With the Phoenix real estate market appreciating at historic levels seemingly every month, many potential homebuyers are asking themselves is it a good time to buy a house. There are many factors to consider whenever you are buying a home but the over-heated real estate market we find ourselves in presents unique challenges that buyers haven’t been confronted with in the past. With that said, lets take a look at the pros and cons of buying a house in the current real estate market and try to answer the question is it a good time to buy a house in the current market.
Phoenix Real Estate Market
The Phoenix real estate market has been setting home price appreciation records for the past two years now which has put a strain on the wallets of potential home buyers. As measured by the S & P CoreLogic Case-Shiller U.S. National Home Price Index, the Phoenix Housing market has led the nation in home price appreciation for 28 consecutive months.
The Phoenix housing market median sales price now stands at $418,000 after finishing 2020 at $333,000. For comparison purposes, at the end of 2020, the Phoenix real estate market had less than 10,000 homes on the market with only 1 months supply of inventory. Now we have slightly over 11,000 homes on the market in Phoenix and we have 1.38 months of supply which is a slight improvement in both categories from a year ago.
The median sales price on homes in Phoenix has been rising 1% – 3% month over month in Phoenix in 2021 but is now showing some deceleration in prices. We have seen a decline in year over year sales volume which would normally signal a slowing market, but continued low inventory is driving price appreciation at the moment.
When is the Best Time to Buy a House?
Some times of the year are better than others to buy a house depending on where you are in the country. This applies more to climates that have severe winters where sellers don’t want to have people trekking through their home in the winter, and buyers don’t want to be out in the cold looking at homes.
But in Phoenix, while our climate is hot during the summer, that doesn’t slow down the summer buying season when kids are out of school and families are looking for their perfect house in their chosen school district.
The Spring and summer months are still the prime home selling season in Arizona and that remains true in our current market. The off months are normally the fall and winter months when inventory is typically lower and there are fewer buyers competing for the homes on the market. That is normally the best time to buy in Phoenix if you are hoping to shop for real estate with less competitors making offers alongside of yours.
The real estate market we are in now is far from ordinary with buyers seeking more suburban locations and more space for families that are spending more time at home. The best School districts and low crime neighborhoods remain at the top of most buyers shopping lists so some buyer criteria always seem to remain the same.
How to Get My Purchase Offer Accepted in 2022
With the Phoenix housing market being so competitive for buyers now, it is imperative that buyers do everything in their control to make their offer to buy a home more competitive than the next offer. Buying a home in todays real estate market is a flat-out competition and aside from having deep pockets to over-bid on your dream home, there are other things you can do to make your purchase offer stand out.
Pay Down Debt
Make your mortgage application cleaner by paying down debt which can have a big effect in a lot of areas of the application. Strategically paying down debt may lower your credit utilization ratio which in turn could have a positive impact on and improve your credit score.
In addition, paying down and/or paying off debt may lower your debt-to-income ratio (DTI) which could improve your mortgage application and make for a smoother loan approval.
The best outcome in paying down debt is to possibly get a better interest rate on your mortgage because your credit score improved, and you lowered your loan costs as well. So, as you can see there are several reasons to manage your debt when buying a home and all of the potential outcomes are positive for the home buyer.
Have a Minimum Down Payment Saved Up
Competition is so fierce in the Phoenix real estate market that sellers in many cases are choosing to not accept purchase offers when a down payment assistance loan is being used by the Buyer. It is unfortunate this is happening since down payment assistance mortgage loans are solid loans for buyers to use and we can get them closed just as quickly as a standard conventional mortgage loan.
However, while this doesn’t happen in all home sales today, we have seen it enough to the point where we advise our buyers if they have the means to make an offer using their own funds that would place them in a better position to have their offer accepted. The down payment doesn’t need to be 20% down, the 5% down on a conventional loan or the 3.5% down on an FHA loan is fine as long as the funds are being provided from the borrower(s) and not any sort of down payment assistance program.
This situation is an unfortunate consequence of a very competitive real estate market and I believe this will be a temporary situation. Down payment assistance loans are great mortgage loans and the use of them should not put any buyer at a competitive disadvantage to having their offer accepted by the Seller.
Improve Credit Score
As I wrote above, if you have time before you are ready to buy a home and your credit score could use some improvement, it would be a wise investment of your time to work on building up your credit score.
Taking action like paying down debt, settling recent Collection accounts, and bringing any delinquent accounts current would all help to build your credit score to the level where it would make a meaningful difference in your mortgage preapproval.
Get Pre-Approved for a Mortgage instead of Pre-qualified
In our hyper-competitive real estate market this is what I have been recommending for my clients hoping to buy a home. Having their mortgage loan application pre-underwritten has made by buyers and their offers more competitive and is the reason why many of my buyers have had their purchase offers accepted. For me and my buyers this has been a game-changer and I highly encourage you to take this approach if you are trying to buy a home now.
Is it a Good Time to Buy a House Now?
The best way to answer this question is to look at the buyers financial, employment, and living situation before providing an answer. The Phoenix Real estate market is poised to go up again in 2022 although not as fast as in 2021. With that in mind and only considering market factors, I would say yes it is a good time to buy if you plan to live in your area for the long term.
However, before committing to buying a home, potential buyers want to be sure the following factors in their life are in order:
Financial: are you current on all of your monthly bills and do you have an emergency savings fund to weather a personal financial storm should it arise? Have you saved up funds for a minimum down payment and closing costs, and budgeted expenses to be able to afford the monthly mortgage payment?
Employment: do you have a solid two-year work history and is your current employment stable and expected to continue for the foreseeable future.
Home life: have you decided to make a home for your family in Arizona and in Phoenix? Buying a home is a long-term commitment that most people have to make at some point if they plan to buy a home. Be honest and sure to yourself that you have made the commitment to establishing your family roots locally before you are ready to buy a home.
If you have thought through everything and all signs point in the direction of making a home purchase, then the first step is to reach out to a mortgage loan officer to start the loan process.
If you are looking to buy a home in the Phoenix or surrounding areas I would be happy to assist with your home purchase. You can reach me directly at steveATthehomebuyinghub.com or by phone at 480 365-8978.
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