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