Real estate continues to normalize and shift from an extreme seller’s market to a less extreme seller’s market. Both the leading and lagging real estate indicators illustrate a slowly moderating housing market. The numbers show that things are changing, nothing is happening too quickly, so the movement is relatively healthy and going in the right direction. Buyers have more options and sellers are making some concessions.
The market is softening = slowing = normalizing = moving closer to balance which are all good things even though it feels weird. After the wild ride of 2020 and the nearly non-existent inventory levels of Q1 2021, the real estate market is working out its kinks. I have mentioned it before and will say it again, it is impressive what a person can get used to. We got used to 10 or 15 buyers for each listing. We even (kinda) got used to only 4,000 active listings (when we should have 25,000). Now we have to prepare today’s buyers and sellers (and ourselves) for another new normal, a much healthier one.
The real estate market continues to shift and change, slowly moving towards normalization. Prices continue to increase, demand is slightly subsiding, and inventory is growing (and has a LONG way to go). The intensity is cooling (from 500 degrees to 350 – its still HOT), and fatigued buyers are writing fewer offers before one is accepted. The headlines attempting to explain the still very hot, yet cooling market seem to be causing more confusion than clarification.
While today’s residential real estate market remains unhealthy (remember when 10% appreciation was a lot?), initial progress has been made. Prices are leveling off, supply is increasing, and immediate sales are declining. This is good for buyers, especially first-time homebuyers, which are foundation of the real estate market.
April saw its best sales rate in 15 years and at the same time sales declined again for the third straight month. Homes are selling faster than ever before, and prices are higher than ever before; yet the signs are all there, the market is slowing – very slowly – and just starting to normalize.
Yesterday one of my clients excitedly called to tell me she had accepted an offer on her home for $1.2M more than she paid for it about two years ago. She then said, “Now what do we do? Rent, buy, flip?” I paused, gathered my thoughts, considered the numbers, and answered, “Don’t rent. Buy.”
Now, this is a headline that says it all, “Who’s Lying About The Housing Market? The housing market is heating and cooling at the same time, depending on the data in question. Who’s telling the truth? Actually, maybe everyone…” Author, Matthew Graham explains that prices are appreciating faster than they have in 15 years, homes are selling in minutes, and bidding wars are commonplace all while demand is actually falling. Demand was THAT high and remains above normal.
Real estate disruption is all about creating efficiency. As we lead busier and busier lives, fast and efficient is appealing, right? In theory, buying and selling a property with Amazon-like ease sounds great. In reality, our human condition drives us to desire human input, not just in reading interesting articles but in being able to talk to someone about specifics.
The percent of homes with price reductions is currently at record lows at 16.1%. Enough contracts are coming in over-asking which means very few sellers are reducing their asking price. For Realtors working with sellers and potential sellers, the next 3-4 weeks is likely going to be the absolute peak. The rest of the year will continue to have strong buyer demand and increasing prices, but the absolute peak of the demand frenzy is likely happening right now. So now is the time for sellers to get the biggest premium.
Once again, today is all about the AZ market. Recently, Lawyers Title hosted a presentation with Tina Tamboer with the Cromford Report. She always shares pertinent and timely information. Below I have combined a lot of her information from her presentation, along with additional information from my research.