Market Summary for the Beginning of April

Here are the basics – the ARMLS numbers for April 1, 2023 compared with April 1, 2022 for all areas & types:

• Active Listings : 13,933 versus 5,051 last year – up 176% – but down 5.5% from 14,739 last month
• Pending Listings: 5,701 versus 8,008 last year – down 29% – and down 3.6% from 5,911 last month
• Under Contract Listings : 8,935 versus 11,620 last year – down 23% – and down 1.9% from 9,109 last month
• Monthly Sales: 7,540 versus 10,141 last year – down 25% – but up 32% from 5,706 last month
• Monthly Average Sales Price per Sq. Ft.: $277.60 versus $290.80 last year – down 4.5% – but up 2.4% from $271.08 last month
• Monthly Median Sales Price: $419,900 versus $456,000 last year – down 7.9% – but up 1.7% from $413,000 last month

The market continues to improve.

Sales volumes remain much lower than a year ago, largely because institutional investors and iBuyers are missing in action on the buying front. A year ago they were competing frantically, which they probably now regret. However sales in March are up 32% from February and only down 25% from March 2022, which compares favorably with down 29% in February and down 39% in January.

iBuyers create 2 transactions instead of one, so transaction volumes will fall when they stop (or almost stop) buying. Demand from normal buyers weakened in March, mostly due to higher interest rates. But these interest rates are lower again in early April, and the drop in demand has been overwhelmed by the sharp drop in supply. Active listings without a contract fell by 5.5% during March whereas listings under contract fell only 1.9%.

The balance between supply and demand has been moving consistently in sellers’ favor since mid November. This confirms we are in the rebound phase of the correction that dominated the second half of last year and created an atmosphere of fear throughout the market. That fear can now be replaced with relief as one market signal after another turns positive and resumes a normal trend. Despite the doomscrollers on social media and elsewhere, today’s market is healthier than it was in April 2019, which at the time we were perfectly comfortable with. Casual observers tend to worry about factors which can cause weakness in demand, then forget to balance that with factors that can cause weakness in supply. Right now, supply is weakening much faster than demand, so interest rate movements are no longer the key thing driving the market. Competition between buyers is starting to warm up because there are so few sellers. This should not surprise us. Supply is just as important as demand.

The USA is unusual in having a very large percentage of its existing mortgage loans at fixed interest rates. In most countries, the majority of mortgage loans have adjustable rates. In Central Arizona this means loans written more than a year ago look very cheap compared with new loans. This deters homeowners from selling homes, unless they don’t need them. They may not need a home if they have just inherited it from a relative who died, or if it is a second home or investment. But if they have a primary residence, selling that home means killing a very cheap mortgage and giving birth to one with a more expensive new rate. Most people do not want to do that. In 2022 we saw a flood of supply from investors, speculators, panicking iBuyers and the like, but this wave has exhausted itself. We are back to a chronic shortage of homes to buy. We have less than 14,000 available, which is about 40% below normal. Demand is indeed weak, but it is only 18% below normal. Do the math.

Prices have moved higher even earlier than we expected. The monthly median is $419,900, up from $410,000 in late February. The average closed price per square foot has reached $277.60, up from $265,20 on Feb 9. That is almost a 5% rise in just 7 weeks.

The listing success rate is back to 78% or so, having fallen to a low of 62% in November last year.

Foreclosure activity remains minuscule. There is little sign of much new supply coming from that direction antime soon.

New construction permits for single-family homes are currently low, so there will be limited new supply from builders for a while.

It is time to re-adjust buyers to expect increasing competition from each other as they chase a dwindling number of homes for sale. Sellers have recently been offering generous incentives including substantial interest rate buy-downs. Those incentives are likely to reduce in value as sellers start to realize they have the upper hand in negotiations.

A few areas on the outer fringes of Greater Phoenix still have a robust supply. These include Buckeye, Casa Grande, Coolidge, Florence, Maricopa and San Tan Valley. However these are counter-balanced by extremely low numbers of active listings in the more affordable central areas, such as West Phoenix, South Phoenix, Tolleson, South Glendale and West Mesa.

Do not make the mistake of thinking the market is the same as it was in late 2022. We are in a new and very different phase.

​*****I have moved from neutral to now again a sellers market, interest rates have moved down about 1% from the high, if your holding off on buying because you think we have a substancial down-turn on its way, thats a mistake…..BUY now….

​*****If you’re considering selling or buying give me a call to discuss your situation and current market conditions.  If you’re on the sidelines waiting to buy because you think there will be more downturn or a crash in the market that’s a mistake, this is the time to buy……

I love referrals! Please remember me! Thank you, Shawn, your Realtor. 

