no hassle listing blog

Why a Balanced Market feels so Unbalanced

Most buyers and sellers would be surprised to hear that the greater Phoenix real estate market is “a balanced market” at the moment.  But it’s true.  Why doesn’t it feel that way?  We think it feels unbalanced primarily for 3 reasons:

1.   Appreciation has been strong since 2015 making the 2022 price correction feel awful to sellers by comparison.

2.   The number of transactions (market shrink) are much lower than normal as  buyers and sellers headed to the sidelines.  Sellers feared equity loss, buyer’s feared increasing rates.

3.   Human emotion – it’s not what’s true but what feels true. Skepticism is the   current market emotion.

Message to sellers:  Now is a good time to sell if you have owned your home for 2 years or more.  The Cromford report gives these appreciation numbers for those sellers : “ The long-term appreciation rates for homes in Greater Phoenix are as follows using January sales to date:  25% for 2yrs., 50% for 3yrs., 63% for 4yrs., 70% for 5yrs., and 86%+ for 6yrs or more.”  Balanced markets mean little to no downward pressure on pricing.  If interest rates rise, we could see a shift back to the buyer’s market that puts pressure on pricing again.

Message to buyers:  The buyer’s market lasted for 4 weeks – November/December of 2022.  Interest rates have now settled back to below historic numbers.  In a balanced market, competition amongst buyers is minimal (i.e. no bidding wars).  Prices declined around 15% in 2022 – providing buyers a better value.  Don’t be caught waiting for further price drops when the market numbers don’t support that happening. As we mentioned above, balanced markets mean little to no downward pressure on pricing.   Also, interest rates are still subject to change.  They go up fast, and down slowly. Take advantage of the relative (and perhaps temporary) interest rate stability.

None of us can predict the future.  But at the moment – this market is a green light for both sides.

Russell & Wendy Shaw

(Mostly Wendy)

Silent Night

The real estate market is eerily quiet as 2022 comes to a close.  After years of record setting numbers, which culminated in the 1^st quarter of 2022, the shift came swiftly and sharply in the 2^nd quarter.  Demand dropped precipitously after interest rates spiked – reaching its lowest level since April of 2008.  Smart sellers responded quickly to the plummeting demand by lowering prices and increasing seller concessions to pay for the buyer’s interest rate buy-downs.  While the news publicized the large decrease in demand, the equally weakening supply garnered far less attention.  Now supply and demand are locked in a seeming battle of the weakest.  All of this has resulted in sales dropping a “massive 45% from a year ago” to quote Michael Orr.  He continues, “After so many years with strong demand this feels very unusual and a little unnerving. This lack of demand is far worse for re-sale homes than it is for brand new homes, which are experiencing relatively brisk closings and little downward pressure in gross contract prices.”

What will the 2023 market look like?  As both buyers and sellers avoid uncertain markets where possible – neither can stay sidelined forever.  Demand is more elastic than supply and heavily relies on affordability (i.e. interest rates, pricing, income).  A meaningful drop in interest rates could stimulate demand.  Sufficient demand will likely bring sellers out of hiding.   In short, the spring buying season will tell the tale.  When it does, we will be the first to report it to you.

In the meantime, we wish to thank all of our loyal and cherished friends and clients for your support.  We wish you all a very happy holiday season and New Year.

Russell & Wendy Shaw

(Mostly Wendy)

By now most are aware that the greater Phoenix market began the year as a seller’s market, then balanced market, and now has slipped to a buyer’s market.  As we often repeat,  real estate markets are local (meaning national statistics are not reflective of what is happening locally) and truth be told, real estate markets are actually hyper-local.  That means different areas and price points may not act in unison even in the same locality.  The Cromford Report shares:

“Buckeye, Maricopa and Queen Creek entered a buyers’ market in July. Surprise, Chandler, Gilbert and Tempe followed in August. Goodyear, Peoria and Avondale joined in September with Mesa and Goodyear falling in line by October. Phoenix is expected to succumb this month within a matter of days. The only holdouts remain in the Northeast Valley cities of Paradise Valley, Fountain Hills, Cave Creek and Scottsdale”.  Why is the Northeast holding on at the moment?  Because they are the luxury areas of the valley – and luxury is not greatly impacted by rising interest rates.

