Category: Hello 2022

Overall, the greater Phoenix real estate market is a buyer’s market.  What does that mean?  It is a market that favors buyers in negotiation because supply exceeds demand.  Of course, nothing is that simple. The luxury market is proving the exception -that marketplace favors sellers.  It is not unusual to see luxury and the sub-million market operate in opposition to each other.  One depends on financing and therefore is sensitive to interest rates (sub-million market).  The other depends more on wealth accumulation (luxury) which leans on the stock market and crypto.  Here is a closer look at some key points that make up our ever-shifting market.

Supply

Supply has been dropping since April and is now down 14%.  This is a combination two factors.  One, the reduced numbers of luxury listings which often come off the market in the summer months, as those with a choice flee the valley during the summer.  Two, sellers who simply couldn’t achieve their pricing goals and gave up.  The Cromford Report shows that July cancellations were up 64% over 2024 and expireds up 69%.  There have been few new listings to fill that void. Take for example Paradise Valley, as the Cromford Report confirms the low supply:

“Once again Paradise Valley is doing well because of its unusual low supply. There are only 92 active single-family listings without a contract, the lowest for more than 3 years and way below the long-term average of 273. Other more expensive areas are improving for sellers, notably Scottsdale… Fountain Hills…and Cave Creek.”

Demand

The demand for homes did see a recent bounce courtesy of an interest rate drop.  But let’s put this in perspective.  Even with improved demand it is still about 23% below normal.  Nonetheless, the trend of weakening demand has stopped and is showing signs of improvement. It confirms the theory that what is needed to revert to a seller’s market is more favorable rates.  While we see nothing to support rates returning to their 2020 ranges, economic headwinds could produce improved rates. Cromford explains:

“But there is hope, ironically. National economists are beginning to release higher expectations of a potential recession coming, with large banks such as Chase, Goldman Sachs, and Deutsche giving a range of 30-43% chance in the near future. This puts more pressure on the Federal Reserve to lower the Federal Funds Rate and stop reducing their securities holdings at their September meeting. The big number to watch is unemployment. If that begins to rise too sharply, then the Feds will ease up on their monetary policies, money will flow into bonds for safety, and mortgage rates will fall again. With home prices already down, that would lead to more contract activity in the fourth quarter and hopefully some relief for tired sellers. No one likes an economic recession, but it may need to happen to turn the housing market around faster.”

Pricing

Pricing is a difficult metric because it is a “trailing indicator”.  That means it is not a predictive tool but rather a lagging responsive tool.  Market conditions must happen first which then show up later in price conditions. Cromford provides more detailed numbers:

“Even as the buyer’s market is easing up in the metrics, price will not see a bottom until 3-6 months after the Cromford Market Index re-enters a balanced state. If that were to happen in October or November, for example, then the bottom of price will emerge around February or March give or take. If sellers decide to wait, the good news would be more activity, their home may sell a little faster, and fewer will have to pay for the buyer’s closing costs. The bad news for sellers would be that they’ll most likely be getting a lower price for their home than if they sold today, so the money they save in closing costs could be a wash. Prices will not show much appreciation until the market re-enters a seller’s market, and that isn’t on the horizon at this time.”

Advice to sellers

Although things have stopped eroding for sellers, we are still in a buyer’s market.  Patience and correct pricing for the condition is key.  A special note for those in the condo sector – the market is difficult at best for condos.  Current marketing time for condos are the highest for any month in at least 11 years.  Find an agent who understands how to market in a buyer’s market and take their advice.

Advice to buyers

While buyers have the advantage at the moment, they should have some perspective – buyer markets are infrequent and typically of short duration.  Over the last 30 days, reduced inventory and stabilizing demand is reverting some gains. If this continues, the days of a buyer market could come to a close.  Buyers who like help with closing costs and little competition from other buyers should act now. As Cromford Reports: “As affordability improves with reduced mortgage rates and lower home prices, more buyers will enter the market and sellers will be under less pressure to concede to every buyer demand.”

As always, we are here to answer any of your market related questions.  Contact us.

