PHOENIX — Home prices in the Phoenix metro area increased again in July, over $405,000 for the median sales prices, according to the Arizona Regional Multiple Listing Service, Inc.
This, up to $5,000 from the median sales price in June and up 28.6% over last year. All this, as rents also continued to climb, adding pressure to families living below the median income level.
Competition in the real estate market is ferocious as a limited number of homes sell for tens of thousands of dollars above their list price on a daily basis.
This competition is compounded for lower-income buyers, particularly when a limited supply of homes below $350,000 is not only attractive to first-time and lower-income buyers but are attractive to cash buyers and investors.
Home investors pricing out some families
Tina Tamboer, a data analyst with the Cromford Report, told 12 News 25% of homes sold in the Greater Phoenix real estate market, mostly Maricopa and Pinal counties, were bought with cash in April 2021, the most recent month for which the Cromford Report has data.
The cash buyers could be hedge funds, real estate trusts, LLCs, or other types of private companies. Most of these institutional buyers pay over list price in cash, never planning to live in the homes or even set foot in them.
Often they are converted from single-family primary dwellings to revenue-generating rental properties.
“That’s on the high side of normal,” Tamboer said. March and February 2021 both had 23% cash purchases.
Many of the winning cash offers came from investors. 12 News analyzed one year’s worth of home sales, provided by the Maricopa County Assessor’s Office and found that thousands of homes were sold to private companies, real estate trusts, LLCs, and other groups.
12 News cannot establish that each of these buyers ever visited the home or planned to live in the home. In fact, no one can. Tamboer said there’s no legal definition for an institutional buyer, and so identifying them with 100% accuracy is not possible.
Real Estate Agent Sandra Valenzuela has been selling homes in the Valley for four years after also doing so for four years in Mexico. She has experience in real estate on both sides of the border, selling and leasing homes in addition to helping buyers.
Valenzuela told 12 News she has noticed an uptick in investment buyers in her four years selling in Arizona, beginning during the pandemic.
“I will have like 30 offers and just a few of them will be families for a single-family residential home,” Valenzuela said. “I will have like 15 offers from investors and like six that are families that want to buy.”
Valenzuela said competition with institutional buyers is especially tough on her clients, who tend to be Latino, single-income families with annual incomes below $60,000.
Her typical buyer is targeting a house in the $250,000 to $350,000 range. According to Valenzuela, that is also the price range targeted by investors.
“All these institutions, they target those prices, and that’s why it makes it hard for our people from Arizona for people in the valley to get a home,” Valenzuela said. “They don’t want to invest more than $400,000.”
Valenzuela said her typical buyer can’t compete with the millions or billions in cash on hand that institutional buyers have.
“They have a lot of money,” Valenzuela said.
Making multiple – over a dozen – offers before closing
In this market, sellers have grown to expect offers of thousands or tens of thousands of dollars over the asking price. Institutional buyers have the cash to do that, but, often, families do not.
Claudia Hernandez is a client of Sandra Valenzuela’s. She is a single mother of two who is attempting to buy a home with only her salary. She decided to attempt to buy a home in 2020.
“Right now where we live at we live with my sister, and she has her family, and the baby’s getting older,” Hernandez said. “They need the space. I’m like if we don’t end up getting out of here I’m going to have to rent, and we don’t want to rent.”
Rental prices have also been skyrocketing – adding pressure to families like Hernandez’s. In July, ARMLS reported the average lease price hit $2,206.
Finding a home wasn’t easy for Hernandez. She made offers on 18 homes in the past year. She learned she had to offer more than the list price, reduce the inspection period, and include a personal touch.
She also had to accept that her ideal home was either not in her price range or would garner too much competition for what she could offer.
“You can’t be picky,” Hernandez said. “When you first start looking into the house you start looking at all the little details but by the 19th house you’re like, ‘I could fix that. Not a big deal. I can take care of that. I can buy that.’”
Making an offer that stands out
Valenzuela’s strategy is to get her buyers to try to touch the feelings of the seller.
“I will have them write a letter and then try to convince them to not give the home to investors,” Valenzuela said. “You know, I try to touch their heart.”
It seems to work.
Hernandez also had her 18-year-old daughter Natalia write a personal letter.
“I’ve never had a place to call my house or my home. I never had felt comfortable inviting people over because it’s not really my house,” Natalia said.
Her letter reflected those feelings about living with family members since she was in 8th grade and what it would mean to her, her mother, and her sister to have a place of their own.
Finally, Claudia Hernandez’s 19th offer was accepted in July. She will close on a two-bedroom townhouse in Mesa at the end of August.
Valenzuela said she believes the letter did the trick.
“I receive all those letters, and they make me cry and it makes cry to my sellers too and they’re like ‘You’re right. I’m not going to sell it to the investors.’ OK!” Valenzuela said, having seen both sides of different transactions.
She said she is disappointed the market has become so competitive.
“It’s sad. It’s sad for the people that is buying especially. It’s sad for them. But it is what it is,” Valenzuela said.
The Hernandez girls are ecstatic.
“I just can’t wait to decorate the house,” Natalia said.
Claudia Hernandez disclosed to 12 News that she offered $10,000 over the asking price, bringing the total offer to $260,000. She said losing out on the previous 18 offers was frustrating, but she believes her patience has been rewarded.
“It’s going to happen. Things happen for a reason, and the time that it does happen is because that’s the time it’s supposed to happen for you,” she said.
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