Ask Our Experts: Arizona Home Buying Trends 2021




Ask Our Experts: Arizona Home Buying Trends 2021




Christina K. (Host):

Hello everyone and welcome! Thanks for joining us this evening on Facebook Live to talk about a pretty hot topic, no pun intended, here in Phoenix: houses. We’ll be discussing Arizona home buying trends for 2021. If you are in the market to buy or to sell this year, we have some insider information to share from Greg R., our Chief Lending Officer at Copper State Credit Union. If anyone knows what's going on in the crazy housing markets, it would be you, Greg!

First - tell us a little bit about yourself. Where are you from? How did you get into lending and the banking industry?

Greg R. (Chief Lending Officer, Copper State CU):

I was born and raised in Indiana. Four years ago, I decided I was moving out here, so I picked up and moved out here, left the cold and the snow behind. Haven't regretted it one minute. I love it out here, and Phoenix and Arizona is my home now. I consider this home. I knew in the fourth grade I was going to have a career in banking. I lived in a small town, rural town, Indiana, only about 2,700 people, and our next door neighbor was the bank president, and every Wednesday he showed up at noon from home, was off work, and I thought, "I could do that." And 30 years later, I haven't worked a half a day in my life. But that's how I ended up in banking.

I started out as a collector, moved into underwriting, managing, doing some indirect lending, working with car dealers, developing business that way, loans that way, mortgage, commercial. I've had some great mentors along the way that really positioned me well to succeed at Copper State Credit Union. Love being here, it's a great credit union, well run, and we've really focused on the member and getting them what they need.


Is 2021 the year to buy a house in Arizona?


Greg R. (Chief Lending Officer, Copper State CU):
In my opinion, yes, it's the year to buy a home in Arizona, but you better be ready for some competition, as it is a very strong sellers’ market out here. Properties go up on the market, and they're selling within days sometimes, which drives prices to keep going up. We're looking at a very high demand of people wanting homes who are moving in from other areas. And there's just a low supply. People are hanging onto their houses longer. The biggest thing you can do right now if you're getting ready to buy a house or you're thinking about getting in the market is be prepared to make that offer and move quickly because it's going to go fast.
It used to be, years ago, you made the offer, and 60, 90 days later you were moving in. It's happening as quick as 30 or 45 days out here right now. If you're going to move slow with it, this is not the market for you.


How is 2021 in Arizona going to be different than prior years for people wanting to buy or sell a house?


Greg R. (Chief Lending Officer, Copper State CU):
I think the difference is we're going to transition out of the refi market that we were in in 2020. When the virus hit and everything slowed down, the Feds lowered rates to historically low rates. You could get a 30-year mortgage at a lower rate than ever before.
So you saw a lot of refi business out there. We were not immune to that. All financial institutions across the country probably did three times the business they had done in 2019 to 2020. I know we did. We processed three times the loan volume. And the majority of that was refi. Everybody was on that craze. We were busy and having fun doing it.
But 2021 I think's going to transition more into a purchase market. And that plays well in Arizona, especially the Phoenix metro area. I saw a report today that we're the fastest growing community in the country right now at about 12% annually growth.
People are abandoning the cold weather, the snow. I'm one of those, guilty of that. Then you got the neighboring states that are, everything's high priced, the taxes are high, everything's high. We're still a very affordable market over here. So we're seeing a lot of people move here.

Christina K. (Host):
So we here in Arizona, Phoenix specifically, are a desirable destination right now?

Greg R. (Chief Lending Officer, Copper State CU):
I think it is. Due to the weather, the proximity to everything. I mean, we're close to the ocean. Four or five hours, you can be at the ocean. Great outdoor activities and all the national parks nearby. Case in point, I was playing golf in April with a guy. Him and his wife worked in New York City. The in-laws were out here when they shut down New York City. They came out here because they could work from anywhere, and they had no plans of going back as early as April.
So I think with the work at home movement and more of that, people are going to go to the more desirable climates.
We have a great community out here, with the universities and just the culture we have. I think we're going to see that going forward.

Christina K. (Host):
That's a lot of reasons to be buying a house in Arizona right now!



What general conclusion can you draw about the 2021 housing market in Arizona?