Russell & Wendy Shaw

(mostly Wendy)

Market Update

Tina Tamboer of the Cromford Report just released this excellent analysis of the Greater Phoenix market and we reprint it here as originally written:

For Buyers

“Since April, active supply levels have now declined 13.6% due to a large increase in cancelled and expired listings from May through July and too few new listings to replace them. July cancellations were up 64% over last year and expired listings increased 69%. Demand for homes has also begun to recover, helped by a drop in mortgage rates from 6.75% to 6.55% and a 14% increase in weekly accepted contracts since the 4th of July.

Despite the median sales price showing a flat trend over last year, asking prices are steadily declining when analyzed by price per square foot. Sellers contributing to their buyer’s closing costs and rate buydowns hit 56% of sales, and so far August concessions are hitting a record high of 58% of sales.

The largest declines in asking prices have been seen in condominium/townhomes under $500K, which are down 5.9% under last year compared to single family homes under $500K, down just 1.3%. Within the same price range, buyers negotiated down an extra 2.5% off of the last list price on condo/townhomes and another 1.3% on single family homes in July.

While things are looking very good for buyers right now, the Greater Phoenix market is no longer falling farther into a buyer’s market. Over the past 30 days, the Cromford Market Index started to reverse course as a direct result of lower supply and stabilizing demand. This could mean the days of this buyer’s market could be numbered if it continues at its current pace. Buyers who would like the benefit of seller incentives and zero competing offers for homes should probably get in the game. As affordability improves with reduced mortgage rates and lower home prices, more buyers will enter the market and sellers will be under less pressure to concede to every buyer demand.

For Seller

While metrics are improving for the Greater Phoenix housing market, it’s still in a full blown buyer’s market so sellers should remain patient when it comes to days on market. July and August so far are seeing a median marketing time of 48 days prior to an accepted contract, the highest for July in at least 11 years, and the count typically doesn’t get any lower between now and the end of the year. Marketing times are especially brutal in the condo market with a median of 69 days prior to contract, the highest recorded for any month in at least 11 years. Even condos under $250K are seeing a median of 79 days.

Even as the buyer’s market is easing up in the metrics, price will not see a bottom until 3-6 months after the Cromford Market Index re-enters a balanced state. If that were to happen in October or November, for example, then the bottom of price will emerge around February or March give or take. If sellers decide to wait, the good news would be more activity, their home may sell a little faster, and fewer will have to pay for the buyer’s closing costs. The bad news for sellers would be that they’ll most likely be getting a lower price for their home than if they sold today, so the money they save in closing costs could be a wash. Prices will not show much appreciation until the market re-enters a seller’s market, and that isn’t on the horizon at this time.

But there is hope, ironically. National economists are beginning to release higher expectations of a potential recession coming, with large banks such as Chase, Goldman Sachs, and Deutsche giving a range of 30-43% chance in the near future. This puts more pressure on the Federal Reserve to lower the Federal Funds Rate and stop reducing their securities holdings at their September meeting. The big number to watch is unemployment. If that begins to rise too sharply, then the Feds will ease up on their monetary policies, money will flow into bonds for safety, and mortgage rates will fall again. With home prices already down, that would lead to more contract activity in the fourth quarter and hopefully some relief for tired sellers. No one likes an economic recession, but it may need to happen to turn the housing market around faster.”

Questions about your specific situation?  Contact us today.

Russell & Wendy Shaw

(Mostly Wendy)

Two-sided Coin of a Market

We are a little more than mid-way thru the year and while temperatures are rising in Greater Phoenix, the same cannot be said of home prices. Unlike the weather, the market is not responding universally.  Luxury has done well – rising on average 4.4% this year.  For that you can thank the Stock Market. However, for the sub-luxury market the opposite has been true – prices have generally drifted downward.  As the Cromford Report states:

“June sales prices for properties under $400K were down an average of 4.5% from last year. The $400K-$600K range was down 2.4%. Mid-range prices from $600K-$1.5M were flat within 0.1%-0.8% over last year, and higher-range prices over $1.5M where buyers negotiate harder on price are up 4.4% on average in appreciation…As with all things, there are exceptions to the rule, but the weakest part of the market is the low-end while the strongest remains the highest price sectors.

