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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. Which leads 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!!!!
EDITED TO ADD: Just a couple of hours after I wrote this, I received a document from my local Real Estate Association board. It contains some very interesting “anti-bubble” data. You can view the PDF file here
Go to ThompsonsRealty.com
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I agree today’s posting about the “shift” in the housing market locally. I believe the market will stay strong & return to neutral slowly if folks don’t panic. In addition, I believe a fair share of people purchasing $350,000.00 home’s who barely qualified this past year or 2 ago will eventually find themselves back in the rental market. Many people “overspent” on their new homes to look good and did not consider the long-term financial consequences. This will provide an increase in availability of resale homes in the next one to three years! As far as LAND goes…definitely a great investment. My favorite part is the low maintenance. I do believe Tonopah, Coolidge, Florence, Prescott, and the rest of the west and east valley are Overpriced. Investors look for good buys and are moving their money down south to Cochise County where you can purchase land for about $4000.00 & up PER ACRE. That beats 300,000.00 per acre in Queen Creek! It’s getting HOT down there so I don’t expect these prices to stay low in Cochise County for very long. I have spent months personally researching this. Between Benson & Douglas there is a HUGE increase in sales in the Pearce, Sunizona, Sunsites, Ash Creek, Sunsites II, McNeal & Double Adobe areas. These are near Tombstone & Bisbee. Bisbee is the County Seat. -Devon
In the MLS last year around this time there were 5000 homes for sale,
nowadays there are over 24,000 homes for sale. It appears that the
overflow of investors in Arizona and particularly in Phoenix jaded
the market making it really a buyer’s market.
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I am getting several inquiries on the lot that I currently own. It is a corner lot. However,
the amount of dollars they are offering is piddles because I have to share the amount with two other
sibblings. I am wondering what they are going for really truly.
Christine –
If you want to email me the address (or tax number) I’ll be happy to do a CMA (Comparative Market Analysis) and show you the likely market price for your lot. No cost or obligation. Well, that is if you’re in the Phoenix area. If you’re not, any decent Realtor should be willing to give you a free CMA.
Caution should be used with any unsolicited inquiry. Typically these come from investors attempting a “lowball” offer. *Never* ever just accept one of these without getting an idea of the true value of your property!
Regards,
Jay
I don’t believe a thing real estate agents say. I don’t hate them just the tricky and unexperienced ones. Which in my opinion is most of them. Take the “no obligation market evaluation” for example, the oldest and most unoriginal term you will see advertised. Do they think people are stupid? The real definition should be, “yes I will come over to your home, tell you what it’s worth, then I will bug the hell out of you until you list it with me”. In the meantime, they will send you some “awesome” fridge magnets, calendars and pencils just so you don’t them. I have written at length about this, I’m NOT selling anything, just a frank, real world discussion.
Have a bad experience with a real estate agent fsbohomz? I’m truly sorry. Bad agents abound and give good agents a bad name.
I market my home evaluations by NOT bugging the hell out of people. I figure if I provide a good evaluation, and those people end up needing a real estate agent, they’ll call. I don’t need, nor desire, to bug anyone.
Superior customer service and delivery will reel in the business. I don’t have time to bug the hell out of anyone.
I don’t do fridge magnets or calendars. I do have a bunch of pens though. Want one?