Author: Russell Shaw

Market Erosion

The trickling erosion of the market continues although the rate of erosion appears to now be slowing.  While supply is up, in fact up a whopping 57% from this time last year, it is still below normal.  Demand is more problematic and continues to be anemic at best.  It seems likely to stay that way unless a drop in interest rates changes buyers’ appetites.  So although we are overall in a balanced market –  for most sellers it doesn’t feel that way.  In fact, areas and price points are behaving differently.  In the center of the valley, supply is more constrained as builders have no land to create new product and thereby more competition.  It is the outer areas where builders are active that sellers are at a marked disadvantage.  Price, a trailing indicator, is being affected currently in part due to the luxury market going flat in summer and in part by seller needed price reductions.    As the Cromford Report shares “seasonal patterns are being emphasized by the weakness in demand”.  So the real two-word problem is – anemic demand.

 The Report further summarizes:

We are firmly into the quiet season and closed sales for June 2024 were already down 15% compared to June 2023. We anticipate low volumes to continue during July and we have 2 to 3 months of seasonal price weakness to endure before the market is likely to pick up steam again in October. This could be jump-started early by a drop in interest rates, but we are not holding our breath.  There is no need for panic, but patience is definitely being tested.

Buyers should take advantage of the lull as they have a chance to negotiate in their favor with more choices to consider.  Sellers need to brace for less showings and offers and try to hang on to the buyers they attract.  Patience seems to be the byword.

Wonder what your specific neighborhood is doing as far as supply/demand and pricing?  Contact us we are always here to give you facts, not headlines.

Russell & Wendy Shaw

(Mostly Wendy)

Most people falsely believe that election years somehow benefit the real estate market.  Elections can affect the stock market (which can affect the luxury market) but the basic underpinning of real estate remains supply and demand.   Real estate agents had hoped 2024 would see an improvement over 2023, but instead a very slow motion chill has been taking place all year creating an even more anemic market than the last.  Slow moving change can prove challenging to interpret given that it is harder to perceive minute, but persistent, changes than seismic shifts.  Not surprisingly interest rates appear to be the major culprit.  Buyers are unenthused by current rates.  The only reason we are not in a decidedly buyer’s market is that sellers have been equally unenthused to sell and give up their mortgages that linger in the 3% range.  With both sellers and buyers in retreat, the result is a low volume (low number of transactions) market. 

Supply

Even though supply has climbed slowly due to decreased demand – that steady creep has resulted in a 54% increase in the number of homes for sale compared to last year.  Additionally, the new build market is faring better than the resale market, which creates further competition for the resale market.  Sellers (along with their agents) are just starting to get the message.  Sellers have begun to recognize that buyers need help with closing costs and buying down rates – as the monthly payment impacts buyers more than sales price does. In the midrange price points, sellers are giving concessions to buyers in more than half the cases.   In the million+ category, rates are not typically a factor and pricing is therefore the target.  The average seller in that category is giving up $51,000 in price, up from last year when the average was $36,000.    The Cromford Report confirms:

“Supply continues to climb, which is unusual for the time of year and we notice that the rate of climb has increased since last month. Buyers have 54% more homes to choose from than they had last year but still face 30-year mortgage rates over 7% which is limiting demand. Sellers are starting to face serious competition from each other and their agents are having to work hard to get their homes sold.”

Sales

Climbing supply and subdued demand results in a cool market.  If we compare the active listings to the number under contract (the contract ratio), we statistically confirm the clear cooling trend.  Again we turn to the Cromford Report for these statistics:

“Most of the slightly positive signs we saw last month have disappeared. We have far fewer pending listings than last month and under contract listings are down 7.8% from this time last year…. For all areas & types, the contract ratio has dropped 15% from 54.5 to 46.1 over the last month. This compares poorly with 77.0 on June 1 last year. The current 46.1 reading represents a balanced market with buyers finding plenty of supply to choose from and sellers experiencing more competition from each other than they have for most of the last decade.

The number of listings under contract (8,238) at week 23 is the lowest we have recorded for that time of the year since 2007. At no point so far in 2024 has the count managed to claw its way above the miserable totals for 2023.

Now 2007 was an awful year with the market stalled by the certain knowledge that house prices were about to collapse. We are not in that situation in 2024, but buyer enthusiasm for re-sale homes is still very low indeed. To put 8,238 into perspective, the total for week 23 of 2011 was well over 21,000.”