The Report further explains:  “The 2022 peak of price was achieved in May, which was the result of contracts accepted in late March and April. Starting in June, sales prices revealed their decline in response to mortgage rate increases. At the end of October, the decline in average sales price per square foot since May was recorded at -9.1%…The largest declines happened between June and July at -4.5% and between August and September at –3.6%.”

Where does that leave us?  We have a shrunken marketplace with less sellers and less buyers choosing to enter the marketplace.  Sellers cannot replace the low interest rates on their homes if they change houses, and buyers are sidelined either because they cannot afford the interest rate hikes or hope to buy at bottom of the market.  This shrinkage has resulted in a softer landing for the housing market.

Wise words for sellers:  if you are selling and you have owned your home for at least 2 years you have made money.  Cromford reports “Appreciation rates based on sales price per square foot through the MLS are:  2 years: +33.6%, 3 years: +59.9%, 4 years: +68.1%, 5 years: +84.8%.” Wise words for buyers: timing a market is hard.  We typically cannot tell when bottom has been reached until 3- 4 months after the fact. When rates drop, we expect the market to respond quickly. Sidelined markets never remain so forever.

Russell and Wendy Shaw

(Mostly Wendy)

Much has been written about the greater Phoenix housing market and even more about the national housing market. The first thing to remember is housing is local.  Following  the national trends while interesting (misery loves company), is anecdotal. Shocking headlines and clickbait may increase readership, but is of little help to those trying to make financial decisions.  While the future is unknown, the present is knowable.   Let’s examine some commonly held ideas and see which hold up as fact, or fall apart as fiction.

Facts

Interest rates have weakened demand

Fact. The year began with mortgage rates in the 3% range, but by the end of October they surpassed 7% for the first time since 2002.  That is a huge difference in buying power.  Michael Orr of the Cromford Report further explains:

“In most years, mortgage interest rates do not have a large impact on the housing market. Other factors have a greater influence that usually overwhelms the effect of any fluctuations in rates. This is not one of those normal years. This is because the changes in interest rates have been both fast and enormous… Rates increased by 14% from 6.47 to 7.37 over the last month alone. This is a colossal hit to affordability in a very short time and the consequent reduction in demand is rippling through the industry in ways that have not been experienced since the 1980s.”

Rapid change is unsettling both to people and financial markets.  While we can point out that 30-year mortgage rates are still below their historical average of 8 percent, affordability and consumer sentiment have taken a terrible blow.

Buyers are scarce but so are sellers.

Fact.  This is both good and bad news.  The bad news is that the market has shrunk – meaning far less transactions are occurring – which is bad for the livelihood of lenders, title companies, and real estate agents who are now sharing a piece of a much smaller pie.  The good news is that less sellers at the same time as reduced buyers has allowed the market to gently move in favor of buyers.  A sort of shaky stability is forming with demand and supply seeking balance.  Michael Orr further comments: “Everyone is focused on how weak demand has become thanks to rising interest rates. However, the same phenomenon is affecting new supply too. Existing homeowner occupiers are very reluctant to lose the mortgages they already have and so motivation to list and sell homes is very low. Total supply is still rising slowly because although new listings are scarce, new contract signings are even scarcer”

Market corrections are normal

Fact. At the risk of dating ourselves horribly, Blood, Sweat and Tears had it right – “what goes up, must come down”.  Financial markets are a complex blend of economic conditions converging.  To name a few factors that affect real estate: demographic changes, interest rates, lending policies, the economy (both local and national), and government policies.  Hence, the seesaw of supply and demand which affects pricing.    There is no greater predictor of change than extended periods in either a buyer’s market or seller’s market.  The last buyer’s market in the valley was in 2014.  A shift was expected and predictable.

