After months of a frenzied buying craze, the Phoenix real estate market appears to have shifted toward a buyer’s market.
Notice I said TOWARD a buyer’s market. That doesn’t mean we are IN a buyer’s market (yet).
On a scale of 1 to 10, with a “5” being a neutral market, a “1” being a ridiculously strong buyer’s market and a “10” being an insane seller’s market, I’d say the current market should be labeled as a “7” (and dropping). Just a couple of months ago, it was an “11”.
So the shift has been significant, but we are still in a seller’s market. Some people would argue my assessment and claim we have shifted to a buyer’s market. Everyone is entitled to their own opinion.
What evidence do I have of a change in market conditions? Lots of anecdotal evidence, not too many hard numbers”
1) Inventory is up, significantly. I’m still waiting on September numbers, but the inventory of existing homes that are listed has probably tripled in the last couple of months. WHOA! You say. Tripled?? That’s HUGE. Yes, it is. But remember the inventory was incredibly low at one point. Despite tripling, there still aren’t enough homes listed to push us in to a buyer’s market. Yet.
2) The number of homes in the MLS that have had price reductions has increased quite a bit. 3 or 4 months ago, you NEVER saw price reductions. Heck, sometimes you saw price INCREASES. Now it’s not difficult to find a listing that has a price reduction. Please note, “price reductions” is not meant to imply that the values in Phoenix homes is dropping. On the contrary, our average appreciation rate year-to-date is a stunning 40 – 50%, depending on whose numbers you use. Compare this to a national appreciation rate of 10 – 15% (which is still really good!). Now, in my opinion, there is **NO WAY** we can sustain 45% appreciation rates. No way. I think appreciation will slow, a lot, and return to more normal rates. Listing prices are being reduced in the MLS because people are still used to the previous months buying frenzy and are, to be blunt, getting greedy when they set prices. People are still setting prices with 45% annual appreciation rates in mind. Then when homes don’t sell, they drop list prices in order to generqate more interest and the dropped price reflects current reality better.
Again, home prices aren’t dropping in the Phoenix area. They just aren’t accelerating and the torrid pace of the past several months. That’s actually a good thing as it stabalizes the market.
3) Open houses. Just a couple of months ago the only time you saw an Open House sign was with a FSBO (For Sale By Owner). Now Open House signs are *everywhere*. The reason for this is simple. Houses are staying on the market longer than they used to.
4) Time on Market is increasing. Back in April, the average time on the market was just a few days. Homes often sold just hours after they were listed. They often got multiple offers OVER list price. This was a buying FRENZY. It was nuts. That frenzy has ended. It’s not unusual for homes to be listed for a few weeks now. (Agents from other parts of the country that just read that are shaking their heads. There are places in the US where average time on market can be measured in months.)
These are significant changes. If they continue, we may indeed find ourselves crossing over from a seller’s market to a buyer’s market. We are not quite to that point yet.
My guess, and it’s purely a guess, is that the factors I listed above will continue to shift and we will over the next few months find ourselves in a neutral market, where we may stay for awhile. Economists will tell you that all markets want to be neutral, and there is nothing wrong with a neutral market.
Should something change, and it can be just about anything, then we could swing back toward a stronger seller’s market, or swing into a strong buyer’s market. No one really knows for sure. If you could predict what the any market will do in the future (be that the stock market, commodities market, futures market or real estate market), you wouldn’t be reading this blog. You’d be sipping mai-tai’s on the beach in Tahiti”.
Stay tuned, it’s going to be fun!!!!