Here Is The Outlook for The Arizona Economy: Click link below to read

Here is the outlook for the Arizona economy – AZ Big Media

With only 12,500 active listings without a contract we are once again approaching a dire shortage of homes for sale. Even a modest increase in demand is likely to force prices higher and quickly recover the ground lost over the past 12 months. The median sales price is down almost 9% compared to a year ago, but has recovered nearly 4% over the last 3 months.

Read on……..

Market Summary for the Beginning of May

Here are the basics – the ARMLS numbers for May 1, 2023 compared with May 1, 2022 for all areas & types:

• Active Listings: 12,503 versus 6,688 last year – up 87% – but down 10.3% from 13,933 last month
• Pending Listings: 6,224 versus 7,386 last year – down 15.7% – but up 9.2% from 5,701 last month
• Under Contract Listings: 9,969 versus 10,889 last year – down 8.4% – but up 11.6% from 8,935 last month
• Monthly Sales: 6,662 versus 10,141 last year – down 28% – and down 12.3% from 7,598 last month
• Monthly Average Sales Price per Sq. Ft.: $279.92 versus $302.48 last year – down 7.5% – but up 0.8% from $277.61 last month
• Monthly Median Sales Price: $425,000 versus $466,000 last year – down 8.8% – but up 1.2% from $419,900 last month

A year ago the market was weakening fast, but pricing was approaching its peak of $306.46 per sq. ft. and closings were still running high, fueled by the unwise purchasing frenzy of institutional investors and iBuyers. The slump that followed in the second half of 2022 is now well behind us and the market is displaying increasing resilience despite interest rates that are far higher than during most of the last 10 years.

Closing volumes were unimpressive in April, but the growth in listings under contract makes up for that with one of the largest month to month increases (11.6%) that we have ever seen for this time of year. The net result is that demand is now growing again, while supply is falling even faster than before. This is good news for sellers, but most home owners are still uninterested in selling, deterred by the large increase in mortgage interest rate that would incur.

With only 12,500 active listings without a contract we are once again approaching a dire shortage of homes for sale. Even a modest increase in demand is likely to force prices higher and quickly recover the ground lost over the past 12 months. The median sales price is down almost 9% compared to a year ago, but has recovered nearly 4% over the last 3 months.

The new home market remains robust with most publicly listed home builders in an optimistic mood, supported by their stock prices hitting new highs in the last few days. The numbers in the ARMLS database suggest their optimism is justified, especially if the perception that the Federal Reserve has finished hiking interest rates becomes a reality.

If you’re considering selling or buying give me a call to discuss your situation and current market conditions.  If you’re on the sidelines waiting to buy because you think there will be more downturn or a crash in the market that may be a mistake, this is the time to buy if you plan on being in the home for more than two years……

I love referrals! Please remember me! Thank you, Shawn, your Realtor.

Market Summary for the Beginning of June

Here are the basics – the ARMLS numbers for June 1, 2023 compared with June 1, 2022 for all areas & types:

• Active Listings : 11,730 versus 9,439 last year – up 24% – but down 6.2% from 12,503 last month
• Pending Listings: 5,696 versus 6,887 last year – down 17% – and down 8.5% from 6,224 last month
• Under Contract Listings : 9,028 versus 10,249 last year – down 12% – and down 9.4% from 9,969 last month
• Monthly Sales: 8,082 versus 8,728 last year – down 7.4% – but up 21% from 6,687 last month
• Monthly Average Sales Price per Sq. Ft.: $283.47 versus $303.39 last year – down 6.6% – but up 1.3% from $279.76 last month
• Monthly Median Sales Price: $434,000 versus $475,000 last year – down 8.6% – but up 2.1% from $425,000 last month

This time last year, the market was in full retreat, but pricing was just a few days away from its peak of $306.46 per sq. ft., reached on June 10. Closings were still plentiful, driven by the demand from institutional investors and iBuyers who were just about to curtail their buying spree.

So much has changed in the last year. The gut-wrenching slowdown that took place in the second half of 2022 is now a distant memory and the market is slowly and cautiously recovering to a semblance of normality. Closings in June were unusually strong – up 21% from May, but these were driven by contracts signed in April when interest rates were more attractive than they are right now. A spike in mortgage rates at the end of May meant we entered June with a weak count of listings under contract, down over 9% from the beginning of May. This means we should expect relatively unimpressive closing counts for June.

