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The Phoenix housing market has seen stable growth over the last several years. This stability has been a welcome change from the turbulent times that are still fresh in everyone’s mind. The housing market in the phoenix area started growing at unsustainable rates in 2005, this unsustainable growth eventually lead to a collapse in 2008 that caused the housing crisis and great recession. The phoenix area was hit particularly hard during the recession. Since 2012, we have seen a very different picture, instead of huge rises and crashes the market has seen steady sustainable growth.
Recently however, Troy Reeves and “The Reeves Team” have started getting questions on whether or not we are starting to enter another bubble. So, are we entering a bubble? Or are we just suffering from a case of recency bias that is making homeowners, and potential buyers nervous that the past is doomed to repeat itself?
To answer these questions let’s start by taking a deep dive into some of the metrics that determine the health of the phoenix housing market.
We will start by looking at the Absorption rate of homes in the Phoenix metro area over the last 12 months. Absorption rate is a very important statistic to measure the health of the overall housing market. The absorption rate is calculated by looking at the current number of homes sold in a month versus the number of total homes on the market. The result is the total amount of months it would take to sell out of the current inventory. Three months is the ideal number for a healthy housing market. We were around the 3-month mark in March of 2017 however we have been dipping under that number since that point.
So, what does it mean that our absorption rate has been steadily under 3 months? The biggest takeaway is that there is not an ideal supply of homes on the market to meet the demand from the buyers looking to purchase a home. This points to a rise in housing prices in the short to medium turn. While the current absorption rate is not dramatically under the ideal mark if it continues lower look for even sharper price movement upwards. If you are looking for additional insights into the absorption rate and what it means for your housing situation please reach out to “The Reeves Team” for an even further in-depth analysis.
Next let’s look at the most straight forward metric of them all, price. While price may not give us as good of a gauge of what’s going to happen in the future as absorption rate, it gives us a great idea of what has happened in the past. While the past in real estate doesn’t necessarily repeat itself, it does often rhyme.
So what does the price analysis over the last 12 months tell us? The biggest take away is that we have a great deal of stability in the market. Unlike from 2005 to 2012 these lines are fairly smooth instead of having huge spikes upwards and huge drops downward we have slow sustainable growth. As you can see towards the end of the chart there has been a recent uptick in the median listing price and in the median sales price, this is to be expected as we continue to see an absorption rate of under 3 months.
As a side note this pricing graph demonstrates something we at “The Reeves Team” always explain to our clients. If you want your home to sell quickly and for the highest possible value, it is important to price your home correctly when you put it on the market. Look at how close the <strong>new median list price</strong> and the <strong>sold median list price</strong> are. This tells us that the homes that are priced correctly are selling and the homes that are overpriced are sitting on the market. In the Phoenix housing market buyers have options so it’s important to be competitive if you want your home to sell for top dollar. If you are interested in putting your home on the market or just want to have an idea of how much your home is worth, contact “The Reeves Team“.
Next up let’s look at inventory. Inventory is a measure of how many homes are on the market, versus how many are being sold. As with price you can see that the number of new listings and sold listings are very similar.
What is striking about inventory going into 2019 is how stable is has been since the housing market started recovering around 2012. Take a look at this article written by “The Reeves Team” in July of 2012. This was one of our most viewed articles ever as you can see by the over 30 comments that were posted when it was written. Troy Reeves correctly predicted that the housing market was returning to normal and that normalcy has continued on until today.
The last item we are going to look at before we zoom out to the big picture overview is the Sold Days On Market. This metric takes a look at all the homes that were sold during a given month and averages how long it took those homes to sell. There are a couple of takeaways from this data over the past year. The first takeaway is that the metric has been under 90 days for the entire last year. The Sold DOM under 90 days for a span of an entire year reinforces what the absorption rate told us above, that buyers are wanting homes faster than sellers are listing them. While the margin is not to wide at this point, it is something that could lead to a run up in prices in the short term if it continues to fall.
The second take away from the Sold Days On Market is that buyers want to buy homes during the summer. As you can see the days on market dips dramatically during the summer months when kids are out of school. You can expect this pattern to repeat for the foreseeable future.
After reviewing the detailed short term metrics we can see that prices and inventory seem very stable, and point to continued sustainable growth. Now that we have looked at the short term lets take a look at the bigger picture and zoom out and look at prices before and after the run up and crash of the housing market.
