2022 Arizona Housing Market Trends with Chief Lending Officer Greg R. 

 

 

[00:16:30 Update: Copper State Credit Union’s WISH down payment assistance program now matches 4-1 up to a maximum of $22,000]

 

Introduction

 

 

Christina K. (Host)

Hello, everyone! Welcome. Thank you so much for joining us for our hot topic today, Arizona housing market trends. We all know that the housing situation has been kind of crazy here in Arizona since the early summer of 2020. But that doesn't mean we know what's going to happen next. That's why I brought in Greg, our Chief Lending Officer here at Copper State Credit Union with 32 years of experience in lending. We’re going to hear from him about the market overall. We're going to get some tips for buyers, sellers, and so much more. First, Greg, I'd love to hear a little bit about your background. How did you come to be such an important member of our team here at the credit union?

 
Greg R. (Chief Lending Officer)

Thank you. I have been in Phoenix and with the credit union for the last five years. I was born and raised in Indiana. I came out here for the weather, which is spectacular, I cannot complain. I've spent my entire career in banking, mostly on the lending side. I have worked all the way from collections to loans, litigation, and have done every type of lending there is, such as mortgage, commercial, and personal.

 


2022 Arizona Housing Trends Predictions

 
 
Christina K. (Host)

What are your predictions overall for the housing market in Arizona this year?

 
Greg R. (Chief Lending Officer)

Housing prices are going to continue to grow. I think they're going to slow this year for a couple different reasons. But just the availability of houses is getting better. It's still a seller's market. But with the Fed (Federal Reserve System) saying they're going to increase rates three to four times this year, every 25 basis points they go up affects affordability of a home. So that'll slow the appreciation [of home values]. Year over year, from 2020 to 2021, Phoenix led the nation with 34% growth, which basically means in 2021, you got 34% less home than you did in 2020. So, I don't think we're going to approach those crazy numbers, but I think we're going to lead the nation again. And the appreciation will probably continue into July and August, and then I think it will plateau out for the rest of the year.

 
Christina K. (Host)

So we can still expect an increase in values, just not as much as last year?

 

Greg R. (Chief Lending Officer)

Yes. I would be shocked if it's 34% with the rate increases and the way the market's going. But Phoenix is a growing area. I mean, we've got a lot of business and industry coming here.

 

Christina K. (Host)

That's so true. You talked a little bit about the Fed. Since the Fed raising rates, that really affects credit unions and banks borrowing from each other. That ends up affecting the mortgage rate that somebody goes home with, right?

 

Greg R. (Chief Lending Officer)


Absolutely. Last year, we were seeing the 30 year fixed rates in that 3.0% to 3.25% rate. Right now, we're creeping up closer to 4%. And by midyear, we'll definitely be over 4% for that. That will affect the monthly payments.

Christina K. (Host)


Especially as the Fed continues to make changes, interest rates will go up and down. So, you’re saying that since the monthly payment is definitely going to be impacted, values will be affected.

 

Greg R. (Chief Lending Officer)


I think so, yes.

 

How Will the 2022 Arizona Housing Market Look Different than 2021?

 

 

Christina K. (Host)


We still have some houses left to buy, which is a good thing! How do you think that 2022, looking forward, might be different than last year for buying and selling? How might it be similar? 

 

Greg R. (Chief Lending Officer)


I think we're going to move into a purchase market [rather than a refinance market] where people are going to upgrade their homes, or we're going to see more purchases than refinances. Rates have been so low. Once the Fed starts raising rates, that's going to slow the refi business quite a bit. This will give a chance for the appraisals to catch up to the market. We've had such crazy appreciation that if you're buying the house today, within 90 days, that house is worth so much more and the appraisals have not been keeping up, which means you're either coming back with more money down or you're going to have to renegotiate something. So, I don't think we're going to see that as much this year as we did last year.

Christina K. (Host)


So last year, basically the appraisals were not matching or meeting the sales prices?