Fiction

Now some fallacies about this market.

Nothing is selling

False.  This is easy to disprove since every home has a deed that is recorded upon sale.  As previously stated, it is true fewer transactions are occurring and sellers have had to come to grips with the frenzied buying party being over.  Currently, 65.7% of the homes listed on MLS are selling (the “listing success rate”).  To put this in perspective – at the peak of the buying frenzy in May of 2021 – 93.3% of the homes listed on MLS sold.  In January of 2008 (the nadir of the market), only 20.4% of the homes listed sold!  The historical average for the valley’s real estate market is 68.8%.  Factually, the Greater Phoenix market has experienced long periods where the listing success rate was below 50%.  If your home is not selling, you need a better agent – not a better market.

The market is crashing like 2008

False. History is not repeating itself. The frenzy of the housing market in 2005 was followed by the crash of 2008.  This is not a crash.  This is a correction.  Again, Michael Orr explains:

“The market is moving in favor of buyers, but nothing like as fast as it did during the bursting of the 2005-6 bubble. Without a source of extra supply, prices are very likely to retreat but relatively slowly and modestly. Any talk of massive price drops is pure speculation. I am not saying it cannot happen. Anything is possible in the right (or wrong) circumstances. But if supply stays tight, then price movements are likely to be slow and gentle, not sudden and violent.”

Higher Interest rates automatically causes lower pricing

False.  No one explains it better than Michael:  “High interest rates make demand fall, but on their own they do not make prices fall. That depends on supply and market sentiment. It is a mixed story on these. Market sentiment is unusually poor (which funnily enough, is often a good sign that things will shortly improve). Supply is also weak, with sellers discouraged. This keeps prices much higher than if supply were rapidly increasing.”

Cash offers are the way to go in a tough market

False.  If you want top dollar, full marketing with an experienced agent are currently crushing cash offers.  Investors offer pricing that reflects their profit and predictions of future value – which they believe will be much lower than present value.  Full marketing with an agent obtains current values and therefore are much higher.  Not convinced?  The good news is we have collaborated with the highest paying investors in town so that our clients can compare all options – from full marketing for top dollar to cash offers.

Cromford Report Final Prediction for 2022

“Normally when prices start to go down, we get a flood of anxious sellers who want to dispose of their properties before prices get lower still. This is what we saw between April and July, but almost all those sellers have now gone. What is now ailing the market is a lack of motivation, both to buy and sell. In this situation prices are likely to drift lower, but not at a fast pace. In fact with the likelihood of even less supply in November and December, we could possibly see some price stabilization. This would leave us at the end of 2022 at roughly the same pricing level as the end of 2021.”

As we approach the end of 2022 – we wish to thank all our clients and friends for allowing us to serve you.  We are truly grateful for your trust.  We wish you a joyous holiday season.

Russell & Wendy

(Mostly Wendy)

Market Blues

After such a wonderful start to the valley’s real estate market in the first quarter of 2022, by contrast the 4^th quarter has started in the doldrums.  It is easy to place the blame – interest rates hitting 7% – therefore reducing both buying power and demand.  For those of us who have been in the business for longer than we should confess, we well remember rates hitting 19% and further know that the historical average mortgage rate is 8%.  To us, 7% is not alarming. However, that is not true for most.

Beyond the psychological impact, what have these higher rates actually wrought?  For buyers – affordability concerns, more property selection, lower asking prices, increased contract-negotiating powers, and seller assistance to buy down the rates.  For sellers – longer marketing times, lower asking/contract prices, and higher costs of selling.

While many buyers have moved to the sidelines because of affordability issues, so have sellers.  Many sellers cannot replace the low interest rates on their current home when moving to another. Therefore, sellers have gone to the sidelines just as buyers have.  In fact, the Cromford Report is showing new listings coming to market at the rate of just over 2000 per week (normal for this time of year would be 2400-2700) one of the lowest counts since 2001. For the moment, we have a fragile market balance. 