Looking at this chart that began in 2000 and runs to today we can get a great perspective on just what happened and where we are today. First you can see that we had sustainable growth from 2000 until 2005 when the housing boom, fueled by the rise in subprime mortgages, took off. As you can see by the parabolic rise in prices from 2005 and peaking in 2007 these prices were not sustainable. In 2008 the housing prices absolutely fell off a cliff and bounced around at the bottom until around 2012. Its clear to see looking back that during the 2010 to 2012 time period we were clearly in oversold territory and a rebound back to normal prices was needed. This rebound was accurately predicted by Troy Reeves” in November of 2012. To give you some perspective “The Reeves Team” drew a red line that continued out from the original sustainable growth between the years of 2000 to 2005 up until today. What is remarkable is, even with the parabolic run up and huge crash and recession that followed, the market has stabilized back to where it would have been if the slow sustainable growth had continued from the beginning.
There are many reasons to be optimistic about the housing market moving forward. The biggest reason to be optimistic, is that it does not appear that we are in a bubble. While housing prices have had growth at a slightly faster than average pace over the last few years, it is mainly fueled by the fact that prices previously were to low and we have been catching up to where we need to be all along. With that being said, it is always a good idea to keep an eye on prices in the future, and if you see another parabolic jump in prices be cautious. However, looking at the data we have reviewed, including the absorption rate, prices, sold days on market and inventory a bubble does not appear to be an immediate threat.
Wouldn’t it be great if there were no downside and everything was looking positive? Unfortunately we are not that lucky. Interest rates have been on the rise in recent years and the Fed Chairman Jerome Powell has indicated he plans on continuing to raise them, possibly even increasing the rate at which we see rates rise. So what does this mean for the Phoenix Housing Market? The biggest takeaway is that if rates go up, the amount of money home buyers will be able to finance will go down, as more of their monthly payments will be eaten up by interest.
The effects on the rising interest rates may take time to play out, but for now “The Reeves Team” remains cautiously optimistic that we will continue seeing long term sustainable growth in the Phoenix Housing Market. The market appears to have completed its return to normalcy and the deep dive that we did on the short term numbers appears to say the same thing. If you want any additional analysis on the market or your home in particular please reach out to “The Reeves Team“.
Let us know what you think of the analysis below!
The real estate market has been rapidly evolving over the last decade. The next decade will be more of the same. At The Reeves Team we are here to help you understand what some of the changes may bring to Gilbert Real Estate.
Technology has changed our lives dramatically and given us access to information the previous generation would have never though imaginable. Yet technology shows no signs of letting up and these changes will continue and will alter the way we buy and sell homes as well as how we interact with our home. So lets dive right in and show you some of the ways Gilbert Real Estate will be changing.
Stay with us on this one. Many times when people think of Virtual Reality they think of strapping a VR headset onto their head and walking around banging into things. While a growing number or people are purchasing expensive virtual reality headsets it is still a very small segment of the population. Instead we are talking about virtual reality home tours you can view on any type of device you would like. There are already companies doing a good job of this. This technology used to be very expensive and bulky to get into a home, but as with everything in technology its getting cheaper, faster and smaller by the year. These virtual reality tours will become more and more common in the coming years. Augmented Reality is similar to Virtual Reality except you use AR to interact with a real environment. Have you ever been in a home you were considering purchasing and not knowing how to arrange the furniture? Or if the furniture will fit at all? Imagine using your phone to be able to position couches and other pieces in the room in real time to see if they would fit and how they work together. Together VR and AR will be game changing technology for home purchasers and its coming sooner than you might expect.
No one enjoys commuting. Spending an hour or more in stop and go traffic dealing with thousands of other people that don’t want to be there either is not how anyone wants to start their morning or spend their evening. That all will change when fully self driving cars carve out a large chunk of the traffic on the Arizona highways. Imagine being able to read a book or even start your workday on the way to your job. Commute time will also be reduced as congestion will be minimized when self driving cars are more prevalent. Self driving cars will be able to communicate with each other to maintain higher speeds and react in real time, this will allow for much less stop and go traffic and reduce the amount of time passengers will need to spend on the road. A quicker commute and the ability to do other activities while on the road will make homeowners more comfortable with moving into the suburbs. This will help areas like Gilbert increase in value. We will also continue to see the Phoenix Metro area expand its footprint as it will be easier to expand horizontally than it will be vertically.