 

Greg R. (Chief Lending Officer)


They were not, because they just couldn't keep up. But, the key factor in appraisals were comparable sales of properties within the same vicinity. As MLS (Multiple Listing Service) updates, it just can’t keep up with the 34% that we were seeing last year

 

Why is Arizona [specifically Phoenix metro] increasing so much faster than other areas of the country?

 

Christina K. (Host)


It's interesting—the Phoenix metropolitan area and Arizona in general is a desirable destination. Obviously, values are increasing much faster than other areas of the country. What are some factors that you think weigh in here?

 

Greg R. (Chief Lending Officer)


I think obviously the weather. Everybody loves the weather out here, especially this time of year. It's much better than Indiana. My daughter sent me a picture Tuesday of 10 inches of snow in her backyard. I’m glad she has that and I don't!

And it's just such a desirable market for business. We've got several manufacturers coming into the area that's going to bring jobs. With those plants, more industries will come to supply them. So, there's a lot of manufacturing and business growth. Several companies are relocating their headquarters here. That's going to continue to help the real estate market prices go up.

It's good news for the community. It's great news for Phoenix and homeowners. In my opinion, you're going to see appreciation continue for several more years that will outpace the country.



Best Way to Determine a Home's Value



Christina K. (Host)


So, what's a good way to find out the value of my home? Asking my neighbors?

Greg R. (Chief Lending Officer)


Yeah, the media and your neighbors are not a good source to value your home. I would contact a realtor or somebody that's in the business. You need to talk to a mortgage professional. We have two highly skilled mortgage loan officers here at the credit union. They can help you with that. And of course, a realtor has a better idea and is more hands-on to the market. They can give you the best estimate.

 

Christina K. (Host)


Essentially, the sets of tools that our mortgage team and realtors have are going to be the most accurate valuations.

 

Greg R. (Chief Lending Officer)


Yes, those are going to be the most accurate.



Advice for Buyers

Christina K. (Host)


So what can buyers do this year to set themselves up for success?

 

Greg R. (Chief Lending Officer)


The key there is being prepared. Get that pre-approval. Make sure to have your income documents ready. You're going to need a couple years of taxes present. You're going to need some recent pay stubs. We're going to ask for them for a couple times. You'll need them at application and right before closing.

 

Christina K. (Host)


Which by the way, we have a House Buying Checklist of Mortgage Documents You'll Need which is a really helpful resource if you want to start gathering those items. If you need a whole overview of how to buy a house in Arizona, check out our eBook on buying a house. But going back to pre-approval...

 

Greg R. (Chief Lending Officer)


Yeah. Be pre-approved, be ready to go. Last year at this time, if you were trying to buy a house and you had contingency on getting the loan approved, or you had a contingency on inspections, appraisals, selling your current house to get into the new one, etc. Those offers just were not getting accepted last year. We had so many people coming over from California, Oregon, and Washington. They were coming with large down payments or full cash offers and they could just buy the house outright, with no contingencies.

We saw a lot of offers where appraisals were being waived. I never recommend having the appraisal or inspection waived. You need to know what you're getting into. 

But that trend has slowed. We're not seeing that as much this year. Homes are staying on the market now up to 8 to 10 days, whereas last year it was a matter of hours they were selling.

 

buying-a-house-in-arizona-ebook

 
Christina K. (Host)


Last year, I remember you had that statistic about buyer's remorse, and how it was over half of buyers unhappy with the choice they made (probably because they had to make it within a few hours!) 

 

Greg R. (Chief Lending Officer)


I just saw that updated report yesterday. Buyer's remorse is still out there - it's still over 50%. But it's not as high as it was last year. Historically, there has been a 90% satisfaction rate. Now, we're seeing that closer to 50%, which is unprecedented. 

 

Christina K. (Host)


Well hopefully, with the changes that you're talking about and predicting, hopefully that remorse starts to come down a little too. People are happier with the choices they're making, because they have a little bit more time to do it. 