What has happened is what we affectionately refer to as “market shrink”.  The volume of transactions (sales) has shrunk.  With fewer homes selling, the number of homes for sale will likely slowly climb.  Additionally, more homes will fail to sell during their listing period.  In April, 92% of the homes on the market sold.  Currently, that number is now at 67% – meaning a third of the homes listed are not selling.

So is there any good news?  Yes.  The truth is this is what a delicately balanced market looks like.  It is just market sentiment making it feel so bad. The shift in the market happened rapidly and the previous hyper-extended market frenzy made recognizing normal difficult. That makes it feel worse than it actually is.  To quote Michael Orr of the Cromford Report “The Greater Phoenix market has experienced long periods where the listing success rate was below 50%, so although market sentiment is poor, the listing success rate is not a reason to feel bad.” For buyers, this is a chance to buy a home with little competition giving you better choices and pricing.  For sellers, anyone who has owned their home since January of this year is likely still at a break-even on value. Even better, if you bought 2 years ago, the average price per square foot is 40.3% higher and the median sales price is $112,000 greater than 2 years ago.  This is why we agents say, a good piece of real estate is always a smart long-term strategy.

Russell & Wendy Shaw

(Mostly Wendy)

A Balancing Act

By now most homeowners have heard the news “the market has shifted”.  While that is true, as usual the story is more complex.

In the first quarter of 2022, Sellers held every card.   Now they are handing them back one by one.   As financial markets tend to run on two emotions (either fear or greed) understandably in the first quarter greed drove the market.  Now?  Hello, fear.  Likely too many people remember the debacle of 2008 and fearing a repeat, the market reacted swiftly.  Therefore, we have rapidly and officially arrived at a balanced market.

So why all the hand wringing?  Isn’t a balanced market a dream come true? An egalitarian market – favoring neither seller nor buyer?  The first thing to realize, is that the last time we were in a balanced market was in 2015.  Many real estate agents have never even seen a balanced market.  Further, after 7 years the abnormal starts to feel normal. Additionally, not all areas and price points are moving in sync – despite the fact they have all shifted.  The lack of consistency across all areas and prices creates further uncertainty- and moving targets are hard to precisely pin down while in flux. So what is known?  Recently the Cromford Report examined the 17 largest cities and found that 6 cities have now moved in to a buyer’s market (i.e. a market where supply exceeds demand – therefore buyers have the negotiating power).  Those currently in the buyer’s market: Surprise, Tempe, Gilbert, Buckeye, Queen Creek and Maricopa. Six cities are in the balanced zone: Chandler, Peoria, Glendale, Phoenix, Mesa and Avondale. A balanced market is one which neither favors buyers nor sellers on negotiation.  This leaves 5 cities still hanging on to a gentle seller’s advantage: Fountain Hills, Cave Creek, Paradise Valley, Scottsdale, and Goodyear.

But just as the location is affecting the relative strength or weakness of the market, so is the price point.  As a case in point, The Cromford Report analyzed the changes in the average sale price per square foot in Phoenix (the largest market) from mid-May to the beginning of August. They found the peak for closed prices was May (but note, those are contracts that actually went together in April when demand began to erode).  They found the median sales price from just Mid-May to the start of August eroded 6.25% – an average of 2% per month. Looking more closely at individual price points – the largest drop was for properties between $1M-$1.5M – with an average decline of 3.2% per month. The runner up was the $500K-$800K with an average decline of 1.2% per month. Not shockingly the low end and high end are fared the best.  The high end of the market is not interest rate sensitive.  The low end of the market simply has restricted supply with negligible new supply being created.  Proving once again that housing is very neighborhood/price specific. 

What you should know

So what should would be sellers take away from all this?  A few points:

1.If you sell now, today’s value is still above this time last year’s value.

2. This a market that is rebalancing.  Yes, it is still eroding, but the rate of decline is slowing.  What will future values look like?  No one can predict.  See point 1 for today’s answer.

