to her financial limits, she needs to get that money back pronto, and she’ll raise the asking price on the house to recoup her unbudgeted losses. She lists it for $539,000.

Big mistake. Sellers, believe me when I tell you that there is a long list of things that do NOT impact how much you can ask for your home for sale. Here’s a short list:

1. How much you paid for the home
2. How much your remodeling or improvements cost
3. How much you “need” to get out of the sale
4. How much your next house is going to cost
5. How much your neighbor sold for last year

Things that impact how much you can ask for your home:

1. How much buyers are willing to pay for it

Period. It’s really that simple. Buyers are savvy these days, and act very conservatively when it’s their half-million dollars being spent. They will only pay what they’ll pay and not a penny more. If they don’t see your home as a good value at the listing price, they’ll pass you by.

Of course parsing out what the buyers are willing to pay for your home is the tricky bit. It’s an art, not a science. If it were a science, they’d have computer programs that picked listing prices. We Realtors would all be out of a job because the computers would be 100% correct, 100% of the time, on 100% of the homes for sale. Houses would sell in a few days and nobody would negotiate over price because the computer generated price would be right every time.

That’s fantasy land. Picking the right list price is an art. It involves lots of data analysis, a history of indepth knowledge of the neighborhood, and a little bit of gut checking. But it should never involve calculating what the seller “needs” to recoup on their investment. The buyers don’t care about your needs; they care about theirs.

PS-The investor on the TV show sold after about 3 weeks on the market. She took $511,000.

Related Posts

1. Price It So You Don’t Lose Money
2. The HouseChick’s take on this point (the HouseChick is Kelley Koehler in Tucson)

Dear Home Sellers,

I’ll let you in on a little secret – your home is not the only one in the Valley of the Sun that has dropped a little in value in the past 18 months.

Too many sellers today list with a gleam in their eye over the memory of what the neighbor sold for in early ‘06, the hopes of extra-large profits in their bank account, and a too-high price in the MLS. Too many sellers also choose their Realtor based on which one agrees to the highest list price.

Sadly, if you don’t choose an experienced Realtor who helps you price your home right from the beginning, you’re likely to spend months and months chasing the market down. With prices slipping incrementally each month, you’ll net less money 3 months from now than you will if you price it to sell in 1 month or less.  The truth is in the MLS archives: overprice your home and you’ll eventually sell for less than you could have if you’d priced right from the beginning.

So, what’s “price it right” mean? In our current market, only 5 or 6 of every 100 homes for sale is actually selling. If you need to be one of those 5 or 6, you must:

• Be priced less than the last sold comp
• Be 1 of the 3 or 4 best priced homes of your type in the area
• Have all repairs and Honey Do’s done
• Be professionally staged
• Be on lockbox with no advance notice needed to show

If you can accomplish what I recommend above, congratulations! You’ve done a lot of prep work and you’ve got a fighting chance of being in the 5% to 6% of homes that actually get to hang a SOLD sign.

If you can’t do what I recommend above, you can compensate by discounting your price, or offering buyer’s incentives like closing costs paid, or a mortgage rate buy-down.

And if you could do the above, but just don’t feel like it, what are you doing For Sale in this market?!? Buyers have the upper hand and they know it. Spare yourself some misery and take down the yard sign.

Related Posts:

• What Pricing Your Home Has To Do With Buying A Car
• How to Handle an Insultingly Low Offer
• Steve Belt’s How To Be The Next Sold Home In Phoenix
• Jay Thompson on Ways to Set a List Price

If you’re trying to sell your home in the metro Phoenix area, or even if you’re just thinking about it, you’ll run up against what I call The Temptation of Your Neighbor’s List Price.

You’ll look around your neighborhood at the many For Sale signs. You’ll secretly skulk down there under the cover of darkness and pull a flyer out of the Info Tube. Don’t worry, you’re not the only neighbor scurrying through the dark to grab a flyer and ogle the pictures of your neighbor’s home’s insides. Everybody does it. It’s one of the dirty secrets of suburbia.

In any case, you’re going to look at all those flyers with their shiny pictures and bulleted feature lists. And you’ll shout to your spouse (or your pet), “Jones is asking that?! And Bill down the street is asking what?! Bill’s got a lousy backyard. And Jones doesn’t have the built-in garage cabinets like I put in. Those cost a fortune! If these guys are asking X, then I could ask Y.”

