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October 5th Market update

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Arizona Market Summary for the Beginning of October from the Cromford Report

“Homebuyers are in a wait-and-see mode with the elevated interest rates.” 

Here are the basics – the ARMLS numbers for October 1, 2022, compared with October 1, 2021, for all areas & types:

  • Active Listings (excluding UCB & CCBS): 20,084 versus 7,649 last year – up 163% – and up 7.4% from 18,694 last month
  • Pending Listings: 4,862 versus 7,605 last year – down 36.1% – and down 13.3% from 5,607 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 7,358 versus 11,578 last year – down 36.4% – and down 12.6% from 8,419 last month
  • Monthly Sales: 6,361 versus 9,377 last year – down 32.2% – but up 0.7% from 6,315 last month
  • Monthly Average Sales Price per Sq. Ft.: $277.40 versus $251.87 last year – up 10.1% – but down 3.3% from $286.79 last month
  • Monthly Median Sales Price: $439,000 versus $410,000 last year – up 7.1% – but down 1.3% from $444,900 last month
  • Now until December may be a good time to buy seasonally through history.
  • As a seller, Spring might be your best bet to sell, but what if median sales prices fall from now until then?  
  • If interest rates fall below 5%, there would be an expected sales surge.
  • Affordability is terrible right now.  There are no good options out there for people that don’t own a home and rent.  Rent is still high price per sqft, although rent rates dropping slightly.  The principal and interest payments are sometimes the same as rent for the same property.  I can find that out for you if you’d like.
  • Dips in interest rates do happen, and you should stay in close contact with your lender.  For instance, around Aug 1, 2022, rates dipped to 5%. Watch out for these dips.
  •  May 2022 was the peak for the Sales prices.
  • It’s tough to time the market.  If you need to sell, you have to try, and a buyer can always renegotiate interest rates in the future. 

After several weeks of reasonably neutral moves, the market is starting to turn unpleasant again. This is particularly true of the last week of September, and October is off to an abysmal start.

Demand has been weak for many months, but a slight improvement occurred in August and the first few weeks of September. Thirty-year fixed mortgage rates were still around 6% a month ago but are now flirting with 7%, and, as expected, this appears to have turned off enough tranche of would-be buyers. Higher rates discourage sellers and make them appreciate the loans they already have. More of them are deciding to expand or improve their current home rather than take on a new loan at a much higher rate.

Listings closed in September were a shade higher than in August, but these were mostly deals with interest rates locked at the lower levels. With these transactions completed, the listings under contract count are now unusually low at 7,358, down almost 13% from a month earlier and more than 36% lower than last year.

Transaction volumes have plummeted since last year, with sales down more than 32% compared to September 2021. The current trend in contract signings means this volume is not likely to recover quickly. Instead, we are more likely to see volumes head lower still in the short term.

The new supply is still well below average for the time of year but is starting to edge up slightly. With contract signings getting scarcer, the inventory is beginning to build again. Although it only rose 7.4% during September, we anticipate it may rise by a higher percentage during October.

Seller confidence has been crushed over the past five months, and the recent trends will do nothing to help. This means buyers will get more confident in their bargaining position, and this is negative for pricing. The monthly average $/SF for closed listings is down 9.3% from the peak of $306.1 measured on June 9. The monthly median sales price is down 7.6% from the peak of $475,000 last seen on June 29.

If mortgage rates had remained between 5% and 6%, we might have seen a slow recovery taking place by now, but the Federal Reserve kicked the market while it was down and looks ready to kick it again. We need listings under contract to move above 8,500 to be experiencing signs of a recovery, and the current 7,500 level is not even enough to absorb the relatively slow arrival rate of new supply. I recommend that you watch this key number closely over the next few months. Here are some charts explaining what’s going on in the Phoenix metro Real estate market update. 

Here is the link to learn more about how inflation is calculated. 

https://www.forbes.com/advisor/investing/pce-inflation/

 

If the Cpi doesn’t change, 2% inflation would be reached in april 2023. 

Aug 1st there was a dip to 5%, we could get another but stay close to your lender or bank. 

As you see rent rates have not come down so much but are expected to drop.  I think we hit the peak.  Many landlords have finally caught up to what market rates are. 

Landlords are negotiating prices with taking an average of $145/month off of initial price on the mls which is just a piece of the pie.  Mls has more higher end rentals and zillow would have a bigger picture, but this pretty much sums it up.

 

4th Quarter is best for buyers with better negotiations typically in a year.   Once the new year hits, more demand typically comes seasonally.  Not the best time to sell; I recommend waiting till spring to sell your home if possible if you think prices will be stable.  

Still considered balanced Year over Year.  Supply and demand have met in the middle. Every city has a different market index, in Scottsdale, you can expect prices to rise in a year’s time but in Buckeye, you can expect them to decrease.  Of course, in todays world, things happen fast and its hard to predict.

Different cities have different CMI. Buckeye is the top loser in this area.  Higher-priced zip codes are the winners. If you would like to see your city stats, please email me at jay@jaybrugroup.com

New listings have exploded, and contracts have been way down since March 2022.  May and June were the price peaks. Contracts are at 6837, and we need this number over 8000. 

December this is the best time to buy seasonally, if you’re a seller, investors will be lowballing you 🙁  Buyers, this might be your best chance at getting a good price.  Although interest rates are high, you can refinance later.  Its a tough call.

May was highest and down an average of 2%/month. 

Interest rates rule the roost, and prices will expect to fall until interest rates fall.  There is pent-up demand, with many people wanting homes but are priced out of the market.  If interest rates come down to a reasonable interest rate of 5%, contracts will be up, supply may come down, and prices may go back up.  Monthly payments are the key for buyers and what they can afford.  It’s a tough spot for someone that needs a home; rents are still considerably high even though they seem to have peaked and will most likely be coming down  Interest rates are high so that your monthly payment is similar to what you would pay in rent in some instances, and if you buy now, prices may fall even further.  You can always refinance in the future, and homeowners statistically always win.  When you own a home, you get tax advantages, pay down principle, make controlled monthly payments, and be safe from a landlord selling or evicting.  Sellers, on the other hand, it’s still a win as the equity you’ve gained has been an excellent investment still.  If you’re looking to sell, just expect longer sales time, buyers will be negotiating hard, and when pricing, try to compare your home to accurate comps in the last 30-45 days, not in the past six months.  If you get no showings, it’s the most likely price if marketed right.  But be patient as well; there are still buyers out there who need homes.  

If you have questions about buying or selling, please text, email, or call me at 480-466-4917 or jay@jaybrugroup.com.

Jay Bru

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