June 2013 Real Estate Market Report
for Metro Phoenix, Scottsdale, and McDowell Mountain Ranch
with Jeff Cameron, The Cameron Team, HomeSmart
Hey thanks for tuning in, this is Jeff Cameron with HomeSmart. It’s June of 2013 and the real estate market continues to be on fire, prices jumped through April and May.
Today, I am going to discuss a couple of myths in real estate. Number one is the myth about household formation, new constructions, back to normal, and the difference between today and 2004 through 2006 range.
So when we first look at household formation, you know actual financial crisis within five years of only creating about 600,000 new households per year, which the normal is over 1 million. Last year, we returned to over a million. We’re expected to be 1.2 to 1.3 million this year; and, going forward with an upside potential of 1.3 or 1.6 million. So if anybody is telling you that people do not want to buy houses anymore? There full of @#%&#!
People are trying to say young people don’t want to buy a home after what we went through. NOT TRUE! Take Kyle and Amy… I sold them a home nearly two years ago for $150k. Today it is worth $225k. They are refinancing into a 15-year mortgage instead of taking cash out. This is the difference! Like our grand parents after the Great Depression, they changed. So have today’s young people like Kyle and Amy!
So, household formation is continuing. Builders over building, that’s what happened in the past. Today, builders are building as much as we need. And in fact, if they are only building a level of 20% of the demand in 2011, but we are eating up that excess inventory. Now, we should be up to about 18,000 new homes this year as they continue to make up and trying to get back to that 35-40,000 level, which once they get to that level, will add a ton of new jobs.
So back to normal…it seems like it’s back to normal because the areas and short sale are only 10% of the homes out there right now. But we’re not back to normal because there’s so low inventory that were seeing bidding worse on just about everything.
So the difference between today and the boom years is that, in the boom years, yes we had low inventory, today we have low inventory. Yes we had bidding worse, and today we have bidding worse. Yes we had a bunch of investors, and today have investors. But back then, prices were rising while inventory is not rising. Right now, we have steady inventory with prices rising, and we have low inventory. Next, investors today are paying cash whereas they’re putting nothing down in the past.
The difference between now and back then, it’s much better now.
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