Greg R. (Chief Lending Officer, Copper State CU):
We're going to see some housing appreciation. The prices are going to go up. But just from the competition, the high demand, low supply, they're going to creep up. If you're thinking about getting in the market, that same house you're looking at right now that might be $250K - six, nine months from now, it's probably going to be a $300,000 house.

Christina K. (Host):
Wow! So you mentioned that it's important for buyers to be ready to act fast. How do you recommend they prepare in order to do this? Especially for first-time home buyers because it's a complicated process! So how do you act fast in a way to make sure you’re prepared but still get the house that you want?

Greg R. (Chief Lending Officer, Copper State CU):
Know what you want and have your homework done before you get there. When the house goes on the market, talk with a Copper State Credit Union mortgage loan officer. We have very talented loan officers. They will get you prequalified for your mortgage, and you'll be ready to roll at the time when you make the offer.



Is mortgage prequalification a “must have” or a “nice to have”?

Greg R. (Chief Lending Officer, Copper State CU):
In this market, it's a must have. If you're submitting an offer right now, if a home goes on the market, they're getting multiple offers within days. And if you don't have that preapproval and you got to start that process, you're probably not going to get your offer accepted. They're going to go with the cash offer or prequalified offer first. Also some good things to have ready to go are two-years tax returns, some pay stubs, bank statements. If you need a contingency to sell your current home to be able to move into the new home, you're probably not going to get your offer accepted.
So you need to try and eliminate as many contingencies as you can to make your offer as attractive as you can in this market.

We're also going to look at 60-days bank statements and make sure that the down payment funds were there. And if it's not, (we conform with all those lending standards for mortgages, government-backed everything) they’ll need some type of gift letter or an explanation letter for those funds, how they got there. You need to have that all lined up. If you're taking it from a 401(k), that's fine, but you kind of need to have that in process when you're making that offer because those funds will need to be available pretty quick.

Christina K. (Host):
Sounds like something you probably don't want to be dealing with at the last minute because you may find that that house slips through your fingers, if that's the case.



Down payment assistance programs for buying a house - Do we help members with those?

Greg R. (Chief Lending Officer, Copper State CU):
We have down payment assistance available for a first-time buyer. Under federal guidelines for mortgage lending, a first-time buyer is considered someone who has not owned a home in the last three years. If you had a house four years ago, you sold it, and you've just been renting and waiting to find something, you can qualify for these funds. Normally it's a matching type grant, $4 for every $1 that the member has to put down. So you put down a dollar, they're going to give you four dollars. So in essence, you're putting $5 down on that house.And this is grant money, that the longer you stay in the house, up to five years, then it's fully earned grant. You don't have to pay it back. If you sell that house within the first five years, you're going to pay a portion of that grant back.
first time home buyer
The program is awesome for single-income families. For some of the programs you have to go through some classes like a savings class, a budget class, make sure you're ready to get into that home, because the expenses for that house do not stop when you buy the house! There's maintenance and everything else. They want to make sure you've budgeted and you're expecting those so you don't have any surprises down the road.

Christina K. (Host):
Yeah. And I imagine that those programs take a little while to complete, which is why you probably recommend doing them ahead of time.

Greg R. (Chief Lending Officer, Copper State CU):
Yes - it's anywhere from 90 days to six months that you have to go through these steps to qualify for the grant. And then once you get certified for that, you have up to a year to go out and purchase the home.



What about those people who are wanting to sell their home in 2021? Any advice for them?


Greg R. (Chief Lending Officer, Copper State CU):
You need to have your ducks in a row as well, because if you put your house on the market, it's going to sell, and it's going to sell very quickly. Case in point, when I moved out here, just bought a little condo until I figured out where I was going to be. I went to the realtor's office, signed the papers to list the condo, was headed off to San Diego for a jazz festival, and got a call on my way over there that the house had sold for cash offer at full price. So it never even hit the listing.

People never even saw it. A couple of realtors within that office had clients that were looking for it. They immediately went and looked at it, and I sold the thing in probably less than three hours.

Definitely if you decide to sell, know where you're moving to and be ready to go quickly.



How has the pandemic has changed the way that we buy houses?

Greg R. (Chief Lending Officer, Copper State CU)

I think we'll go back to a new normal. Realtors are still going to be very active in the market. You're still going to need to work with a realtor to get it done just from a selling side and a buying side because they can really hold your hand and get you through this process. And the market is moving as quickly as it is, you need that professional to help guide you through.
We work with several realtors on the purchase side, so we can get you preapproved and maybe refer you to somebody. But I think you're going to see the listing different. You're going to see more virtual stuff, where you're going to the realtor's office and you're seeing the house pretty much online, going through each room. Now, they've got cameras that rotate through the house, and you can kind of look at whatever you want.