Real Estate has been changing at a rapid pace and will continue to change in the future. It has never been more important to work with a Real Estate Agent that is forward thinking and keeps up with the technological trends. The Reeves Team was one of the first teams in Arizona to use an interactive website to provide insights into the Real Estate Market. When websites like Zillow were growing in popularity many agents feared the trend. At The Reeves Team we went the opposite direction and put MLS listings on our website for anyone to access. We didn’t just show our listings but any listings around the value. We were also one of the first teams to incorporate video tours into our listings to help provide a better understanding of our listings before potential buyers came to view the home in person. Change is not always easy but at The Reeves Team we are committed to giving our clients as much power as possible.
What do you think of these upcoming Real Estate trends? When do you think VR tours will be prevalent? Let us know in the comments below.
If you try to tell people who don’t live in the area how cold it is you are not likely to find sympathy. Sure, it is unseasonably cold in Gilbert right now, but its colder in most of the rest of the U.S. Those unsympathetic individuals will never understand the struggle of the cold weather in the desert. While the rest of the world is prepared for cold weather this time of year, the temperatures can catch Gilbert residents off guard. With this in mind we have 5 tips to help you deal with the cold weather we are experiencing. These tips will be things you should know to help prevent problems that arise from the cold.
Tip #1 Protect your plants from frost
It is a fairly rare occurrence when we get a frost in Gilbert. Because it is rare it often catches us off guard when it does happen. If your plants are damaged by frost it can harm or sometimes kill them entirely. If you have plants that are sensitive to frost you can purchase frost cloth to cover the plants during the days we do receive a frost. You can also use blankets or sheets if the temperatures are going to get below the 30’s. If you do use sheets or blankets make sure to remove them in the morning before the temperatures get to 50 degrees otherwise the excess heat can harm the plants.
Tip #2 Prepare your heating system
Everyone thinks to have their HVAC system checked before the summer heat, but many residents forget to check their heating system before the cold weather approaches. As always it is important to change your air filter regularly. It is also a good idea to have a certified HVAC technician inspect the unit to see if any repairs are needed. It is always better to know that something needs to be repaired before the temperatures drop.
Tip #3 Check your weather stripping
The strong Arizona heat can do a number on the weather stripping that surrounds our doors and windows. It is a good idea to go over all of your doors and windows and make sure that the weather stripping is there and that it is in working order. If you notice that the weather stripping is not in tip top shape it is a good idea to replace it as soon as you can. This will help keep your home warm and save you money on your electricity bill.
Tip #4 Avoid frozen pipes
While Gilbert doesn’t often get hard freezes it can happen. When this happens its possible to have damage to pipes. The most common pipes that can freeze are associated with your pool. The Anti-Siphon valve or the Vac-Breaker is the most common part to freeze when we have a cold spell come through Gilbert. The best thing you can do is to put a rag around the valve. Taking this simple step can save a lot of headaches and pool repair fees that could be easily avoided.
Tip #5 Prepare your fireplace
If you are lucky enough to have a Gilbert home with a fireplace now is the perfect time to use it. It is important to have the fireplace checked by a licensed professional before using it. If there is an issue it is better to find out before using it instead of having the smoke that should be going out the chimney bellowing into your living room. Once inspected you will be able to enjoy the heat and cozy atmosphere that a fireplace provides.
Do you have any other tips for staying warm during the cold Arizona weather? Let us know in the comment section below.
The last two years have been either a blessing or a curse in the housing market. If you are a homeowner, the sustained price growth has been a blessing as valuations have risen over 20% from the same time in 2016. Families that have listed their home for sale have been able to expect multiple offers on their homes from buyers eager to enter the market. Many times these homes have sold at or above the listing price. On the other hand, many first time home buyers have seen the market over the last 2 years as a curse. With home values rising rapidly with no end in site, there has been heavy competition. Many buyers have not been able to buy in their desired areas and many have left the market dejected after being beat out on multiple houses by competing buyers. As the prices have risen steadily many potential buyers have felt like they missed their opportunity and home ownership will be forever out of their reach. Recently however, their are a number of factors that just may finally shift the odds back in the buyers favor. Here at The Reeves Team we are going to break down the reasons we may be in for a shift from a sellers market to a buyers market.