Price

Shifts in supply and demand eventually impact pricing.  But as we have mentioned before, price is a trailing indicator.  The valley’s median price tends to flatten in the summer due to the luxury segment of the market going quiet as those with a choice seek cooler climates.  To avoid seasonal impact, we simply look back a year where we see that pricing has been fairly stable with only gentle appreciation.  The Cromford Report adds specific clarity:

“Pricing was unexpectedly strong in April, but May has seen this trend reverse and the average price per sq. ft. is now up only 3.5% for the last year. The median sale price was unchanged, as it is far less affected by the luxury home market. It is up just under 6% compared to a year ago.

We are entering the weakest time of the year, between June and September when luxury home buyers are thin on the ground. They tend to find cooler places to hang out than face the heat of a Phoenix summer house hunting expedition. Investors are busy during the summer as bargains are easier to find and gross margins on fix-and-flips are looking very healthy these days. Investors tend to pay less than market value, so this also drives the average $/SF lower between June and September. We expect pricing to be flat to lower over the next 3 months, after a strong rise between January and May…In other words we are expecting stability in pricing with a slight tendency towards weakness.”

Summary

We are not yet in an overall buyer’s market but the weakening market trends, unless interrupted, say we are slowly arriving there. Many of the greater Phoenix perimeter areas are already there.

Buyers While interest rates are not currently motivating buyers, sluggish demand and supply that is up 54% from last year is providing buyers an opportunity to buy that has been missing for years.  Flat pricing, more choices, and less competition from other buyers is a buying opportunity.  Interest rates can be refinanced in the future when more favorable.  Getting the right house at the right price is key.  If interest rates drop enough (sub 7%) we likely will see a rapid rebound in demand.  Demand moves much more swiftly than supply and supply can dry up rapidly.

Sellers With supply slowly and steadily rising all year, sellers are coming to grips that they need to work harder to attract a buyer.  Sellers haven’t seen a supply/demand ratio as anemic since 2014/2015. As in any market, buyers are rewarding the attractive, well-priced and well-marketed homes.  The less desirable homes with deferred maintenance, need to price more aggressively.  Both categories of sellers need to get pricing right and manage their expectations.    Agent choice matters – good marketing, good market knowledge, and proper pricing are the seller’s best friend.

Russell & Wendy Shaw

(Mostly Wendy)

The quiet market

The marketplace keeps answering the question of whether an election year boosts the real estate market.  And that answer still remains no.  Here is your proof. This market  continues to echo the (non-election) 2023 market – low volume and even quieter than the previous year.  Again, the culprit is interest rates.  The recently released Consumer Price Index showed the annual inflation rate had declined to 3.3% and that good news immediately caused mortgage rates to drop below 7%.  Still, it wasn’t a large enough drop to create a major boost in demand.

While interest rates may not be currently motivating buyers, sluggish demand and supply that is up 54% from last year (according to the Cromford Report) is providing buyers an opportunity to buy that has been missing for years.  In the midrange price points, sellers are giving concessions to buyers in more than half the cases.  Sellers have recognized that buyers need help with closing costs and buying down rates – as monthly payment impacts buyers more than sales price does.  In the million+ category, rates are not typically a factor and pricing is therefore the target.  The average seller in that category is giving up $51,000 in price, up from last year when the average was $36,000.

With supply slowly and steadily rising all year, sellers are coming to grips that they need to work harder to attract a buyer.  Sellers haven’t seen a supply/demand ratio as anemic since 2014/2015. As in any market, buyers are rewarding the attractive, well-priced and well-marketed homes.  The less desirable homes with deferred maintenance, need to price more aggressively.  Both categories of sellers need to get pricing right and manage their expectations.    Agent choice matters – good marketing, good market knowledge, and proper pricing are the seller’s best friend.

Russell & Wendy Shaw

(Mostly Wendy)

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 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)

We are now in the heart of the spring selling season and yet it doesn’t feel like prime time.  The market has been quieter than we had anticipated at the beginning of the year.  The greater Phoenix market has drifted into a balance – as homes for sale have slowly accumulated and demand has waned under the pressure of rising interest rates. 