Instead of visiting in person 12 houses on a Saturday to figure out what you want, through that online process you're probably going to narrow it down to one or two and go see those in person. And I wouldn't be surprised if at some point in this market, you see it virtually, you just make the offer and put in an inspection clause in there that we've got seven days from acceptance to yay or nay it.



Looking to the rest of 2021, what's exciting about the Arizona housing market?


It's exciting that we're a growing community. We have so many new people coming into the community, and we're here to serve the community. We do a very good job at that. We'll welcome you to Copper State. We can walk you through the process, get you where you need to be. I just think with everything that's going on around in Phoenix, with the building, and the housing, and people moving in, it's going to be an exciting market and great to help people fulfill their dream of owning a home.

These low rates that we're in right now, it's making houses more affordable to folks that might have historically been renters. With the low rates, now they can afford to buy a home. So seeing them and helping them get into their first home is awesome.




Is there anything that concerns you in the housing trends this year?


On the same token, the concerns there are the home values going up as quickly as they have. The low rates are helping folks afford homes that historically have been renters. That quick appreciation's going to maybe put them out of the market. So that's kind of a concern, that we got to watch the home prices going up so we don't have a crash going forward. I don't see that happening because there were a lot of other things going on back in '08, '09, that are not happening now. Now it's true values. The appreciation numbers, I think, are very true.
Most of the country's seeing appreciation of home values in that 3.0, 3.5%. Arizona's clicking along by 10% every year right now. That gets a little concerning from the risk management side. But it's true dollars. It's true money now, going forward.
Probably one of my biggest concerns that I'm seeing right now is with the demand for housing so high, the supply low, offers are being submitted where they're waiving the inspections on these homes. I never recommend that.

home buying inspection
The inspection is checking out the condition of the home and checking out, by an expert, to make sure that there's nothing seriously wrong. That's why that you hire a professional. It usually costs you $400 to $600. They'll check the plumbing, the hot water heater. If it's got a pool, they run the filter. They look at the condition of the roof, any of the appliances. They really do a thorough job of going through, and they give you a report of what's going to happen, how much expected life is left, what should be fixed, what shouldn't be fixed.

An interesting thing - Mountain West Credit Union Association, which we're part of that, we had our quarterly lenders conference yesterday on Zoom, and they had done a poll of home buyers from the credit unions within the group, which includes Arizona, Colorado, and Utah, and I was shocked by this number. 

55% of those buying homes had some level of remorse about buying the home. That's a shocking number because that's supposed to be... It's your biggest purchase. It's supposed to be a great, happy time. And 55%, and that is up from like 18% the year before. And I think it all comes back to the buyers having that pressure of waiving those inspections so they can get the house that they want. It's their dream house, and they get in there, and they find out the hot water heater wasn't working, the refrigerator wasn't working, or the roof had a major leak that they had just covered up. And all those repairs fall back on the buyer.

Another thing to be mindful of is an appraisal gap. Historically I would see this one or two times a year. Now, we're seeing it two, three times a month, where the appraisal comes in lower than what they're asking, and people are just putting the money down. If you're going into this market, you're likely going to have to pay over asking price. They're going to put some pressure on you to waive the inspections, get rid of all your contingencies, and just buy this house, close it, and get in it. And that's not a good idea with the surprises that come with home ownership. Owning a home is a big purchase. It's the biggest financial commitment you're going to make probably in your life, and you need to be well versed and well prepared for that.



What's your best piece of advice for potential home-buyers out there in the Arizona market this year?


Work with your mortgage lending officer, have your ducks in a row, and get that preapproval. That preapproval is key if you're not paying cash for that house, which I really hope that you'll consider us for your financing. That, and you really need to have that in place and ready to roll with that and close on the house fairly quickly. Because offers that don't have that are not being considered. The homeowners selling are seeing five, six offers on day one. If they've got three that have no contingencies or anything like that, those are the three they're going to consider. And if you have a contingency or you're not preapproved, you're probably not going to be considered for that house.

Thank you all for being with us today!

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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.