 

Greg R. (Chief Lending Officer)


Correct. This year, you're probably going to look at three or four houses before you get an offer accepted. But last year, it was 10 or 12, and I think people were getting discouraged while trying to buy. But this year, I think it's going to be a better buyer's market, but we're still going to be a strong seller's market. And just try not to get emotionally attached to the house until you actually have the offer accepted.



Advice for Sellers

 
Christina K. (Host)


What can a seller do this year to set themselves up for success, to really get the most out of the value of their home?

 

Greg R. (Chief Lending Officer)


You really don't have to do a whole lot of major upgrades to the house. Just have it functional, have it look clean. But I guess the key thing for a seller is know where you're going when the house sells, because it's going to sell fairly quick.

Christina K. (Host)


Okay. So it's not as much about preparing your house. It's more about where you are going to go after it sells.

 

Greg R. (Chief Lending Officer)


Exactly. They're still going to sell within 10 days. I would think 10 to 14 days is what we're going to see. Sellers are still getting 99% of their asking price. 42% of the market in January sold over list price. So, there's still some craziness out there, but it's settling down.

 

 

Advice for Those Who Want To Upgrade

 

 

Christina K. (Host)


What about folks who want to upgrade to a new home and get out of their current one? Any specific advice?

 

Greg R. (Chief Lending Officer)


You need to be pre-approved, obviously that's the key, and just be ready to move in a moment's notice when you find the house you want. Luckily, contingencies are now being accepted so you're more likely to have success than you were last year. With this fast-paced market, you can do a simultaneous close, get your home sold, and move into the new home in less than 30 days. So, it's all preparedness. When you make the commitment to buy a home, you need to be ready to go.

 

Get Pre-Approved

 

 

Affordability Trends

 

 

Greg R. (Chief Lending Officer)


One alarming metric that I saw the other day was, last year, Phoenix real estate prices appreciated 34% while income only appreciated 10%. At some point, the affordable real estate market isn't there anymore. With interest rates rising, and home values still rising, buying a house early in the market in 2022 is going to be better than waiting.

 

 

 

Tips for First Time Home Buyers

 

 

Christina K. (Host)


Do you have any specific advice or tips for first time home buyers in this Arizona market?


Greg R. (Chief Lending Officer)


First time home buying in the Phoenix market is a tough market. It’s tough to get into, just because there are so many people with large down payments and the housing prices are going up all the time. I just scanned an article this morning where the median home price now is $400,000. So, it's not really a starter home for a lot of folks. Luckily, for first time home buyers at Copper State Credit Union, we work with the Federal Home Loan Bank out of San Francisco on a down payment assistance program called the WISH program. If you're a first time buyer in this market, it's key that you seek out grants or down payment assistance, if you meet certain low income requirements. The one that we participate in and we've helped several members with, is a three to one matching fund. So, for example, if you contribute $5,000, they're going to give you $15,000 so you go in with a $20,000 down payment.

[Update: Copper State Credit Union’s WISH program now matches 4-1 up to a maximum of $22,000] You could put down $5,500 and have the WISH program provide the maximum of $22,000 (if you qualify) for a total down payment amount of $27,500. Some of this can cover closing costs as well! You must stay in the home five years and then that money is yours to keep, along with the appreciation on your home.



Christina K. (Host)


That's really cool!

 
Greg R. (Chief Lending Officer)


Feel free to contact a Copper State mortgage loan originator. They're very well-versed in it. They've helped several members. And nothing's more satisfactory to us as helping somebody get into that first house.

Christina K. (Host)


Absolutely. Now, I imagine that's not as quick of a turnaround time. If you're going to do the home loan assistance, the WISH program, there's probably some hoops you need to jump through.

Greg R. (Chief Lending Officer)


There's some steps you have to take, yes. You set up a savings account and go through a little budgeting and housing counseling program. Normally, it takes three to six months to get to that stage. You have to demonstrate the ability to pay your debts, save money, and stick to a budget. At that point, once you're certified, you can go out and start shopping for your home.

