Market Uncertainty
With the current head line grabbing volatility in the financial markets, home buyers and sellers are questioning what effect this is having on the housing market. As the Cromford Report points out that volatility in the housing market has been the norm in last 5 years: “Fortunately, or unfortunately, volatility in the housing market is nothing new over the last 5 years. From extremely low mortgage rates, high demand, and astronomical appreciation from 2020-2021, to extremely high mortgage rates, falling demand, and depreciation in 2022, to moderately high mortgage rates, low-but-stable demand, and flat appreciation from 2023-2025. Real estate professionals have guided their clients through it all.”
Having sold real estate in the valley since 1978, it is true that we have guided our clients through almost every market extreme. At the end of the day, we lean heavily on the underlying economic immutable law of supply and demand to provide guidance. So while the stock market can rise and fall quickly and dramatically (such as it has to the extreme of late) supply and demand take some time to impact the housing numbers. Volatility in the stock market tends to impact the luxury segment, while interest rates impact the mid to low end market that rely on mortgages. Typically, when the stock market plunges or the economy moves towards recession, money moves to secure havens such as bonds – causing mortgage rates to drop. This did not happen last week – money did not seem to view bonds as safe – shockingly causing mortgage rates to rise.
Despite all this chaos, demand has been subdued but relatively stable for the last few years – a good sign. Conversely, supply has continued to rise in March and April which is very unusual and not a good sign. Here is where the valley currently stands courtesy of the Cromford Report: “11 cities in Greater Phoenix are in very weak seller’s markets: Paradise Valley, Scottsdale, Fountain Hills, Phoenix, Anthem, El Mirage, Glendale, Avondale, Apache Junction, Chandler, Gilbert· 4 cities are in balanced markets: Cave Creek, Tolleson, Tempe, Mesa· 14 cities are in buyer’s markets: Peoria, Goodyear, Surprise, Buckeye, Laveen, Sun City, Sun City West, Litchfield Park, Queen Creek, Sun Lakes, Maricopa, Gold Canyon, Arizona City, Casa Grande.
A weak seller’s market will not look too different from a balanced market, it only means that price appreciation will be slightly higher than the rate of inflation, which is just 2.4% per the most recent CPI measure. “
To sum the market up – at this point we expect gentle erosion in pricing in most of the marketplace. Sellers need to price right for an eroding market and address condition issues. Buyers have more power and more choices. Change is the only constant and knowledge is power. Lean on experienced agents to guide you.
Russell & Wendy Shaw
(mostly Wendy)