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