The short answer to this question is No. A common phrase you will hear in wall street is “Trees don’t grow to the sky”. The meaning behind this is simple, If you watched a tree grow from its youth you would see it grow at a steady rate. If you see a tree grow 2 feet a year for 10 years it would be rational to assume the tree will continue growing forever and after awhile it would reach all the way to the sky. As we already know this isn’t the case, but many people seem to use that reasoning when looking at the housing market. Since 2012 we have seen sustained growth in the Gilbert housing market. That is 7 straight years of nearly 10% gains each year. When you see homes appreciate this consistently for that amount of time its easy to think it will continue going up forever. Unfortunately, we have a fairly recent example of how volatile the housing market can be when we all endured the 2008 financial crisis. It is unlikely we will see any steep corrections like the one we witnessed a decade ago, there is a strong possibility prices could begin to decline slowly giving buyers much more leverage when negotiating for a new house.
There are a number of reasons we could see a slowdown, and not all of them have to come to fruition to make the slowdown a reality. The biggest factor to consider is rising interest rates. The rates a homeowner has to pay when getting a loan on a home can dramatically affect the mortgage payment each month. Rates were brought down to almost zero after the financial crisis in 2008 and stayed there for quite some time. Borrowers were able to purchase homes where a large portion of the payment was going to principal and less to interest, this allows them to pay more for homes and stay within budget. Because interest rates were low and stayed low for a long time prices have marched steadily higher. Now that the federal reserve has began to raise interest rates and home prices are at or near all time highs it is squeezing potential buyers out of the market. When there are less buyers that means sellers will need to compete harder to land one willing to pay the going rate for their home. We are starting to see home homes listed for sale, but currently its only a slight uptick. If more homeowners begin to worry about falling prices and begin to list their homes we could see even further price reductions.
This is a very interesting time not only in housing but also in the overall economy. Not only have we had extremely low interest rates over the last decade, we have also had quantitative easing in which the federal reserve pumped billions of dollars into the economy annually. The federal reserve has not only raised interest rates it has also stopped its policy of quantitative easing. The Fed still has trillions of dollars on its balance sheet that it now needs to sell which could further put pressure on the overall economy. We also have record low unemployment levels and a growing economy which helps offset some of the negativity in the markets. We could see a temporary dip and then a march higher or we could possibly see a longer more protracted sell off leading to lower prices over the next couple of years. One thing is pretty clear, we wont see anything nearly as bad as we saw in 2008 when the sub prime mortgage rates took down the whole economy.
So what do you think? Will we see a buyers market over the next several quarters or will we continue to march higher as we have done over the last 7 or 8 years? Leave your thoughts in the comments section below.
Bitcoin has only been around for ten years, but in that short time it has accomplished quite a lot. Bitcoin has proven useful as a decentralized currency and created an alternative to every currency before it that is backed by and controlled by centralized governments. Bitcoin and alternative cryptocurrencies have been in the news often over the last two years. First, for the spectacular run up in value in 2017 that made early investors returns that you couldn’t find in traditional markets. Bitcoin unfortunately stayed in the news in 2018 as it lost over 80% of its value from the peak in December 2017. While bitcoin has proven itself as a secure alternative to fiat currency, it has not proven itself to be a stable asset or store of value.
As the price has fluctuated The Reeves Team has had several questions from Bitcoin investors. Questions include if they can use their bitcoin to purchase a home or qualify for a mortgage. While some of the regulatory issues around Bitcoin are still unclear we will break down what we do know and how you can best use cryptocurrency when purchasing a home. We will also discuss the current process of selling your cryptocurrency to pay for your down payment, and if its possible to use your Bitcoin to qualify for a mortgage.
Before we jump into those topics we first want to provide a warning. As we have seen over the past two years Bitcoin is an extremely volatile asset. While using your cryptocurrency to make a home purchase could be a great decision there are also many ways in which it could go wrong. The first consideration to make is what happens if the price plummets. Are you planning on paying for the entire down-payment, or even the entire home in Bitcoin? If you are, it would be prudent to start moving funds from cryptocurrency into dollars. If you wait until the last minute to convert from Bitcoin to USD the price could plummet leaving you without the funds to close and possibly in breach of contract. The second consideration is if the price goes up. Are you mentally prepared to pull your funds out to purchase a house and have the price double the next day? Bitcoin can swing wildly in both directions so please make sure you are prepared for all scenarios.