For the cities with the highest proportion of luxury homes, pricing has generally out-performed the rest of the valley, Single-family detached homes in Scottsdale have risen 4.3% over the past year. Cities dominated by the mid-range have struggled to stay above water. Chandler for example is down, but only just, at 0.1%. The cities with a predominance of entry-level homes are usually faring less well. Avondale for example is down 5.3% for single-family detached homes compared to a year ago.”

 While luxury sales are a seasonal business (as those who can escape the summer heat, do) the average seller competes all year long for buyers.  Sellers, unable to reach pricing goals, are pulling their homes off the market and not immediately relisting.    In fact, cancelled listings were up 46% in June compared to last year and expired listings up 79%.  Additionally, new listings coming to market have slowed.  This resulted in an 8% drop in overall supply in the last 5 weeks.  Yet even with that, supply is still up 41% – which is why the market is still favoring buyers over sellers. At some point lowered prices combined with lower supply – even without lowered interest rates – will stimulate the market.  We will report it as soon as we see it.

Russell & Wendy Shaw

(Mostly Wendy)

The greater Phoenix housing market has been a buyer’s market for over 8 months.  Buyer markets are infrequent and typically do not last – many just weeks.  So far, this one has proven to be slow moving but persistent.

As they say “What is good for the duck hunter is not good for the duck.” For buyers (the duck hunters) more supply than demand has given them choices.  The only sticking point being interest rates.  But those stubborn rates are causing downward pressure on pricing which is good for the duck hunters, bad for home sellers (the ducks).  As the Cromford report explains:

“There are three main measures that affect housing affordability: mortgage rates, home values, and income. In the past when home values rose too fast for incomes to catch up, it was mortgage rates that adjusted and brought payments back into range, but in this cycle rates have proven to be an unreliable, volatile ally. The housing industry has been waiting three years for mortgage rates to decline and save the day, and as more time goes by without relief, the more pressure there is on home prices and incomes to adjust in order to increase demand. It is finally happening… We have not seen such a favorable situation for buyers since March 2009.”

But sellers are reacting to this market too. 

“Meanwhile, more sellers have decided market conditions are too unfavorable for them and are taking a pause. While supply is still up 45% from last year, the last 7 weeks have seen a 3.4% decline. New listings added to the MLS every week has dropped 39% over the last 2 months, and are now at the second lowest level historically (2023 was the lowest year for new listings). Weekly listing cancellations are up 38% over last year, and expired listings in the last week of May were up 84%. In the past, cancelled and expired listings were re-listed right away and didn’t affect the total count, but this time sellers are taking a longer break and sometimes opting to rent their homes instead.”

Make no mistake, supply is still holding steady and outpacing demand, but at least supply has stopped increasing.  However, there is a specific segment of the market that is particularly discouraging for sellers – condos and mobile homes.   “While the market is nowhere near as cold as it was between 2006 and 2009, we are recording several indicators that tell us it is worse for condo and townhouse sellers than at any time since June 2011, some 14 years ago… Although they are fewer in number, mobile and manufactured homes are doing even worse than condos… This reinforces the impression that it is the low-end of the market where sellers are struggling the most.”

A final note to buyers:  with supply fixed at the moment, if rates do drop, we will likely see a surge in activity which will begin to consume the existing supply. Demand is elastic and can move swiftly.   These windows of opportunity typically don’t last. The last similar opportunity was March of 2009.  Consider buying in the next 3-6 months.

A final note to sellers:  While price is a trailing indicator and the market moves before pricing does – this mix of supply and demand has been established for months now.  Therefore, as the Cromford Report points out, it is unlikely we will see anything other than further price declines over the next three months.  In a market that favors the duck hunters: price to today’s market rather than yesterday’s; focus on condition; and hire an agent skilled at marketing and negotiating and who has been through a buyer’s market or two. Many agents have only known seller markets.  These tips are your best defense against the hunter.

Russell & Wendy Shaw

(mostly Wendy)

Buyer Market Blues

What is good for the duck hunter is not good for the duck.  Our housing market has been a buyer’s market for over 8 months.  Buyer markets are infrequent and typically do not last – many just weeks.  So far this one has proven to be slow moving but persistent.

