Market Snapshot May 2024

A Low Volume Market does not equal a Low Priced One

As we have stated so many times, a low volume market is not a headline grabber.  You wouldn’t know that listening to the “authorities” who trade on clickbait headlines.  For years they have been promising crashing prices.  No, just no.  Here is the truth of the market.  Mortgage rates have remained high for about two years now.  That suppressed demand. But, that does not automatically equate to reduced prices.  For downward pressure on price – you need excess supply.  And while supply has slowly continued to climb – we still aren’t oversupplied.  Rather the cumulative effect is a balanced market.  In reality, that means we have some areas (such as Chandler) favoring sellers and some (Maricopa, Buckeye) favoring buyers and some balanced (Goodyear, Surprise).  The Cromford Report examines the numbers more closely:

“… most cities are either in a much weaker seller’s market, balance, or a full-blown buyer’s market. Supply is up 44% over last year and has reached a level similar to pre-pandemic 2017-2019. Supply is still 27% below normal, but it’s balanced out by demand that is also 20% below normal, suppressed by high mortgage rates.

Under these conditions the market has seen higher marketing times and an abnormal spike in cancelled listings. In a balanced market, it’s important to prepare homes for sale prior to listing and dismiss the idea that a buyer will accept a carpet allowance and credit for repairs over competing homes that are move-in ready. “

But while the market is gently weakening for sellers, the bright spot is pricing (always a trailing indicator) just hit the highest price per square foot for closed sales.  Again, the Cromford Report shares:

“… the monthly average price per square foot for closed listings for all areas and types in the ARMLS database has exceeded $308. This means it has made a new all-time record high – $308.01.

Again and again, they make the mistake of thinking a weakening of demand will force prices down. The market sees low volumes when demand is weak, but to get prices to come down you need excess supply and desperate sellers.

I expect the usual seasonal decline in average $/SF during the 3Q, but for now, the market deserves some respect for its resilience and sellers can celebrate the new all-time high.”

If mortgage rates do not lower –  we can expect supply to continue to build.  In that case, it might be time for sellers to sell sooner than later.  If rates do come down, expect the supply to tighten and pricing to respond positively. 

Contact us for a no obligation, no cost analysis on your home.

Russell & Wendy Shaw

(Mostly Wendy)

The Slow Motion Market

The Greater Phoenix real estate market is not much of a headline grabber.  In fact, the marketplace reminds me of a Saturday Night Live skit I watched recently “Pilates – so hard and so boring”. Yup, we see some similarities.  The market has slowly eroded into a sort of balance between supply and demand. However, as we so often have pointed out, to paint the valley with one paintbrush is simplistic and inaccurate.  Specific price points and areas behave uniquely. Of the 17 largest municipalities, 10 currently favor sellers – they are in descending strength: Chandler, Gilbert, Glendale, Tempe, Mesa, Avondale, Phoenix, Fountain Hills, Scottsdale, & Peoria.  Two are in balance, Paradise Valley and Surprise.  Favoring buyers- Cave Creek, Goodyear, Queen Creek, Maricopa, and Buckeye. For those interested in overall market trends, read on.

𝗦𝘂𝗽𝗽𝗹𝘆

Supply has been quietly growing since the start of 2024 and as of this writing, there are over 17,500 listings without a contract.  While this is below the long-term average, as the Cromford Report points out it is still the highest total for the end of the first quarter since 2019. It is also worth noting how unusual it is for supply to grow during March(up 2.8%) during the peak of the spring buying season.  Usually spring buyers are so thick on the ground that supply dwindles.  Not so this year.  As the CromfordReport notes: “Listings under contract are only down 6% compared to last year, but active listings are up 26%.”

Additionally, resale sellers are competing more than ever against builders.  In fact, builders have grown their market share by offering lower than market interest rates (i.e. bulk buying loan money).  That strategy is paying off as new home market share is now 22.6%, while only 3 years ago they were less than 15% of the total units sold in residential homes & townhouse/condo sales. The Cromford Report further examines this:

“Re-sales have been suffering from strong competition from new homes and this source of supply is looking stronger than last year. In February there were 2,810 single-family home permits across Maricopa and Pinal counties which is the highest number since March 2022 and up 107% compared to February last year.

Multi-family permits for February were lower at 1,147 units, down 51% from a year ago. However multi-family permits are a very lumpy number which fluctuates wildly from month to month. It makes more sense to look at an annual running total. This stands at over 20,000 units, which is twice the level we regarded as normal until 2022.

Sellers should expect to be facing increased competition from the new home builders over the coming 12 months.”

𝗗𝗲𝗺𝗮𝗻𝗱

First quarter demand could best be described as anemic, managing to pull even lower numbers that 2023. (Note: 2023 was a very low volume market historically – so lowerthan low is not good news).  The Cromford Report comments:

“Demand remains low and the number of pending listings fell 3.5% from last month and stands over 9% below this time last year. Although the March closed listing count was up 17% from February, this is far less of an increase than we would see in a normal year and the monthly total is down as much as 12% from March 2023. Demand has been weak for a long time and is starting to show signs of falling further. The annual sales rate is now down to the lowest it has been since 2009. As we have pointed out many times, demand for new homes remains far stronger than for re-sales.”

“Everyone is waiting to see if mortgage rates might fall and spark some buyer enthusiasm, but all forecasts of these rates have proven to be unreliable so far.” With inflation still looming as an issue, there seems little indication from the feds that bank overnight rates will be lowered anytime soon.

𝗶𝗕𝘂𝘆𝗲𝗿𝘀

It’s been awhile since we have commented on the iBuyers(Opendoor, Offerpad).  For those who are unfamiliar, these are the companies who give you a “cash offer“ without going through the traditional sales process on the open market.  They buy for profit – theirs, not yours.

At one time the iBuyers reached a market share of about 5.7%.  Now they are only about 1% of the market. Both companies’ monthly volume is 90% below their peak.  Why?  The average iBuyer offer (and this goes for the other “we pay cash for your home guys”) is about 25-30%below market value.  Consumers have gotten wise to this.  While “no commission” sounds great – it comes at a high price.  It is a fair statement to say that -unlike Realtors -cash buyers are your adversary, not your advocate.  If you want market value, you need to be on the market.

𝗧𝗮𝗸𝗲𝗮𝘄𝗮𝘆𝘀

At the moment, the market is quiet and fairly stable.  Since January of 2023, prices have generally been moving higher.  Prices have risen 7.3% over the last 12 months per the Cromford Report and the market is summarized thusly:  

“A one-word summary of the current state of the market would be insipid. Volumes are unusually low but the market is stable and the level of distress remains close to record lows. There is also little sign of a significant change in the near term so those hoping for a major drop in prices are no doubt indulging in wishful thinking. We are heading slowly toward balanced market conditions so the prospect for a rapid rise in prices is also minimal.”

Whether buyer or seller – a stable market does present opportunities.  Contact us for ways to maximize your dollars.  We are your advocates.

Russell & Wendy Shaw

(Mostly Wendy)