3. Supply and demand are determining who holds the strength in negotiations.  The answer is area specific and price point specific.  Get hyper-specific when evaluating your home.  This is a moving target.

4. You need a good real estate agent again.  At the peak of the market, 93.3% of all homes on the market sold.  That number is now 70.4% (the lowest number for this time of year since 2010 which came in at 58.1%).  The difference between selling now or not, is back to the agent’s marketing and knowledge.

We are back in the land of normal – although it will likely take a bit for everyone to absorb that fact.  The slowing of the rate of decline is our earliest hope that this market will settle in to the much overdue correction.  As always, we will keep our friends and clients aware to the changes.  We are here to inform.

Russell & Wendy

(mostly Wendy)

Gary Keller …The current market is ‘the most confusing I’ve ever seen…

There’s a lot to worry about in today’s market — coronavirus infections are near 2021 peaks, health officials are ringing the alarm about monkeypox and polio, inflation and mortgage rates are steadily climbing, home sales have slowed and the industry’s biggest real estate companies are bracing for a possible recession.

Even as strengthening headwinds pushing agents and consumers to the brink, Keller Williams founder Gary Keller encouraged agents at the brokerage’s annual Mega Camp conference on Tuesday to take a more tempered approach to analyzing the current market.

“When times are good, understand at some point, they’ll get tougher,” he said matter of factly while sporting a black graphic tee that read ‘Charge the storm.’ “And when times are tougher, at some point, they’ll get good. That’s just the way the world works.”

However, Keller couldn’t help but acknowledge that today’s market shift is much different than past cycles when it was easier to read the tea leaves and understand exactly what to do to survive. However, he said today’s market is filled with ‘mixed signals’ that can make it hard to strategize.

“I would say this is the most confusing market I’ve ever seen in my entire 40-plus years in our industry. It’s confusing, and it’s only confusing because you have mixed signals,” he said. “Normally, you would expect all the signals to aim in one direction. And that’s not what’s happening.”

Keller noted that although home prices are rising, average days on market are still at an all-time low, despite being longer than two to three-day timeline agents got used to at the height of the pandemic. He also highlighted the false alarm around rising mortgage rates, which, despite hovering near six percent, are also near historic lows.

“If you’re talking to individuals that don’t understand mortgage rates, they do not realize that 2.9 percent was a gift from the gods maybe never to be seen again in your lifetime,” he said of the past two years’ trends. “But a lot of people remember, again, that when I got in real estate, and interest rates were below 10 percent. That was considered amazing.”

“Then they rose to almost 18 percent, and I remember all of these experienced agents in the office where I worked — they all went, ‘Nobody’s gonna buy real estate at these rates, we’re just gonna sit and wait for it to come back,” he added. “I don’t think they lasted in the industry. Right?”

Keller directed agents to be attuned to the market, but resist falling into the belief their businesses can’t continue to thrive even in such confusing times.

“I ignored the market and kept doing my activities,” he said hearkening back to his first years in the business,” he added. “I just kept going on about my activities, and there were four or five months where I actually didn’t have any closings… And by the end of the year, I hit every financial goal I set for myself and I even took December off.”

“The trick was ignoring the market and keep doing the activities,” he added. “That’s where you’ve got to be real careful because some of you will see this data and go ‘Oh crud, things really suck. The sky is falling and I can’t do any better.’ Don’t fall into that trap.”

Home sales are slowing — but don’t freak out

In 2020 and 2021, agents easily smashed their previous sales records as rock-bottom mortgage rates, remote working, a pause on student loan payments and several stimulus checks pushed buyers to battle each other for scant listings. However, 2022 ushered in a slower pace as inflation, rising mortgage rates and other socio-economic factors tempered buyers’ ravenous appetite for homebuying.

As a result, Keller said the industry will end the year with 5.1 million home sales, which falls in line with other predictions that place year-end sales around the 5.7 million mark. Although 5.1 million is a far cry from 2021’s 6.1 million home sales, Keller said that’s still a healthy number of transactions compared to the early 90s when annual home sales struggled to break four million.