The numbers below provided by Tom Ruff of the Stat as well as the Cromford Report –  confirm 2024 first quarter lackluster numbers:   

• In the first quarter, demand was approximately 5% lower year over year. (Note: 2023 was a very low volume market historically)

• In February and March, in terms of sales per day, there were 15 fewer sales per day this year compared to last.

• Demand is down approximately 26.02% from the first quarter of 2020. (pre-COVID)

• Sales volume for Q1 2024 is down 31.61% from Q1 2021. (COVID buying frenzy)

• The median sales price is 5.65% higher year over year, home prices are stable.

• Listings under contract are only down 6% compared to last year, but active listings are up 26%.

• Flip sales are down 74% from 2 years ago and at a level comparable to 2015.

The luxury market is still holding up (although also not as strong as last year) as it is generally unaffected by interest rates.  Additionally, builders have grown their market share by offering lower than market 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.

Takeaways:  Sellers now are competing again for buyers especially against new builds and should look to their REALTOR® for advice on how to maximize time on market and net.  Prices are holding at the moment.

Buyers should be relieved to see more home choices than in years accompanied by stable pricing.  Interest rate concerns can be addressed by rate buy downs (ask us!) or by purchasing a new build.

Whether buyer or seller – a quiet market does present opportunities.  Contact us for ways to maximize your dollars.

Russell & Wendy Shaw

(mostly Wendy)

𝗧𝗵𝗲 𝗠𝗮𝗿𝗸𝗲𝘁 𝗯𝘆 𝘁𝗵𝗲 𝗡𝘂𝗺𝗯𝗲𝗿𝘀

Now that the peak home buying season is upon us – we have a little more data on how the market is performing.  No pearl clutching headlines here, but still, we find it interesting (accusations of being a geek might be valid) and hope you will as well.

𝗦𝘂𝗽𝗽𝗹𝘆 – Supply is up 14% over last year but still 31% below normal according to the Cromford Report.  Compare the following numbers just for contrast.  We have as of the writing of this report – 16,886 active listings vs. 4400 just 2 years ago.  Wow.  Below normal looks pretty normal by comparison. As usual though, the numbers need further examination. It is the top end of the market is where the supply is plentiful.  Homes over 10 million currently have a2.6 year supply. Between 5-10 million – 16 months supply.  Between 3-5 million, 8 months of supply.  Like price, location also determines supply.  Outlying areas have more supply such as Buckeye, Maricopa and Casa Grande.  Butthat shifts the closer homes are to the city center as the Cromford Report explains:” … many cities that are closer to Phoenix and are dominated by homes under $1 million still have a tight supply and buyers outnumber sellers in most of these areas.” The moral:  marketplaces are really a combination of micro markets that must be independently evaluated.

𝗗𝗲𝗺𝗮𝗻𝗱 – Not shockingly, higher interest rates are keeping buyer demand below normal levels. Depending on one’s view – this is not entirely bad news.  Why?  Price. With supply and demand somewhat in abeyance, pricing is fairlystable.    As the Cromford Report shares:

“…Those who have been keeping these updates over the past year have probably noticed that the median sales price has barely moved for 10 months. Starting at $440,000 from June-July 2023, stagnating at $435,000 from September-December, dropping to $430,000 from January-February 2024, and now back up to $441,000 in March. While the current appreciation rate from last March measures +5.8%, over the next 2 months this will start to move closer to 3%, which is in line with the rate of inflation. This 10-month stagnation in price, which has endured erratic mortgage rates ranging from 7-8%, has allowed some breathing room for annual incomes to catch up to prices”

𝗦𝘂𝗺𝗺𝗮𝗿𝘆

“There is still no sign of a market crash in the short or medium term, but the market is struggling to gain traction. The healthy amount of incoming supply is not quite matched by a small improvement in demand and the balance between sellers and buyers only favors sellers by a small amount when considering the market as a whole. In many sectors of the market, buyers have more negotiating room, even though, judging by the recent price movements, most of them do not seem to realize this..”

If the last few years have taught us nothing else – markets can shift sometimes unexpectedly.  As always, we will keep you informed when we see it.

Russell & Wendy Shaw

(Mostly Wendy)

We are only 60+ days into 2024 and we are studying every market indicator looking for clues as to what this year is likely to bring.  The problem is that trends require sufficient time and strong signals.  We have neither to date.  