For buyers (the duck hunters) more supply than demand has given them choices.  The only sticking point has been interest rates.  But those stubborn rates are causing downward pressure on pricing which is good for the duck hunters, bad for home sellers (the ducks).  As the Cromford report explains:

“There are three main measures that affect housing affordability: mortgage rates, home values, and income. In the past when home values rose too fast for incomes to catch up, it was mortgage rates that adjusted and brought payments back into range, but in this cycle rates have proven to be an unreliable, volatile ally. The housing industry has been waiting three years for mortgage rates to decline and save the day, and as more time goes by without relief, the more pressure there is on home prices and incomes to adjust in order to increase demand. It is finally happening.”

But sellers are reacting to this market too. 

“Meanwhile, more sellers have decided market conditions are too unfavorable for them and are taking a pause. While supply is still up 45% from last year, the last 7 weeks have seen a 3.4% decline. New listings added to the MLS every week has dropped 39% over the last 2 months, and are now at the second lowest level historically (2023 was the lowest year for new listings). Weekly listing cancellations are up 38% over last year, and expired listings in the last week of May were up 84%. In the past, cancelled and expired listings were re-listed right away and didn’t affect the total count, but this time sellers are taking a longer break and sometimes opting to rent their homes instead.”

A final note to buyers:  with supply trending downwards, if rates do drop we will likely see a surge in activity.  These windows of opportunity typically don’t last. Demand is elastic and can move swiftly.

A final note to sellers:  Price is a trailing indicator and the market moves before pricing does.  In a market that favors the duck hunters, correct pricing – with a focus on condition – and an agent who can market and negotiate are your best defense against the hunter.

Russell & Wendy Shaw

(mostly Wendy)

Housing Crisis – Real or Imagined?

“The report of my death was an exaggeration” ~ Mark Twain

“While Greater Phoenix is slipping farther into a buyer’s market, it’s not extreme enough for a collapse of that magnitude. Buyer’s markets over the past 25 years, excluding the 2008 sub-prime mortgage collapse, saw prices drop between 5% and 11% year-over-year, and those price declines were enough to pull the market back into a seller’s market each time…. Either way, the current buyer’s market supports declining prices over the next 3 months; 20% is extreme, but 3% is more reasonable. If mortgage rates move closer to 6.5% or lower, all projections will change again.”

Once again – supply/demand controls pricing.  When supply exceeds demand, prices decline.  But, for a seismic drop in values – supply must move upwards dramatically or demand must collapse. Instead of dramatic movements, we are seeing gradual erosion of demand with a continuing increase of supply.  That results in downward pressure on pricing.  But it is wise to remember that unlike supply, demand is elastic and can bounce quickly – especially in response to lower mortgage rates.  The report of the housing market death appears to be an exaggeration.

Russell & Wendy Shaw

(mostly Wendy)

It is not an easy time to comment with certainty on the direction of the housing market.  The housing market is a slow-moving ship.  Unlike the stock market, we don’t see daily volatility.  But let’s be clear –the point is we don’t see it – not that it doesn’t exist. That is because a sale of a property takes up to 60 days – so ‘reading the present market’ amounts to really reading the past.  

Volatility in the stock market and uncertain tariff policy are causing home buyers and sellers to question the effect on the housing market.  As the Cromford Report points out, volatility in the housing market has been the norm lately: “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 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, 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.  The Cromford Report addresses the luxury impact:

“It is becoming clear that the luxury market has lost some of its exuberance over the last 6 weeks, and it appears that week 8 may have been the high point for the year for this segment of the market. It is normal for the luxury market to be negatively influenced by falls in the stock markets and in cryptocurrency, as well as by increases in economic uncertainty. All of these have occurred in recent weeks. The S&P500 entered a downtrend in the latter half of February and is down almost 10% since then. Bitcoin peaked on January 20 and is down almost 23% since then. Stock market and cryptocurrency profits fueled a lot of the unusually high demand in the luxury home market and with those profits down it is unsurprising that demand for luxury homes has fallen.”

While the impact to luxury was predictable, something much less predictable also happened.  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 in April – money did not seem to view bonds as safe – shockingly causing mortgage rates to rise.  Mortgage rates greatly impact the mid-market demand. Rates have finally seemed to settle in the last week in the 6.8% range as of this writing.

