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.
While the Greater Phoenix housing market follows the same trends of the national housing market, it does so first (currently running 4-6 weeks ahead versus the usual 6-9 months ahead). The cooling trend emerged 10-12 weeks ago locally, while nationally the trend became more apparent in April. Not only does the Greater Phoenix market run ahead of the national market, it has bigger swings. Our highs are higher and lows are lower. For example, over the past three months, the national single family inventory has increased by 64% and during the same time period, Greater Phoenix’s single family inventory increased by 148%.
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.
There are a lot of forecasts from different publications, analysts, and economists. It seems as though the analysts and economists who are not in real estate tend to predict that home prices will decline. Many of the housing analysts and housing economists say that appreciation will go flat but unlikely go negative by much if at all. I am not sure if the housing analysts either know more than the others or they do not want to give bad news to the real estate industry. I’d like to believe that it is because they know more but at this point, anything could happen.
The US housing market is shifting and it is shifting quickly. The speed in which the changes are happening is making both real estate consumers and practitioners uncomfortable. The velocity of rate increases, the velocity of inflation (despite the very recent modest decline), the velocity of price appreciation, and now the simultaneous velocity of growing inventory and declining buyer demand. Using facts and not emotion is the best way to address the discomfort.
In light of all of chaos and headlines, it is imperative to focus on what is going on right now. As difficult as it might be to avoid predictions, that is what is necessary. The market is shifting quickly and it is dangerous to make assumptions. The best way to service today’s home buyers and sellers is to guide them through our current market.
The market is indeed softening, locally no doubt, nationally – it is just becoming visible. The AZ market had a four-week head start. The pressure on affordability hit nationally last week when we saw purchase mortgage applications decline by 17% year over year. 2014 was the last year total housing inventory increased (this is true both locally and nationally). Currently, inventory is up 19% in a month.
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.
After reading my update from last week, a friend and client said she was confused. While the market is softening, as discussed, her listings are still selling immediately, above asking, and with multiple offers. That is just it. These things are all still happening. Houses are actually selling faster than they were last year. TheContinueContinue reading “Greater Phoenix Real Estate Market Update 4/1/2022”