Your Y is always bigger than your neighbor’s X. The Temptation has arrived. (And I realize that my X and Y sentence could sound a little pervy, if you’re reading it out of context. Hmm. Moving on…)

You must resist the Temptation of Your Neighbor’s List Price. Please go back and re-read that sentence about X and Y. Focus on the verb.

The key to your neighbor’s list price is that they’re asking for X. They are not necessarily getting X. In all likelihood, our current strong buyer’s market will cause your neighbor to take significantly less than X, or take his home off the market.

Do not give in to the Temptation. Do not assume your home is the only one in the city that has lost a little bit of value over 2007. We’re all in the same boat. Some of us just imagine we’re on a luxury yacht, while a few brave sellers are recognizing the truth - it’s just a boat. What’s that old saying? A rising tide lifts all boats. And a correcting market lowers all housing values. Don’t worry about what your neighbors are asking. They’re probably asking their teenagers not to smoke and drink and drive too fast too. But you don’t see that happening now do ya?

I’ve been looking over my blog stats as part of my New Year’s resolution to reorganize and fine-tune what I do. It seems that my post comparing selling ice cream with selling your home is the most popular post by far.  Dunno if there’s a whole lotta people Googling for pictures of ice cream or what, but I’ll repost it here for everybody’s enjoyment. They are really purty pictures of ice cream, after all.

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Most home sellers these days in the Valley are savvy enough to realize there’s a lot of competition out there. They know they’ve got to spruce up, clean up, organize, and stage their house so it stands out from the competition. The process of doing this is a whole other post that I’ll get to in the coming days.

Here, today, I want to talk about my Ice Cream Analogy. I whip this one out when I’m talking to sellers who are resistant to the idea of painting, carpeting, or snazzing up counter tops. The usual refrain I hear is, “We don’t want to waste money updating that when the buyer might not like the color or style anyway. Why bother? Just let them do it once they move in.”

Folks, that mind set is a cop-out. Why do I say that so bluntly? Here’s where the ice cream comes in.

Let’s imagine you & your neighbor both stand in your front yards offering free ice cream. Your neighbor offers vanilla ice cream. You’re offering almond nut crunch with chocolate sprinkles and caramel sauce.

Whose ice cream offering do you think will get more takers? Vanilla! More folks will choose the vanilla ice cream, every time, no matter how yummy the almond nut crunch looks and tastes. Why? You can dress up a vanilla scoop any way you like. Add chocolate sauce, rainbow jimmies, chopped peanuts, Oreo cookies, strawberry topping or anything else to make it all yours. But the almond nut crunch w/ toppings is an option which is hard to un-do. You can’t easily turn that confection into anything else. It would take time, patience and some creativity.

Time, patience and creativity are qualities most buyers are lacking or are unwilling to exercise, for a variety of reasons. Today more than ever, buyers want a blank canvas that they can just spend a little money & effort personalizing. Most are turned off by a home that needs a lot of “un-doing” before they can get to the personalizing stage.

Need to sell? Vanilla-ize your digs. It’s called “Real Estate Beige” for a reason - it sells real estate.

Related Posts -
Selling Home Like Dieting
Fido Helps Sell Home?
Selling Home? Think Used Cars
North Phoenix’s own Moto Sushi
North Phoenix’s own Dream Dinners

Real estate is filled with pithy sayings, old legends, and rules of thumb. I’m sure most professions are the same. One of the old sayings in real estate is that “nobody buys a house during the holidays!”

BTW, I hope I didn’t upset any non-Christians with my title. It’s getting so hard these days not to upset somebody or another. It’s just that “At Christmas” fits better visually in my title bar than “During The Holidays”.  Nothing more.

So, is it true that nobody buys or sells real estate during the holidays? I hope some of my readers — espeically those who read but don’t comment regularly — will help me refute this “truth”.

I’ll start: today, Christmas Eve, I’m inking 2 deals. They’re smallish, so I’m not bragging here. Just trying to say that we should all take myths about real estate with a grain of salt.

Everybody else? Tell your story of buying or selling a home during the holidays.