It is common knowledge that demand is sensitive to interest rates, but thinking that higher interest rates lead to lower prices is simplistic and wrong. In the current environment, higher interest rates dramatically reduce the desire to pay off low-interest loans and so dispose of property. Those who bought at the peak during the first half of 2022 may be underwater, but unless a dramatic change in their circumstances makes their financial situation desperate, they are unlikely to be motivated to sell and convert that loss on paper to a hard loss of real money.

The weakness of supply is the main factor to consider when studying the current housing market. Despite the low number of homes going under contract, the number of homes for sale (without a contract) dropped another 6% and is now below 12,000. This is an unhealthy supply and it is well-nigh impossible for prices to decline when supply is so weak and trending lower.

If supply were to rise, then a cooling trend could start to build. The monthly releases of building permit data suggests that future supply will be strong for rental multi-family property, but single-family homes to purchase are being planned in ever smaller numbers. The recent decision to restrict future permits because of water concerns means that situation is likely to remain in place for a long time. The market will see less volume than we have become used to, but prices will be reinforced by the chronic supply.

In the very long term (over decades), a shortage of water could cause net migration to drop and even turn negative. This would generate more supply and cause downward pressure to build up on prices. But that event is very unlikely within our existing time horizon. Without such a macro-level change in circumstances, the supply of single-family homes and condos for sale looks set for long-term scarcity.

Unless we get a significant reduction in mortgage rates, the affordability of homes will remain a major problem. This will constrain sales volumes, but it is very unlikely to put downward pressure on pricing. Instead we are much more likely to see a long-term price appreciation trend setting in once more, with the chronic shortage of supply the over-arching unsolved issue.

TITLE FRAUD IS ON THE RISE: Last week, the Maricopa County Recorder’s Office launched a new service, Maricopa Title Alerts.  Here is the link to help protect your home:

Maricopa County Recorder’s Office Title Alerts service sees 15,000 sign-ups | KJZZ

Market Summary for the Beginning of July

Here are the basics – the ARMLS numbers for July 1, 2023 compared with July 1, 2022 for all areas & types:

• Active Listings: 11,545 versus 14,406 last year – down 20% – and down 1.6% from 11,730 last month
• Pending Listings: 4,997 versus 5,766 last year – down 13% – and down 12% from 5,696 last month
• Under Contract Listings (including Pending): 7,858 versus 8,621 last year – down 8.9% – and down 13% from 9,028 last month
• Monthly Sales: 7,377 versus 8,113 last year – down 9.1% – and down 9.0% from 8,110 last month
• Monthly Average Sales Price per Sq. Ft.: $287.76 versus $300.43 last year – down 4.2% – but up 1.5% from $283.71 last month
• Monthly Median Sales Price: $443,000 versus $474,374 last year – down 6.6% – but up 2.1% from $434,000 last month

Comparisons with this time last year are getting easier, as a year ago the market was deteriorating as demand from institutional investors and iBuyers collapsed. A steep rise in interest rates had spooked the market and ordinary buyers were holding their breath too.

A year later we have a market which is seeing very low demand and even lower supply. With the 30 year fixed interest rate stuck around 7%, most homeowners do not want to sell and buyers are struggling to qualify and afford a home. Buyers are unimpressed with the low inventory of re-sale homes and are increasingly turning to new built homes. Developers are enjoying strong orders, firmer prices and healthy margins, but have relatively low inventory of homes for sale and a weak pipeline of new permits to build. The strongest sector in the housing market is single-family new construction.

Some people drastically overstate the importance of interest rates in determining home prices. Interest rates are important but when they move higher they lower supply as well as demand. It is the balance between supply and demand that determines how prices move. At the moment supply is much weaker than demand so prices are increasing, as they have since January.

For homeowners, rising prices are reassuring. There are remarkably few new listings and closings are declining as we enter the summer doldrums. Title companies, lenders, warranty providers, inspectors and appraisers are all suffering from a prolonged weakness in transaction volume. While interest rates remain at 6.75% or higher, we appear unlikely to see much improvement. In fact rising prices will make it even harder for buyers to close on a home. However if interest rates were to fall to 6% or below, we could see a sharp increase in demand and an improvement in supply too.

We will shortly see the average $/SF for closings overtake the figure from a year ago. At the moment the gap is 4.2%, but last year’s prices were falling fast and this year we are seeing a rise of almost 3% in just 2 months. The third quarter is notorious for weakness in average pricing, but even if closed prices stay flat for the next 3 months, annual appreciation will have turned positive by the end of the quarter.

If you’re considering selling or buying give me a call to discuss your situation and current market conditions.

I love referrals! Please remember me! Thank you, Shawn, your Realtor.