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: “The overall Cromford Market Index for all areas & types stands at 78 (a balanced market is 100), firmly in buyer’s market territory and heading south at a slow but steady pace. Supply is still growing and demand is low but steady with a glacial trend upwards. We would need something new to happen to spark a significant improvement in demand. Prices are starting to decline and so are mortgage rates so affordability is on an uptrend. The movement is pretty slow for interest rates but quite sharp for prices. The cooling off at the top of the market has a lot to do with that. However, the top end has almost no effect on the monthly median sales price and that has declined from $465,000 to $445,000 over the past 5 weeks. We deduce that a clear downward trend in home prices has now been established. With the hottest months still in front of us, that is not likely to reverse anytime soon “

To sum the market up – at this point we expect gentle erosion in pricing to continue.  Sellers need to price right for an eroding market and address condition issues.  Buyers have more power and more choices.  Watching the stock market and the mortgage rates will tell you the likely outcome of each market segment. Change is the only constant and knowledge is power.  Lean on experienced agents to guide you. 

Russell & Wendy Shaw

(mostly Wendy)

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)

It’s a Buyer’s Market – Are Prices Dropping?

Buyer’s markets are rare in the valley – we have been in a buyer’s market only 4 times in the last 25 years.  By definition, a buyer’s market happens when supply exceeds demand.  This causes prices to move downward which at some point stimulates demand.  Increased demand consumes excess supply and rebalances the market.  So if we are currently in a buyer’s market – why are prices not plummeting?

The Cromford Report explains:

“Phoenix has been in a buyer’s market for 3 out of the last 4 months, and it’s continuing into March as of this writing. Some buyers may be surprised to see price measures aren’t showing a decline yet, in fact the median is up 4.3% over last year. Price measures take at least 3-6 months to crack after a shift in the market, and that shift needs to be in effect for at least a season before it starts to hit the price line.

Why does it take so long? For a number of reasons, but one is the length of the sale. When selling a home, first the seller needs to list it on the open market and possibly wait 30 days before accepting a contract. Then after another 30-45 days in escrow, the price finally records. Then in order to establish a trend, two more months need to be established to show a measurable decline in price. Stocks, in contrast, can be sold and recorded at the push of a button, so volatility and price responses are instantaneous, and crashes are common.

This is only the 4th buyer’s market for Greater Phoenix over the past 25 years, and the one from 2006 -2008 was a doozy that ignites PTSD for those who suffered through it. Because the housing crash coincided with the Great Recession of 2008, there are some who believe home values are set to crash if another recession should occur in the near future. Historically, this theory is not supported. Typically home values go flat and boring during recessions, or barely rise. Ironically, buyer demand for homes increases during recessions because mortgage rates typically decline. Measures today suggest prices could decline in the coming months if supply continues to rise, but more like a coast or glide, not a crash.”

Will prices decline?  If so, the first sign arrives in decreased list prices, followed by lower pending home prices, and then in the closed prices.  The unknown variable in all of this is interest rates.   If mortgage rates land in the 6.1% range, demand likely will quickly respond.  But, if rates maintain their current range, pricing will respond by moving downwards to get rid of the excess supply.  Which scenario is most likely? Only time will tell.

Questions about your neighborhood or price range?  Contact us for answers. While we are not fortunetellers, we are students of the market.

Russell & Wendy Shaw

(Mostly Wendy)

Our apologies to Charles Dickens, as we co-opt his famous title.  Rather we should say “tale of two markets” as greater Phoenix is currently operating as two very distinct marketplaces.  Depending on which you fall in, your experience will differ greatly from the other segment.  One segment, the luxury market, is flourishing.  Why?  We can attribute that to the stock market having had three years of impressive growth.  2024 was, by most any measure, a fantastic year for domestic stock markets. The S&P 500 hit 57 new all-time highs during the year and closed with a gain of 25% (including dividends).  When the stock market flourishes, so do luxury sales, as they typically aren’t dependent upon and therefore not sensitive to mortgage rate fluctuations. A word of caution to those in this market segment:  the luxury market is cyclical and good times do not last forever.  As to the general marketplace where the bulk of the housing sales occur, interest rates are having an outsized impact. The low and mid-range market is experiencing low demand and its result of drastically restricted number of sales.  As a point of comparison, in 2021 when mortgage rates were low, the greater Phoenix market has 108,998 sales.  Fast forward to now, and that number is only 71,858 ( a drop of 34%).  While demand remains stubbornly stalled in this market segment, supply continues to creep upwards.  Hence, buyers are experiencing newfound strength in negotiations over sellers.  The Cromford Report further explains the trend:

