Interest rates have been very volatile and while inflation remains persistent despite the Fed’s continued efforts it is unlikely rates will decline any time in the near term. We need rates to be stable and boring and not bounce around like they are. This constant fluctuation is hurting the already tight affordability.
Welcome to a balanced market. We are currently in stage 3 of the market shift, an increase in seller concessions. We will likely stay here for a while. It is important to set clear expectations with your home buyers and sellers. While the days of the runaway seller’s market are long gone, today’s sellers are not desperate (aside from iBuyers) and will not sell if they do not have to. We are working our way through the chaos and a stable market may actually be in sight.
Despite knowing that the market was going to normalize – no market lasts forever, especially not savagely unbalanced, unsustainable markets – but the speed of this change has been surprising, to say the least.
The Greater Phoenix residential real estate market has seen 15 weeks of change but in the past 4-5 weeks that change has been amplified by a lot.
Sellers have less power than they did only 6 weeks ago. The market is very different than it was recently. It is not catastrophically bad, but it is far trickier than it was.
Overall, active supply is up 92.4% year over year and at the same time listings under contract is down 15.9% year over year. Buyers are seeing inventory rise after two years of rejection. Now is the time to prepare your sellers for what is happening right now. Today’s market is very different from the market of only a few months ago.
All eyes are on interest rates right now. Nothing moves as quickly as interest rates, right now they are fluctuating wildly. We haven’t seen interest rates move this fast and go this high since the 1980s. Rising rates create more challenges for owner-occupied buyers and not the cash buyers who are usually investors. The higher rates hurt the demand of the people who need to get a loan in order to buy. Owner-occupied purchases declined slightly from Q4 2021 (64.2%) to Q1 2022 (64%). The majority of owner-occupied buyers purchased between $500,000 and $1,000,000.
The relationship between supply and demand establishes pricing whether it is for toothpaste, a mani/pedi, Bitcoin, or a house. Demand moves based on consumer sentiment. This is true for Wall Street and Main Street and that is the extent of the similarities between the two.
While the company that we love to hate is struggling, we are all left on the sidelines guessing what will happen next. This is not the end of iBuying, nor is it the end of Zillow, and this certainly does not mean the market is crashing (the price reductions are only bringing the asking price down to market value). It may mean that Wall Street investors decided profitability is important and it is time to stop buying high and selling low.
Do you have clients still worrying about when the housing market will crash? The intensity of late 2020 and early 2021 felt like the market frenzy of 2005. As the market normalizes it may feel weird or uncomfortable as we pivot again. While those emotions are important and we have to have emotion to make decisions, we have to look at the facts. And the facts point towards stabilization and continued appreciation, just at a slower rate.
Looking at housing, things look good and the market is attempting to normalize, but we do not see the whole picture. Wall Street, federal policy, a worldwide pandemic, labor and supply chain shortages also impact housing. But there is still more to consider: the intense and seemingly ever-increasing battle between the Department of Justice (DOJ) and the National Association of Realtors (NAR).