“If you look at 5.1 and you go all the way back to 1995, 5.1 [million] looks pretty darn good, so perspective really matters,” he said. “There’s plenty of real estate being bought and sold to build fantastic businesses and have fantastic income around that business.

So why does the current market feel more like a drought than a monsoon of opportunity? Keller Williams Vice President of Strategic Content Jay Papasan said it comes down to one thing: more competition.

“The last time we were at 5 million [transactions] there was a third of the Realtors that there are today,” he said. “So there’s just more people chasing the same transactions.”

With that in mind, Keller and Papasan said agents need to focus on mastering the fundamentals of real estate and focus on becoming better at handling hard times rather than wishing for easier ones.

“When interest rates went to almost 18 percent and the transactions really dropped off dramatically, my attitude every day was somebody’s going to buy or sell a house and I’m gonna go work with them,” he added. “Everybody else? Good luck.”

Slowing home price growth ≠ buyers’ market

Rising home price growth has been the bane of homebuyers’ existence for the past seven years, as homebuilders struggled to fix a worsening imbalance between supply and demand.

That imbalance has worsened over the past two years as coronavirus-induced supply chain issues and rising labor and material costs slowed builders, and market headwinds encouraged a record-level of buyers to enter the market. As a result, home prices have continued their meteoric rise with national home price growth reaching around 18 percent in 2021, which Keller Williams Senior Economist Ruben Gonzalez won’t last for long.

“For some perspective, the last time we had a double-digit price increase, that was followed by seven years of single-digit price increases,” he said. “So having multiple years of double-digits is very unusual and it’s not something that’s going to persist.”

Before homebuyers pull out their bullhorns in celebration, Gonzalez and Keller said a slow down in home price growth doesn’t necessarily mean homes will become more affordable.

“We don’t believe we’re going to see negative price [appreciation],” Keller explained while noting it’ll take at least four years for the market to reach the historic trendline of 4 percent home price growth. “We believe that we will simply see a reduction in the rate of inflation [for home prices].”

Keller said homebuyers are currently spending 25 percent of their income on housing costs, which albeit high, is still lower than previous decades when homebuyers spent up to 35 percent of their monthly income on a mortgage.

“I’m so oriented towards my days of selling, that I go, ‘Yeah, what’s the big deal?’ Keller admitted. “Because in 1979, which isn’t on this chart, in 1979, I promise you that number was 32 to 35 percent and I thought that was normal.”

Keller said inventory is still at 3.3 months, which signals sellers still have the upper hand. However, if the United States market follows Canada, a true buyers market could be on the way.

“The reality is that what we just came out of  — and I can’t say it enough — is unprecedented. And people are going to have to forget that. That was [about making hay when the sun shines,” he said. “Canada is experiencing exactly what the US is experiencing.”

“Sales are dropping at about the same pace, price appreciation a little less than what we’re gonna experience this year, but almost right in line with that, and inventory? Same thing,” he added. “They’re moving into a buyers market rapidly.”

Inflation is taking the gas out of people’s tanks — literally and figuratively

Although the past two years have been heartbreaking, Keller said there’s still been plenty of opportunities as evidenced by record-low unemployment rates, robust home sales (until now), and relatively solid personal finances among homebuyers compared to the Great Recession.

However, consumer sentiment is at a record low. Why? Inflation.

“There is more money sitting out there in bank accounts than ever before. People are unemployed at one of the lowest rates in history and son-of-a-b — they’re unhappy. Desperately unhappy,” he said. “It’s just a little weird, right? You’ve got a job. You’re just got a great pay raise. You’re living a good life.”

“I truly believe that gas is the number one determinant of how consumers feel about the economy, and the reason is an extra $100 to $200 a month just on gas, is the extra money — that’s new clothes for the kids to go to school. That’s just that extra money for that, that three-day or four-day vacation trip,” he said. “It takes some of the little fun out of it.”

Keller said it’s important for agents to help consumers properly process economic stressors, which will help them make better financially-sound decisions about homebuying and selling.