“Since the beginning of this year we have seen an increase of 2,324 in the active listing count (excluding those with a contract). This a 11.9% rise, which is much higher than the 8.1% increase we saw this time last year, and it is added to a base of 19,460 rather than 14,593. So it is safe to conclude that supply is both higher and growing more quickly than a year ago.

Listings under contract have also shown some growth – up 13.3% from 5,387 to 6,103. This time last year they grew 23.8% over the same period. We have gained only 716 listings under contract instead of 1,257 last year and the growth percentage is down 44%.

We are therefore seeing demand grow, as is normal for the season but at a significantly slower rate than in January 2024.

So if supply is growing faster than a year ago, but demand is growing more slowly, the comparison with 2024 looks discouraging for sellers. Many readings confirm this picture…

This situation will result in more difficulty for sellers in resisting negotiation demands from potential buyers. New competition from other sellers is appearing quickly and asking prices will need to be set to be competitive and attractive rather than complacent. A price which is initially set higher than the market can bear will result in a long marketing period and eventually deeper price cuts than if the price had been set properly in the first place. This is particularly true at the low and mid-range price points. ‘

Pricing – As we oft times mention, pricing is a trailing indicator.  The S&P / Case-Shiller® Home Price Index® just reported year over year appreciation of 2.1% for greater Phoenix.  The fact that pricing is not keeping up with inflation shows the market weakness.  It is important to remember, supply and demand ultimately control pricing. With demand weak, sellers are forced to respond with price reductions to compete.  As the Cromford Report confirms:  “Price changes are very much in vogue – they recently peaked at 3,820 per week, 52% higher than this time last year. This is not too surprising as we do have 40% more listings now. Price cuts outnumber price increases by about 14 to 1.”

New Builds – New builds – once the shining star of the marketplace – are losing some luster. The Cromford Report shows a drop in market share of new builds from December of 2023 vs. December 2024 of 28% down to 24%.  Builders have also begun to scale back on their production plans as evidenced by a drop in permits.  As the report shares, this is likely due to two reasons:

“This decline may be partly responding to a perceived lack of demand, but may also be influenced by home builders’ reaction to 2 key elements of government policy which could make life for the developers a little more tricky in 2025 and beyond.

• higher tariffs on materials imported from countries such as Canada, Mexico and China – either option will increase building costs – either paying tariffs on foreign sourced materials or buying American-made products will both be more expensive for builders than the current situation and will put pressure on their gross margins
• a clamp down on undocumented employees engaged in the construction trade could make some skills hard to find and lengthen build times

By far the largest area of employment for undocumented labor in Arizona is the construction trade. It is estimated that about 34,000 such undocumented immigrants are currently working in construction in Arizona, and roughly 80% of them were born in Mexico. These are unlikely to be working directly for the big homebuilders, but they make up a significant percentage of the skilled workers in their subcontractors. It is not yet clear whether or when these people might be deported, especially if they have no criminal record apart from staying and working in the USA without authorization. Less than 4% of undocumented immigrants are believed to have a criminal record. However, if the numbers of construction workers were to be significantly reduced through deportation, the rate of construction of new homes would likely fall. “

This is not a commentary on the current administration and its policies, but rather a housing discussion.  If the number of new builds continues to decline due to the limited labor pool or an increase in expense from inflation or tariffs on goods (lumber, aluminum, etc.), this could benefit the resale market. With reduced competition (i.e. less supply  being created) or increased affordability comparative to new builds, the resale market would benefit. Conversely, if large volumes of undocumented immigrants are deported – already weak demand for housing will drop further, resulting in price erosion.  These uncertain factors in the housing markets bear watching.

Whatever the housing market brings, we will report it here.  If you have questions you would like answered in a future article or in person, please contact us.  As always, we are here to serve and inform our wonderful clients and friends.

Russell & Wendy Shaw

(mostly Wendy)