Now, I didn’t say buy a car. I just said think about it.

Here’s a little piece of advice I give to sellers who are struggling to really hear and internalize the pricing advice I’ve given them. (Because in today’s market, it never fails that my advised listing price is less than the sellers hoped for.)

Think about buying a new car. Or a used car. Whatever. You go online, you do your research. You know that the car you really want to buy should cost about $30,000. Or whatever, use any number you like; I’m using $30k because it’s nice and round and easy and complicated math isn’t my bag.

So you’ve budgeted $30,000 for your new car. You’ve found out - online - that there are 2 dealerships nearby offering the exact car you want. One has listed the car at $35,000. The second dealer listed the same car at $50,000. Being the Age of Internet, you can see all this online, easily, without leaving your Barcalounger or changing out of your favorite plushy jammies.

Which dealer are you going to visit? No kidding Sherlock. You’re going to the dealer who’s offering the product at a mere $5,000 above the market value. You’ll make him an offer at $25,000, he’ll come back at $29,000 and you’ll ink the deal.

The hapless, helpless dealer who advertised his $30,000 product at $50,000? He doesn’t even get a look-see.

This is how it is when you’re pricing your home for sale. Don’t just “try it”. Don’t just “wait and see”. Price it right, from Day One, and you will see the rewards. You’ll be one of the 6% of homesellers who actually sell their homes in Metro Phoenix this year. Insist on overpricing? You might as well spend big bucks on one of those TV ads with the deep booming annoucer voice bellowing “Last Chance!” and “Won’t Last Long!” (because it will last long. And long is painful.)

Related Posts:

• Price Your Home So You Don’t Lose Money
• The Temptation of Your Neighbor’s List Price

For folks trying to sell their home in the Metro Phoenix market, it’s been a confusing year. Sometimes you hear prices are down. Sometimes the local media says the median price is up. Staging is vital. Staging is superfluous. Get a pre-listing home inspection. Don’t get a home inspection. Get an appraisal before you list. Appraisals are worthless. Who knows anymore?

Real estate & media types who talk about the importance of “being priced right” are (sometimes inadvertently) contributing to the confusion.

People who tell you “you have to price it right” could be avoiding the truth. These days in the Metro Phoenix area the truth often is, “if you really want to sell you have to be priced 2% to 5% less than the last sold comparable property.” 

Let’s say you’re a homeowner who needs to sell and you’ve invited several Realtors over to interview them. Many will Oooh and Aaaah and assure you that you really can ask $10,000 more than the competition because you’ve got shelves in the garage.

Some gutsy Realtors might tell you that while your home is truly lovely with many thoughtful & useful upgrades, it’s important to price below the asking price of homes currently for sale, and also below the last sold comparable property.

What that Realtor will say is “price below sold comps.” What you’ll hear is “your home is worth less than your neighbor’s.”  When you hear that, you’re going to experience an unpleasant mix of emotions. It’ll feel like someone just spat all over your hopes and dreams, told you that your home and your entire lifestlye isn’t worth as much as a tin shack on the beach in Guadalajara, called your children ugly and kicked the family dog while she did it.

You’re going to hate that Realtor. Instantly and irrationally, you’re going to wish bodily harm on that Realtor and imagine kicking her out your front door, action-movie style. How dare she imply that my house is worth less than the neighbor’s?!

If you are that home seller, I implore you to fight the urge to go Dirty Harry on the Realtor who’s just told you the most truthful thing she can. Take a deep breath and remember the dynamics of a declining market.

In a declining market, housing prices fall. As a seller, time is not your friend. Homes that sell six months from now will sell for less than homes that sell this month. This has nothing whatsoever to do with your house, your lifestyle, your children, your intrinsic self-worth, your financial situation, or your need to net a certain amount on this sale so you can move on.

All things being equal, in a declining market houses priced below the most recent sold comps will sell quicker than those priced above the last sold comp. And because homes priced below the competition and the sold comps sell quicker, the sellers will net more money than sellers who overprice and sit on the market for months and months, taking incremental price drops while they chase their competition to the bottom.

Sellers, do yourselves a favor. As long as your gut tells you everything else about that Realtor is OK, hire the one who gathers up her courage and tells you to price beneath the last sold comps.