Tuesday, September 20, 2016 / by Daniel Jackson
Across the nation, real estate headlines are all talking about lack of inventory. In many markets around the US, there are simply not enough homes for sale to meet demand. That creates a seller's market, and leads to rising home prices. How does that affect Yuma Arizona? At first glance, the numbers look pretty promising for Yuma County. In the first 8 months of the year, we sold 1,675 units. That's an average of 209 homes per month. Based on the current inventory, there is a 6.45 month supply of homes. 6 months of supply is considered a balanced market.
However, within the market as a whole, we have several sub-markets. There are different areas of town, different neighborhoods, and different price ranges. Let's take a look at price range first.
If you are thinking about selling your home in Yuma, something else you need to consider is the number of potential buyers looking for properties like yours. For example, last year in Yuma county, 34% of all the homes that sold were under $100,000. Another 28% were between $100,000 and $150,000. That means if you are trying to sell your house for more than $150,000, only about 38% of the buyers are going to look at your home.
That doesn't mean homes in the higher price range aren't selling. In fact, I recently looked at a comparison of homes sold in the $200,000 and up market over the last 5 years. Take a look at the chart below. The $200k+ range is growing fast. Take a look:
Let's dig a little bit deeper on this topic of price ranges. Take a look at the chart below. The blue columns show what is currently for sale in the different price ranges, and the orange shows what has sold so far this year. Notice the $200k+ price range. You can see that 30% of all the homes for sale right now are asking $200,000 or more. So far this year, only 22% of the sales have been in this range. Contrast that with the $100-$150k range, where 31% of our sales have been, and only 22% of our listings currently are.
Another interesting comparison is to watch the different sub-markets within Yuma County. For example, the Foothills area of Yuma is our snowbird paradise. During the hot months of the year, the market dies down and things get very quiet in the Foothills. Our perception in town is that nothing is happening out there. However, tracking the numbers year by year, you can see that it is a growing market. Every year we sell a few more homes in the Yuma Foothills than the year before (look at the red bars below).
San Luis, AZ is a smaller market with lower average sales prices, but homes tend to sell faster there and spend fewer days sitting on the market.
You will also notice that the average sales price in San Luis AZ has been steadily growing over the last several years.
Another set of market factors to consider is financing and interest rates. There are currently some very attractive low down payment and down payment assistance programs available. One extremely popular program is the Pathway 2 Purchase program that gives buyers 10%, up to $20,000 to put down on their home purchase. The Home Plus program is also a way of qualifying to buy a house with next to nothing down in Yuma. Other zero down programs include VA loans and USDA loans.
On the subject of interest rates, the 30 year fixed rate average is currently 3.50% according to Freddie Mac. The headline this week is "Mortgage Rates Head Up." Yes, rates have been lower this year, as you can see. But come on! Let's try to have a tiny bit of perspective here. 3.50% is still lower than rates have been pretty much EVER in history.
So how do low rates impact the housing market? It's a little frightening to think about really. If our average house sells for about $148,000 now, and the average rate is 3.5%, that works out to $664.59 a month principal and interest. If rates go up just 1%, the buying power drops over 10% to $131,165 to keep the same payment.
On the flip side of that, compare prices and payments today to 8 years ago in 2007 at the peak of the housing market. Home prices were averaging $196,000, and rates were at 6.34%. That comes out to $1220 per month principal and interest. Last year in 2015, the average home was $147,000 and rates were at 3.85%, which comes out to $690 per month. If you are a potential buyer, now is the time to make a move before rates go up too much more!
The real estate market is healthy and growing in Yuma. We are not seeing explosive growth in home values, but prices are rising slowly and steadily. I see this as a good sign that the market is healthy and not growing too fast to sustain. Individual home values are not rising as much as they seem to be at first glance. This trend is partially due to lack of inventory in the lower price ranges. 209 homes per month is a good solid number that puts the market on track to sell slightly more than last year. Overall, we are seeing a healthy real estate market with normal ups and downs. The biggest potential risk I see is the impact of rising interest rates.