So lets tackle the big question the team often gets. Can I use my Bitcoin to qualify for a mortgage? We have even had situations where a client could not qualify if the amount of Bitcoin they owned was not included. When applying for a mortgage a bank will want to see verification of how you hold the funds that you have in your account. In the not to distant past if your funds were the result of selling Bitcoin or if the funds were still in Bitcoin, the bank was almost certainly not going to work with you. Much of the reason for not allowing funds associated with bitcoin was because Fannie Mae one of the largest players in the mortgage industry had not given Bitcoin the green light. Recently Fannie Mae has clarified its position and given us clarity on when Bitcoin can be used to help qualify for a mortgage. As of this writing it is possible to secure a mortgage using your cryptocurrency holdings. In order to qualify it is important to have exact documentation of the original purchase as well as documentation of any of the cryptocurrency that has been sold. This is great news for anyone who wants to turn some of their risky cryptocurrency assets into a much more stable investment in a home.
If you do plan on selling your Bitcoin or other cryptocurrency to pay for the down payment there are a few other considerations. Again, documentation will be key as any holes in documentation could result in your mortgage application being rejected. In addition it is important to make sure you only transact in U.S. Dollars. If the currencies are converted into any other currency it can cause additional headaches and could also result in your application not going through. If you sell your cryptocurrency for a down-payment you will also need to be aware of the tax implications. Any profits you have made on your Bitcoin investment will need to be reported to the IRS. While there are still some gray areas with reporting cryptocurrency profits it is very clear in this situation that taxes will be owed on the profits you take from your sale.
If you have any additional questions about purchasing a home using cryptocurrency, or just buying/selling a home in general, please contact The Reeves Team. Let us know what you think about Bitcoin and if you think selling cryptocurrency to purchase a home is a good idea in the comment section below.
The garage has had an important place in the hearts of American homeowners. After the passing of the Federal Highway Act in 1921 car ownership in America soared. This started our love of cars and our obsession over where to store them. In ‘confessions of an automobilist’ an article written in June of 1925 it states, “Real estate men testify that the first question asked by the prospective buyer is about the garage.” The article also goes on to note that “The house without a garage is a slow seller.” Here at The Reeves Team we can assure you that the article from 1925 is as true today as it was then.
Garages have never been more popular than they are today. Over 80% of homes sold in 2017 had a garage, that is up over 20% from the 1960s. Its not just the homes with garages that are increasing, its also the amount of garage spaces with each house that are increasing. Last year 17% of new single-family homes sold had 3 or more garages spaces. So garages have never been more popular than they are today, but will changes in the way Americans are living affect the way we use our garages?
Ride sharing services such as Uber and Lift are making it easier for households to downsize the amount of vehicles they need. A household that used to require one vehicle for each adult can now have one shared vehicle and use ride sharing services to supplement when there is a need for a second vehicle. Currently this trend is only popular among millennials, but if the same trend occurs with cars as it did with cable television, automobile companies should be concerned. The question is, will the growth of ride sharing companies make a big enough dent in car ownership that houses with multiple car garages begin to decrease instead of increase?
Ride sharing companies are not the only threat to garages. If you live in the the Phoenix Metro you are probably familiar with the self driving cars that are buzzing around our roadways. Most Gilbert residents view these as a competitor to ride sharing services, but in time it could be more. Google has already announced that one of its long term ambitions is to have subscription services that you pay monthly for access to rides on demand. Subscriptions services such as these could further allow families to downsize to just one car for the entire household. It may even allow bold individuals to eliminate vehicle ownership all together.
So while it is getting clearer that automobile ownership is probably at its peak and will begin to slow down over time, does that mean the same thing will happen to garages? In today’s housing market we are conditioned to see houses with garages as beautiful. In most peoples eyes houses with 3 car garages have more curb appeal than than those with a two car garage or carport, but will this change in the future?
So is it possible we could look at 3 car garages as eyesores in 20 years? Will garages become detached from houses and hidden away in the back yard as they used to be? The answer is no. There are a few reasons why we haven’t reached peak garage and the trend for 3+ car garages is not going away any time soon.