“It’s going to take through 2023, most likely, to grind through all of this,” he said. “But the last three years have misled people to believe that buying real estate was like owning an ATM. “Yeah, I can buy it and tomorrow, I’ll just flip it.’ This real estate game is amazing, but that was a moment in time. That’s not reality.”

Keller said agents must help homebuyers think about real estate in the long-term and that any

purchase that’s made with the intent of staying seven years or more, is a winning decision even in this market.

“If your holding horizon is anywhere from seven to 10 years, the facts show that you’re good to go,” he said. “Someone says, ‘Oh, you know, I don’t want to buy right now. I’m afraid prices go lower.’ Well, institutional buyers are seizing opportunities.”

“I remember reading the books when it was really hot and heavy about buying versus renting, and the investment world was saying buying a home is never good,” he added. “Call Blackstone and all the other institutional investors and say ‘You shouldn’t buy.’”

“But ultimately it’s not your life, it’s their life, and your goal is to give them the perspective and give them every chance to understand all the issues so they can make an informed decision.”

Even through the confusion of today’s market, Keller said agents can still create some of the best years of their careers if they’re willing to charge into the storm instead of running from it.

“Buffaloes are an interesting animal. When a storm occurs, they’re the singular animal that runs into the storm. Somehow they figured out that if you face the storm and run into it, you get through it better and faster,” he said. “That’s how you win.”

The Balancing Act

The greater Phoenix market continues to shift to rebalance.  The emotion of the market has shifted from greed to fear – which in our opinion has been the driving force behind the market’s unusually fast shift.  But not all areas and price points are moving in lock step.  The Cromford Report reports on the 17 largest cities and shows that 6 cities have now moved in to a buyer’s market (i.e. a market where supply exceeds demand – therefore buyers have the negotiating power).  Those currently in the buyer’s market: Surprise, Tempe, Gilbert, Buckeye, Queen Creek and Maricopa. Six cities are in the balanced market: Chandler, Peoria, Glendale, Phoenix, Mesa and Avondale. A balanced market is one which neither favors buyers nor sellers on negotiation.  This leaves 5 cities still in a seller’s market: Fountain Hills, Cave Creek, Paradise Valley, Scottsdale, and Goodyear.

But just as the location is affecting the relative strength or weakness of the market, so is the price point.  The Cromford Report further analyzed the changes in the average sale price per square foot in Phoenix (the largest market) mid-May to present. Here is what they found:

“The peak of price for 2022 so far was May, since then the median sales price has declined 6.25% from $480K to $450K. That’s an average of 2% per month* thus far, however the downward trend has not been consistent across all price ranges; a detail not reflected in the median sale price measure. To analyze the price response by sales price range, we use the sales price per square foot.

Price Range	May 2022 Measure	August-to-Date Measure	% Total Change since May
Up to $300K	$213.89	$212.50 – 0.6%	-0.20%
$500K-$800K	$287.30	$277.15 – 3.5%	-1.20%
$800K-$1M        1	$333.11	$327.41 – 1.7%	-0.60%
$1M-$1.5M	$384.36	$347.26 – 9.7%	-3.20%
Over $1.5M	$583.57	$586.60 + 0.5%	+0.20%

The table shows that properties between $1M-$1.5M have seen the strongest decline since May, with an average decline of 3.2% per month. This is the only price range above the overall average decline of 1.8%. The runner up is the $500K-$800K with an average decline of 1.2% per month. “

To summarize, this a market that is rebalancing.  Yes, it is still eroding, but now more slowly.  Supply and demand are determining who holds the strength in negotiations.  The answer is area specific and price point specific.  Not shockingly the low end and high end are faring the best.  The high end of the market is not interest rate sensitive.  The low end simply has much more restricted supply and negligible new supply being created.  Proving once again, housing is very neighborhood specific.  As always, we offer our help and counsel to any buyer or seller considering a move.

Russell & Wendy Shaw

(Mostly Wendy)