The fact that this is an election year leads most people to assume that the election will be an outsized influence on housing, specifically mortgage rates and pricing.  We love hearing the theories, but it is not true.  To quote the Cromford Report “the main influence on the housing market comes from policies, not the elections themselves”.  Now there is a market that responds to elections – the stock market.  The last four elections saw the stock market respond positively afterwards.  That in turn can affect a portion of the housing market.  Both the luxury market as well as the 55+ market rely more heavily on cash purchases. Positive changes in portfolios can benefit demand.  Could we see the election affect the stock market again this year? Likely.

But if housing fundamentals are not directly affected by elections then it leads us right back to the basics – supply and demand.  

𝗗𝗲𝗺𝗮𝗻𝗱

It comes as no shock that demand was tepid at best in 2023 (we are in search of a better description – abysmal?) The good news is it appears demand hit bottom in 2023. The bad news? Demand is still fairly anemic.  The Cromford Report expounds further:

“Although demand has improved a little since late 2023, it remains very subdued and is having difficulty catching up to last year, which was pretty poor in the first place. With typical 30-year fixed mortgage rates over 7% again, we are not seeing much enthusiasm among buyers, who were clearly hoping rates would fall below 6.5% at least. Last year the market caught a second wind in April but ran out of puff 2 months later. It is by no means clear what it will do in 2024, but so far it is merely ticking over, providing very little to get excited about.”

𝗦𝘂𝗽𝗽𝗹𝘆

While low demand was grabbing the headlines in 2023, most missed that the supply of homes for sale was actually lower and exerted a greater influence on the market than demand.  Sellers hung on to their low interest rate homes and stepped to the sidelines at the same time demand was dropping due to soaring interest rates.  The result was a very low volume of homes sold.  The annual rate of homes sold (sales rate) has stopped falling – but the bad news is it hasn’t risen significantly. The Cromford Report shares this:

Listing under contract counts continue to be underwhelming, only reaching 8,182 after 7 weeks of the year. The same time last year we had 8,877 and 12,131 the year before…

We appear to be stuck at the very low rate of between 72,100 and 72,600 closed listings per year across all areas & types. Just 2 years ago we were at 110,000, so we are missing some 38,000 deals compared with then. Mortgage interest rates have been rising again for the last 3 weeks, so a volume breakout is looking unlikely in the short term. If we were sailors we would call this the doldrums.

𝗠𝗮𝗿𝗸𝗲𝘁 𝘀𝗲𝗴𝗺𝗲𝗻𝘁𝘀

Real estate markets can perform differently based on geography as well as price points.  Currently, 10 of the 17 largest areas are favoring sellers.  They are in descending strength: Chandler, Gilbert, Glendale, Fountain Hills, Phoenix, Mesa, Tempe, Avondale, Scottsdale, & Peoria. 3 Cities are balanced: Cave Creek, Paradise Valley, & Surprise 4 are buyer markets:  Goodyear, Queen Creek, Buckeye and Maricopa.

Price point also seems to be dictating the experience for buyers and sellers. The healthiest price segment is the mid-range homes closer to the center of Phoenix. Mid-range homes in the more distant areas are getting too much supply to perform as in town properties. Luxury which performed strongly in 2023 is now experiencing surging supply.  As the Cromford Report shares: “We still see weakness in the top end of the market. Demand remains relatively healthy but supply is much stronger than in 2023, especially for homes over $2 million. Cave Creek is doing better, but is recovering from very weak 4Q of 2023.”

𝗦𝘂𝗺𝗺𝗮𝗿𝘆

Having read this far, you may rightfully ask for clarity. What does this information bode for the 2024 market?  Exactly – not much – a rather mixed bag with no significant changes yet.  As the Cromford Report sagely states:

“Messages from the data are giving us mixed signals. The signals are weak too. Demand is improving but so is supply. Normally this would lead to greater volume but any growth in sales is so slow that it is almost imperceptible, when seasonality is taken into account.

Last year we saw 60.6% growth in listings under contract on February 11 compared with the start of the year. This year the growth is 59.9%, very slightly worse and starting at a lower base point.

Altogether there is not much to get excited about if you are longing for positive movement. On the other hand, there is also not much to get excited about if you are hoping for the market to crash. I have nothing to satisfy either of these positions. Arizona is famous for its boom and bust real estate cycles, but at this moment it is very much stuck in neutral.

2024 so far looks likely to be a version of 2023 but with stability in home appreciation and maybe even improved affordability as incomes rise. Interest rates remain the wildcard.  As always we will continue to track 2024 trends and report it here first.