The primary reason garages are here to stay is that more and more households have become multi generational. Even though the recession has been over for nearly 9 years the number of multi generational homes continues to grow. Over 20% of households in the United States include two or more adult generations. With homes housing more adult family members the need for storage and easy access to that storage will continue to increase. So while we might not be keeping as many cars in our garages in the future we will not have a problem keeping them full.
Another reason garages are not going away is because while cars may soon start disappearing, recreation vehicle ownership continues to grow at a staggering pace. A recent trend the home builders have been experimenting with is selling houses with the option of incorporating an RV garage. Our clients have been loving these houses with many choosing a specific builder because they offer the RV garage option. American will always love their toys and home builders are responding by creating even larger garages so homeowners can more easily store them.
So it is clear to us that we have not reached peak garage. Instead garages will continue to be an important part of home ownership for years to come. Do you agree that garages are here to stay? Let us know if you agree or disagree in the comment section below.
The the recent entry of Zillow offers the Gilbert area has become flooded with iBuyers. iBuyers are companies that are attempting to streamline the process of selling a home. You may have heard radio commercials for Opendoor or Offerpad on your commute to work. Or maybe you have seen Zillow advertising to purchase your home as you browse their site. We at the Reeves team have been getting more and more questions about these services. We will shed some light on the differences between iBuyers and the traditional home selling process. We will also answer some of the most common questions are clients have been asking us.
The most common question we get is “Will they offer me the same amount I would make if I sold my house myself?”. The short answer to this question is No. You will not make as much by selling your home to an iBuyer service as you will through a traditional sale. The reason for this is simple. Ibuyers such as Opendoor will need to resell your home at a higher price to make a profit. If the companies broke even on the sale of the homes they would be losing money as they have to employ a employees to facilitate the transactions.
So what is the benefit of using an iBuyer? Offerpad and other similar companies are trying to make the process of selling your home as simple as possible and hope that buyers are willing to pay a premium for this simplified process. One thing to note is if you are working with an experienced real estate professional that puts their clients needs first, such as The Reeves Team, the home selling process can be tailored to your needs without paying the premium that iBuyers will charge.
Another question we get is, do these iBuyers charge a fee? The answer to that question is yes. While the fees can vary from company to company, most iBuyers hover around the 7% mark which is higher than you would pay working with an experience real estate team. While many people look at these companies as home flippers the companies themselves are trying to distance themselves from that narrative and suggesting they make their money from the fees associated with the sale and not from price appreciation.
So should you use an Ibuyer such as Zillow Offers or Offerpad? While these companies do offer flexibility in the home selling process, we recommend using a licensed real estate professional that your trust. If you are open and honest when communicating what you need from the home selling process you can recreate the ease of selling to an iBuyer without paying the extra fees they will charge for the convenience. This is also a great time to remind you about The Reeves Team 90 day sale guarantee!
So what do you think of the new iBuyer startups? Let us know in the comment section below.
As Arizona residents we don’t often find ourselves overly concerned with flooding and water damage. It rarely rains, and most of our homes are build above ground with basements being a rarity. However, when it does rain we can often get substantial amounts of rain all at one time. Arizona residents are familiar with downpours we receive during monsoon season. October isn’t a time many Gilbert Homeowners typically associate with large amounts of rain, however this October we are seeing a different story. Less than halfway through the month and we have already set a record for the most rain in recorded history in the phoenix area. With these facts in mind The Reeves Team is providing you 5 helpful tips to keep your home from taking on any water during this unseasonably wet October.
1. Determine How water flows Around Your house
One good thing about getting this much water all at one time, is that it allows us the opportunity to see how water flows on and around our homes. So the next time we get a large amount of rain grab a hold of your umbrella and march out into the rain to see if anything is concerning. Watch how the water flows on your roof and where the majority of the water is dumped on to the ground. You can check to see if there is any erosion at the points where the bulk of the water comes off of the roof. Its also a good idea to see how the water runs once it lands on the ground. Make note of anything you want to change once the clouds blow over and we get our typical sunshine back again.
2. Repair or replace roof Tiles or Shingles
Many leaks occur from our roofs. With tile roofs it can be difficult to determine if repairs need to be made. If you are concerned you can have a licensed roofer inspect your roof and let you know if repairs are necessary. You should also have the underlayment inspected on your tile roof as that is often the cause of leaking in Arizona Homes. Its also extremely difficult to tell the condition of the underlayment so its a good idea to have this checked out when purchasing a home.