For the availability of the funds and the benefit you get from that, it's well worth the time invested!

 

[More info about the WISH program here (it's #13 on the list) 13 Interesting Misconceptions on How to Buy a House]


Online Homebuying Services

Christina K. (Host)


Services such as Opendoor, Redfin, Better, Knock. What do you think about those?

 

Greg R. (Chief Lending Officer)


There's a lot of them out there, and in certain situations they're very good. However, you have to understand, sometimes if a deal [seems] too good to be true, then it might be. These companies buy your home at a little bit of a discount and let you stay there while you try to find a place. But, they keep the home equity appreciation on that home for the time that you're staying there. These services are definitely a viable option if you're upgrading and you want to go ahead and move. You can do that. But that comes at a cost. So, this year we're seeing more offers being accepted with contingencies, and with houses still closing 10 days on the market, you can still get both loans closed within 30 days. Sometimes it's more beneficial to go this route and keep the home equity for yourself instead of giving it away.

Christina K. (Host)


Yeah, that makes sense. And something you said reminded me. So you mentioned 30 days. Is that a timeline that Copper State Credit Union can typically stick to? I mean, that's fast for a mortgage loan!

 
Greg R. (Chief Lending Officer)


Yeah, absolutely. As long as we've got the cooperation of the borrower and we get the documents we need. If you get pre-approved ahead of time, then all we would need was the purchase agreements and some updated pay stubs. We'd wait on the appraisal and the inspections. Appraisals are going much quicker now - last year, that was an issue where we were bumping up against the 30-day mark because of slow turnaround time on appraisals. But we managed to get them all done within 30 [days]!

 

Christina K. (Host)


Wow! That's a pretty good completion rate you've got, 100% within 30 days!

 

Greg R. (Chief Lending Officer)


We had a good year, we work with some great realtors. If you're out there looking to buy a home, and you're a member of Copper State CU, or if you're not a member of Copper State and you'd like to be a member, we can certainly assist you. We can set you up with a savings account, work with you and your realtor, and provide you the same great service that we do our current members.

 


Key Takeaways

 

Christina K. (Host)


Is there anything you want to share with our audience today who either is watching live, watching after the fact, or on our website? Key takeaways from our session?

 

Greg R. (Chief Lending Officer)


Be prepared, do your homework, talk to a mortgage loan originator, and know the options available to you, because not all mortgages are created equally. We had an incident not too long ago where someone was getting a 30-year mortgage at a much lower payment than ours. Once we got into the contract and sat down with them, it turns out that they were getting a 10-year interest only payment. So the payment looked lower, but they were not paying down that house. They were paying interest on it a lot longer. Not all 30 year loans are the same. So definitely seek out the advice of a mortgage loan originator or a mortgage professional that's not your realtor. It needs to be someone who deals with the loan [a mortgage loan specialist].

Christina K. (Host)


Right, because there are so many different moving pieces when it comes to buying a house! You have the title company, the lender, etc. Everyone knows their part of it so well, so that going directly to the source and finding the expert is really valuable.


Greg R. (Chief Lending Officer)


That'll be valuable. And like I said, not all 30-year mortgages are the same. The pricing is not the same. The origination could be different. So do your homework, seek advice from professionals, and good luck. It's a great market. It's a great community to live in. So it's going to be a great year.

Christina K. (Host)


We love to hear that! Thank you so much for joining us everyone! Greg is our Chief Lending Officer here at Copper State Credit Union and we hope that this was helpful. Always check copperstatecu.org/events for updated information regarding live and on-demand webinars. Thank you!

 

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This article is intended to be a general resource only and is not intended to be nor does it constitute legal advice. Any recommendations are based on opinion only. Rates, terms and conditions are subject to change and may vary based on creditworthiness, qualifications, and collateral conditions. All loans subject to approval.