Russell & Wendy

Mostly Wendy

2024… So Far

We are only 45+ days into 2024 and we are anxiously trying to read the tea leaves for what this year will bring.  The fact that this is an election year leads most people to assume that the election will be an outsized influence on housing, specifically mortgage rates and pricing.  We love hearing the theories, but it is not true.  To quote the Cromford Report “the main influence on the housing market comes from policies, not the elections themselves”.  Now there is some truth that the stock market responds to elections – at least the last 4 elections saw the stock market respond positively afterwards.  The stock market influences the luxury market as well as the 55+ market.  Could we see the election affect the stock market again this year? Likely.

But if housing is not directly affected by elections, it leads us right back to the basics – supply and demand.  It comes as no shock that demand was tepid at best in 2023 (we are in search of a better description – abysmal?) The good news it appears demand reached bottom in 2023. Demand is now somewhat improved, even if still fairly anemic. 

While low demand was grabbing the headlines in 2023, most missed that the supply of homes for sale was actually lower than demand and a greater influence on the market.  Sellers hung on to their low interest rates homes and stepped to the sidelines as demand was reacting to soaring interest rates.  The result was a very low volume of homes sold.  The annual rate of homes sold (sales rate) has stopped falling – but the bad news is it hasn’t risen significantly. The Cromford Report shares this:

We appear to be stuck at the very low rate of between 72,100 and 72,600 closed listings per year across all areas & types. Just 2 years ago we were at 110,000, so we are missing some 38,000 deals compared with then. Mortgage interest rates have been rising again for the last 3 weeks, so a volume breakout is looking unlikely in the short term.

If we were sailors we would call this the doldrums.

What do we expect in 2024?  Likely a version of 2023 but with stability in home appreciation and maybe even improved affordability as incomes rise. The below 400K market remains strong for sellers with limited inventory while the luxury market is currently swelling with new supply.  Price point seems to be dictating the experience for buyers and sellers.  As always we will continue to track 2024 trends and report it here first.

Russell & Wendy

Mostly Wendy

The Housing Market Shifts Slightly Towards Sellers

2024 began with a slight advantage for home sellers.  Why?  December typically ends with less active listings every year as a number of listings expire on the 31^st.  Additionally, we saw a little bump in buyer demand as interest rates became more attractive.  Those two small changes pushed the market out of the balanced zone (which only lasted 7 weeks) to one that slightly favors sellers.

But saying we are in a slight sellers’ market is still misleading as most generalities are. The luxury market has performed completely differently than the rest of the market – as the luxury market is not interest rate sensitive.  Beyond price points, geographic submarkets can also perform uniquely.  As of the writing of this article, here is where the geographic submarkets stand according to the Cromford Report:

“Not all cities are in a seller’s market, the distribution is as follows from strongest-to-weakest:

Seller’s Markets: Tolleson, Apache Junction, Fountain Hills, Chandler, Gilbert, Laveen, El Mirage, Anthem, Glendale, Sun Lakes, Phoenix, Scottsdale, Mesa, Avondale

Balanced Markets: Tempe, Litchfield Park, Sun City West, Peoria, Goodyear, Surprise, Paradise Valley, Arizona City

Buyer’s Markets: Cave Creek, Gold Canyon, Queen Creek, Sun City, Casa Grande, Buckeye, Maricopa

Most cities are either gradually improving or holding steady in their market measures. “

This remains a muted market with contract activity well below normal (making this a good time to hug your real estate agent). As the Cromford Report states:  “We are starting 2024 with one of the lowest counts of listings under contract we have ever recorded for the start of any year (5,127). We measured 5,456 last year and 9,393 in 2022. We have to go back all the way to the dark days of 2008 to find a lower count (3,468). 2007 was also very bad, but at 5,197 it just beats the 2024 reading.” Gulp.  If we compare unfavorably to 2007 that is anemic indeed.

What will 2024 bring?  The Cromford Report offers this: “It’s not reasonable to expect another insane market with skyrocketing prices like 2020-2021, or another 12.5% drop in values like 2022. It could be quite boring in terms of price for the first quarter, but uplifting with more traditional home buyers getting back in the game. “ Boring sounds kind of nice, doesn’t it?

Russell & Wendy Shaw

(Mostly Wendy)