3. Ensure your lot is properly graded
There are two types of grading around a home. Positive grading and negative grading. Positive grading means the slope of the land is away from your home and your foundation. Negative grading is the opposite and means the slope of the land is towards your foundation. As a homeowner you want positive grading so when you have heavy rains the water is not trying to get into and under your foundation. If you have a basement this becomes even more important. When you purchase a home you should have the home inspector check the grading. Its also important to think about your grading whenever you make changes to the outside of your home, such as adding vegetation or structures on the property.
4. Regularly clean and maintain your eavestroughs and gutters so that they’re not blocked
Not every home in the Phoenix area has gutters, but if you do have them it is important to make sure they are clean and free from debris. If your home has gutters it is for a reason. The gutters help ensure runoff doesn’t accumulate in the wrong areas. Gutters are typical of homes with basements to ensure the water does not runoff into an area that can cause water damage to your home. Set a calendar alert in your phone before monsoon season and when leaves begin to fall to make sure your gutters are in good working order.
5. Know how to turn off the water supply to your house
Many leaks occur through burst pipes or backups in your homes plumbing. It is important you know where the water shutoff is to your home. Often times in Gilbert your main water valve will be close to the street for convenient access. Some shutoffs will require a specific tool so make sure you have one available. If there is ever an emergency you will be glad you knew how to shut the water off quickly.
If you follow these tips you will feel much more comfortable when large storms arrive or when the unexpected happens in your home. Water damage can be a difficult thing to deal with as a homeowner so take as many preventative measures as you can. Let us know what other tips you have for preventing water damage in the comment section below. If you have any questions of want additional tips please reach out to The Reeves Team.
We at The Reeves Team have been getting a number of questions regarding the upcoming interest rate hikes and how it may affect the Gilbert real estate market. The federal reserve has been raising the federal funds rate at a rapid pace over the last year. In the last year there have been 3 rate hikes of .25% and it looks like its poised for two more rate hikes by the end of the year. Depending on your view this can be seen as a positive or a negative. The optimistic view is that the federal reserve feels confident enough in the economy to continue raising rates without hurting the economy to badly. Its true that our economy has been doing well for nearly a decade at this point and it has not shown any signs of slowing down. The pessimistic view is that 5 rate hikes in a year is to much to fast and could cause a pullback in the housing market or could even cause the next recession. The Reeves Team will take you through a look at some of the possibilities and technical jargon you may hear over the coming months regarding the federal reserve rate hikes and how it could affect the Gilbert housing market. If you have not read Troy Reeves State of the Phoenix Housing Market it is also a great place to get his take on where we stand.
The federal reserve used to keep its decisions on interest rates a tightly guarded secret. Nobody besides the central bankers knew if the rate would go up, down or stay the same until the announcement was made. This policy changed in the mid-70’s after the federal reserve raised rates quickly from 5.75% to 13% and then back down to 7.5% in a relatively short period of time. This caused confusion among the banks and the businesses who kept prices high because they didn’t know what to expect. This stop-go monetary policy was replaced by what we now know as forward guidance. The forward guidance provided by the central bankers has economists convinced that two more rate hikes are coming before the year end. The president views the increase in the rate to be harmful to the growth of the economy and has forcefully spoken out against multiple rate hikes by the year end. Having the president attempting to influence the fed rate policy is a break from tradition and many believe may in fact force the federal reserve to raise rates twice to show its autonomy from the executive branch. Unless things in the economy change drastically it is reasonable to expect the federal reserve will increase rates twice by the end of 2018.
The short answer is Yes. We have historical examples of economic downturns that were created because of the federal reserve misjudging the strength of the economy and raising interest rates to fast. The most recent example is the recession in the 1980’s when interest rates were raised rapidly from 6% to 10% and created a recession almost single handed. The most famous example of over-tightening by the federal reserve is the great depression. In fact in 2002 Ben Bernanke who was on the Federal Reserve at the time apologized for the federal reserves role in the great depression saying “Regarding the Great Depression, … we did it. We’re very sorry. … We won’t do it again.” So as a Gilbert homeowner or a potential homeowner it is important to pay attention when the federal reserve starts to increase interest rates at a rapid pace. The question we have to ask is if the economy is strong enough to bear these increased interest rates. Currently the unemployment rate is below 4% from a high of nearly 10% in 2009. We are also seeing strong growth in the housing market and stock market even though the market expects another two rate increases. These indicators give us hope that we may not be ready for another recession in the short term.
