Good morning yo! :)
Did you like that title play? It means "SHIFT" hahah and since last week's post really put me behind with "Well Sh*T" I figured it was the best approach to such a publishing!
I would like to welcome everyone who lives in the Phoenix area to a now, and finally, BALANCED REAL ESTATE MARKET!
The time of selling shit hole houses for thousands over list price is gone!
Lazy complacent listing agents can no longer capitalize on half ass effort it takes to effectively sell a home.
Sellers can move out and find something they'd like to move up to without risking being homeless.
The sense of urgency has been reduced allowing buyers to see enough homes to make an informed, non-regrettable decision.
Price and presentation really matter when selling a home.
Buyers must be educated from their lenders far more than before.
and, and, and...
Some other agents may see this as a bad thing, but I don't consider myself a normal agent. Quite frankly I see myself as considerably unconventional. I went into this business to serve people and families.. which are, Sellers AND Buyers; equally... If they are not our customers specifically, our client now holds 50% of the negotiable leverage rather than 0% or the entire 100%.
I know there are exclusive listing agents out there, and sadly the majority of agents are usually buyers agents. Taking the position of wanting to serve one over the other would be taking the position of I only represent Husbands in divorce settlements and the Wives can be served by someone else.
At the end of the day, they are both humans looking to move forward while closing a chapter behind them; Buyers and Sellers are just the same
There is nothing worse than having to be the executioner in the delivery that 9 out of 10 people are worthy of this home. Or the worst for us was telling 32 out of 33 people that they are not welcome to buy this home...
Let's leave that kind of supply and demand drama to buying a new gaming console, not to what people want to call home.
I am not suggesting that everyone should be entitled to buying a home.. insert the fallout of 2005-2006.. sad deal.. Everyone should have the right to buy the American Dream, but only to those who can effectively afford it.
These past two years have had the best presentation of paperwork, more heart poured into the want for the home, and dammit if ever, all the buyers were well beyond qualified to purchase a home. Being the heartfelt referee in this situation, one can only sustain that kind of emotional fitness for so long before shit starts breaking.
Looking back in February, that video tone and delivery...
Shit! I was broken.
So here we are... back to a balanced market. It's refreshing! and I'm happy to see it happening... :)
To see me step outside my comfort zone with a video update on the subject, check out the link below :)
Phoenix Real Estate Market July 2022 = BALANCED!
Here is a simple breakdown for you.
To process the significance of the recent changes, let's go back a smidgen, first.
Check out this detail from February 2022
The MLS inventory info was a live snapshot of that morning: 3,175 homes available.
The active listing, under contract, median sales price, and closed sales data percentages are from February 2021 - February 2022.
Now check this out!!.. July 2022
Just a six month change and things have picked up a lot! Check out how many houses are on the MLS: 11,129 single family houses are available
If you include condos and townhomes the inventory is roughly 15,000
From July 2021 to July 2022, active listing inventory has spiked a whopping 159%
I've spoken a lot about how our Phx market needs to have 24,000 - 28,000 homes available to be considered a balanced market. That's when interest rates and sales prices jive with affordability...
The people at the Cromford Report summarize this fascinating data up beautifully:
Contract Ratio indicates how "hot" a market is. It specifically measures the number of completed sales contracts relative to the supply of active listings. How the formula works is, Listings that are Pending/Under contract are multiplied by 100. Then that number is DIVIDED BY the Active Listings waiting for a contract. This gives us a contract ratio.
The higher the number the greater the buying activity relative to supply. If this number rises then it is a sign of growing contract activity and a positive signal for sellers. Conversely a falling number is a sign of a weakening market - either supply of active listings is increasing or contract activity is slowing, or both. In a balanced market for normal market segments, the value of the Contract Ratio is usually between 30 and 60. When it lies below 20 the market can be considered "slow" or a "cold market". Above 60 can be considered a "hot market" and when it moves above 100 we regard this as evidence of a "buying frenzy". In high-end luxury market segments the normal level is lower, usually lying between 15 and 25.
Case in point... the number of active listings to what is under contract, defined by the ratio, we
Seller Market is Officially Over! Here’s What to Expect. How Some Sellers Are Winning Against Interest Rates
Welcome to a balanced market*, how quickly the tables have turned! While seller markets are ideal for the not-so-perfect home, balanced markets are ideal for the not-so-perfect buyer. This means that buyers who have been recently rejected due to lower down payments, non-conventional financing, or need for closing cost assistance will find sellers are now willing to work with them in this new environment. Supply across all price points is up, with 53% of active listings added by new home developers and investors. Builders especially are dropping prices and offering unique buyer incentives to compete. Experts don’t know how long this period will last as it depends on what interest rates do over the next few months, but home buying just became fun again. *The market is considered in balance when the contract ratio is between 30-60. Calculated by dividing what’s under contract (8,680) by what’s active (15,033) and multiplying by 100, the contract ratio as of July 7th, 2022 is 58.
The proverbial “Dump Your Junk” season is over, that loving phrase the industry uses when demand is significantly higher than supply and even the smelliest dilapidated property gets multiple offers over asking price. That is no longer the case as of this writing. Get ready for longer marketing times, multiple price reductions, Realtor® tours, price opinions, staging, repairs, seller-paid closing costs and price negotiations. The extreme seller market is over.
It’s no surprise that the market has been shifting since February, with the primary influence being large mortgage rate increases. However, over the past 6 weeks mortgage rates have been particularly volatile, fluctuating from 5.1% to 5.8% within 3 weeks only to drop to 5.3% over the next 2 weeks, and then back up to 5.8% a week later. History tells us that buyers do not like sharp, rapid fluctuations in mortgage rates. It causes buying activity to freeze until a level of stability and certainty can be achieved. This market is no different, contract activity has dropped 28% in the last 6 weeks. The number of listings under contract at this time of year should be around 10,000, putting today’s count of 8,680 well below normal.
In the meantime, a 220% increase in supply over the past 15 weeks has put pressure on sellers to compete. With cash buyers offering significantly below list price recently, attention is back on traditional buyers, many of whom have been priced out of the market due to affordability. Price reductions have gone up 500% since March, but have done little to increase demand as mortgage rate increases offset their effect and continue to keep payments high.
But not all is lost! Cue the interest rate buy-down, a seller concession tool that has been collecting dust, unneeded, for well over a decade. The reason price reductions have had little effect on affordability is a $10,000 price reduction only saves a buyer $53 on their mortgage payment at 5.8%. However, for a similar cost a seller can buy down a buyer’s mortgage rate and save them $100’s on their monthly mortgage payment, either permanently or temporarily depending on the plan; thus putting their property at a higher competitive advantage than just a straight up price reduction.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2022 Cromford Associates LLC and Tamboer Consulting LLC
Although in a balanced market, I do not believe we are in a spot to present offers that are ridiculously low like inverse of the over asking offers of the past two years. Regardless of the interest rates and such, the zip code data still shows that sellers are getting near 100% of their list price. This will decline to a practical level over the next couple months. My opinion of practicality is between 95-98% of list price... we just have to get there first. There's a lot to unpack there. :) Should you or someone you know need a safe place to ask questions about real estate, we are that place; and we do so without expectation. Please share the video with a buddy like I did. Have a grateful weekend!