Transaction volume continues to be slow in the Phoenix residential market. Anecdotally, agents are experiencing a steady stream of showings, but high rates remain discouraging for many would-be buyers.
In many cases, deals require some level of creativity. When available, assumable loans are playing an interesting role in the market, since they may be far below current rates. One of our recent listings, for example, had an assumable VA loan at a rate of 2.25% on a $1.6 million property—which would be close to a $5,000 savings, when compared with today’s interest rates. Of course, a VA loan has strict requirements: The owner of a VA property would lose their eligibility to get a VA loan on their next property if they sold to a non-veteran buyer. In any case the dramatic difference between rates illustrates how powerful assumption is within the single-family residential space, along with other creative solutions such as seller carryback financing and wraparound mortgages.R.O.I. Resi Newsletter April 2024
Over the past month, the supply-demand index dropped from 113.6 to 111.1, with the supply index up from 70.3 to 71.8 and the demand index remaining stable from 79.9 to 79.7. The Bureau of Labor Statistics has been under increased professional scrutiny in 2024 as the Consumer Price Index (CPI) continues to increase “unexpectedly,” resulting in soaring mortgage rates and stunted purchase demand for homes. The primary issue is Owners’ Equivalent Rent (OER), which represents a 27% weight in the CPI and measures what homeowners estimate their home would rent for on the open market. The measure isn’t new, but the formula is. Recently, BLS decided to re-weight single-family homes more heavily in the OER calculation than in previous measures, which has caused the CPI to rise dramatically. Regardless, investors have responded as if there was no change, wreaking havoc on mortgage rates.
Originally shared via roiproperties.com newsletter. Click here to read full newsletter.