When the Federal Reserve decides to increase interest rates it is generally seen as a negative for the housing market. It is seen as a negative because higher interest rates mean that more of a borrowers monthly payment will go to interest. When interest rates go up, potential homeowners purchasing power goes down. As potential homeowners can afford less home, sellers will often need to lower their prices to accommodate the reduced purchasing power. There are a couple of reasons why this is not always the case. First off, the Federal Funds Rate is not always as closely tied to the aver 30 year mortgage rate as most people would assume.
As you can see from the chart above the federal funds rate and the 30 year fixed mortgage are loosely correlated but they are no where near identical. You can see the funds rate rose dramatically from 2004 to 2006 and then dropped substantially in 2008 all while the 30 year fixed interest rate remained relatively steady. The second reason that interest rate rises could actually increase home values is FOMO. FOMO or fear of missing out is the phenomenon that occurs when buyers feel like if they do not get in now they may never be able to get in. As you can see from 2004 to 2006 the Federal Funds Rate was actually increasing at a dramatic pace while the housing boom was occurring and home values were rapidly appreciating. By now we all know that was not the only thing that caused the market to run up and subsequently crash but it does show that its possible to have price appreciation while the federal rate is increasing.
It is hard to believe that he housing crash and the great recession are nearly a decade old at this point. While its been nearly 10 years it was such a big event that it is still fresh in most peoples memory. So most home owners and home buyers are aware of just how bad prices can crash when they do go down. While we remember how bad it was last time, it is important to remember that the circumstances have changed dramatically and we are not in the same place we were 10 years ago. While interest rates were rising in 2008 when the financial crisis occurred, the crash can be attributed more to the subprime mortgage epidemic and the lack of solvency for major financial institutions. Banks have been careful not to recreate the same issues that caused the crash last time. If the federal reserve does raise rates to quickly and the economy and housing is negatively affected, it is unlikely to be as dramatic and can hopefully be corrected more quickly than the previous crash.
Its also important to not that home prices had a dramatic spike before the crash in 2008. As you can see from the chart above the price of homes went parabolic starting in 2004 and ending in 2006. Then there was a huge sell off and over correction in the market that ended in 2009. Since then the price of homes have normalized and are currently much closer to where they should have been if they continued the trend before the massive run up in 2004. So while the rise looks dramatic from 2012 to 2018 it is important to keep in mind that home prices were dramatically oversold before they began to bounce back.
Currently there is a lot of talk about the yield curve and how it can be an indicator or a potential recession. It is important to note that just because the yield curve inverts does not mean we are due for a recession. With that being said an inverted yield curve has preceded the last 7 recessions so it is certainly something to keep your eye on. So what is a yield curve?
To put it simply, a yield curve is the return you get for purchasing bonds depending on the length of time before their maturity. Typically if you purchase a bond for a shorter amount of time you would expect less return on that investment. As you can see from the chart currently the yield curve is not inverted, you will “yield” more from purchasing a 30 year bond than you will for purchasing a 1 year bond. However this curve is flattening and if interest rates continue to rise we could see an inversion of this curve. This is something to keep an eye on as it has accurately predicted the past 7 recessions. However, each time is different with a unique set of circumstances and history doesn’t always repeat itself, but it does tend to rhyme.
So we at The Reeves Team have thrown a bunch of information at you. Hopefully you have learned a lot and will now be able to more accurately understand the relationship between the Federal Reserve Rate and the Gilbert Housing Market. However, you may still be asking yourself what does it all mean? Is now a good time to buy a home? Or sell my current home? While there are headwinds that are coming for the housing market, we are in a much better position than we were before the crash in 2008. If there is a pullback in the market it will likely be much smaller and shorter than the previous pullback. It is also not certain that the market will pull back at all, we could continue to see sideways price movement or even sustained growth. It is unlikely we will continue to see the 12 to 15 percent increases year over year we have been seeing in the Gilbert market over the next year or two. While there is sure to be a lot of news and information around the market in the next few months, take everything with a grain of salt. We still have a great economy and more people than ever want to live in the Gilbert area.