Mid-September 2022 Phoenix Metro Real Estate market update.

September 2022 market update Jay Bru group (Data supplied by the Cromford Report)

For all the slides in the latest market report, click here.

There has been a significant shift in the market in the past six months, but it’s not as bad as everyone thinks. I know that a lot of people are looking online and seeing a crash crash crash, but we are not at the same level, please go through the data below and see the numbers. We have just shifted into a balanced market where it’s hard to believe that the market can climb so fast and turn on the dime. With the rising interest rates, buyer demand is down, and the consumer consensus is negative. But if you go through history, it’s a balanced market, and the market is still making adjustments. If you think about it, the past few years couldn’t last forever, and it’s surprising how long the seller market has lasted. Listings have gone from 4700 to over 19,000 in a few short months and have stabilized in the past four weeks. The listing price has come down dramatically, but the sales price has not moved as much, although prices have declined. Interest rates have risen, but just because the Fed increases their rates doesn’t mean interest rates on a mortgage follow suit. Right now, you have to be very, very close to your lender. Interest rates fluctuate by the week, it seems.

Fall is here with the snowbirds coming back, the Super Bowl is coming, and many people have no choice but to buy but are sidelined by all of this fear. Rental listings have increased as well, but rental rates are staying high. So that leaves people either renting high or paying high-interest rates and not getting the home they want.

This is an unbiased blog; we report numbers that the Cromford Report tells us. It is tough to know where prices are heading, but the market is still trying to find where it belongs. I’m optimistic about the market, but I think prices will stabilize. There are good deals out there, you need to know how to get them, and I can help with aggressive negotiations and finding the property.

32% of New Home Sales Had Concessions to Buyers

Mortgage Rate Hikes Cause Drop in Contracts Again

For Buyers:

The percentage of closings with seller-paid closing costs continues to grow as August and September to date range between 12-13% of total sales in Greater Phoenix, inching closer to the normal range of 25-28%. Areas on the outskirts, such as Casa Grande, Maricopa, Coolidge, and San Tan Valley in Pinal County and Wittmann, Tolleson, and Buckeye in western Maricopa County, all have 20-30% of sales closing with concessions. These areas have more than their fair share of new home subdivisions that contribute to this measure, as 32% of new homes that closed in the MLS in the last six weeks involved concessions, compared to only 11% of resale homes.

As mortgage rates remain volatile and challenging to predict, buyers need to get educated on the lending tools designed to ease the impact of dramatic rate swings. Tools such as the “Lock and Shop” option, offered by some lenders to allow buyers to lock at an acceptable rate for up to 90 days, and seller-paid permanent and temporary rate buy-down incentives designed to dull the sting of payment increases. It would be best to lock in your rate before any more interest rate hikes occur. The fall till Christmas is typically a good time to buy with the inventory at its highest. In the new year, there will be more competition. This is typical in past years, but we are in a new environment, so it’s been tough to figure out what direction the market wants to go.

Buyers who are less affected by mortgage rates, but are looking for the best time to pounce on a home, should know that the 4th quarter of the year tends to be the best time for buyers seasonally. There is often a boost in supply around September and October, with sellers eager to close before the end of the year. Once 2023 gets started, contract activity is expected to rise sharply from January through May. The upcoming Super Bowl, Phoenix Open, and Spring Training events are expected to generate more open house traffic and exposure for active listings. When buying, besides concessions, you can ask for home warranties, choose your close date, do not waive inspections or appraisals, and use comparable properties sold in the last 30-45 days when evaluating properties.

If you have to sell your property to buy another one in case of downsizing or want another house, you have to remember that you will have to get a new interest rate, and you will lose your old interest rate, so that can be challenging for monthly payments. But typically, if you buy and sell simultaneously, the market doesn’t matter because you will get market prices on both purchases, so the market doesn’t affect you as much.

For Sellers:

The last three weeks saw more hikes in mortgage rates, rising from recent low weekly averages of 4.99%, 5.22%, and 5.13% in early August to 5.55%, 5.66%, and 5.89% in late August and early September. A similar spike happened last June when rates spiked from an average of 5.09% to 5.81% within three weeks. The result was a 28% drop in weekly accepted contracts over four weeks and the worst July for closings since 2007. Then rates improved, dropping to an average of 4.99% by August 4th. The buyer response was immediate, with a 25% boost in accepted contracts within four weeks. Unfortunately, the latest spike resulted in another dramatic drop in buyer contract activity, down 14% in 2 weeks.

For now, the housing market is not for the faint of heart, and only serious sellers need to apply. Gone are the days of buyers waiving appraisals and inspections, Wall Street cash buyers offering more than the asking price, and multiple offers. Over the last six months, the housing market has shifted from an intense seller market to a delicate balance, the predictability of which relies on the behavior of interest rates. Until rates rise below 5%, demand in the coming months will likely remain weak, thus putting more pressure on sellers to reduce their prices, offer permanent rate buy-downs, and pay for their buyer’s closing costs. Many sellers are sitting on significant equity in their homes. While the cost to sell has increased significantly, a great majority of those who have owned their property for at least two years can bear that extra cost without distress and still close with a significant profit. Go the extra effort and get good pictures, make your home spotless, do touch-ups, and get your price right, and I’m sorry for all the dog lovers out there. Your pets do not make a house more attractive to sell, so deep clean regularly. Expectations should be lower on price, days on the market, and a lack of showings if your home isn’t priced correctly.

MeasureMarch 2022September To-DateChange Since MarchSeasonally Normal Range (Established 2014-2019)
Average # of Weekly Price Reductions4803,690+669%1,800-2,300
Median Price Reduction$10,000$10,000$5,000-$6,000
Median # of Days Active Prior to Contract731+24 Days21-42 Days
% of Sales with Seller-Paid Closing Costs4%13%+9%25-28%
% of Sales Over Asking Price54%17%-37%12-15%
Sale Price to List Price Ratio101.5%97.6%-3.9%97-98%
We have the demand for homes but increased interest rates have cut off contract ratio.
Stay in contact with your lender!! It’s vital with these fluctuations. 10-year treasury bill rates are tied to rates rather than the fed hikes. Get your rates locked in. 4.99% in June was the low point, and since then has risen, dropping the contract ratio.
The Grey bars mark the previous recession which brings down interest rates. Interest rates do not last forever but are hard to predict in general. You can always refinance later within 1-3 years.
We are in despair. Emotions should not be in the decision process, let’s look at the numbers.
Down $20,000, but there is an uptick in the last data draw, but seller concessions are not taken into consideration with the median price. Seller concessions are funds sellers pay buyers toward closing costs.
Looks similar to 2006, but the bad loans created the affordability then, now it’s different. But ouch hey.
Landlords will scale back in rents with more competition. This is only the MLS data, which mostly accounts for single-family homes.
Rents vs asking are coming down. Landlords not getting their asking price. Supply has increased but not necessarily rent rates. With most people not being able to buy, rentals are still firm in general; it’s just a bad situation for some. It’s most likely advised not to buy a home as a rental right now unless the rent is much higher than the costs. I can figure this out for you. September is our peak season for rentals. Roommate situation on the rise.
We are not in crisis, just a massive shift.
This is only a 7 % drop in the supply index. In the 2002-2009 crash we had 57,000 listings during the crash; we have 19,000 now listings approximately.
Cromford Market Index™ is a value that provides a short-term forecast for the balance of the market. It is derived from the trends in pending, active, and sold listings compared with historical data over the previous four years. Values below 100 indicate a buyer’s market, while values above 100 indicate a seller’s market. A value of 100 indicates a balanced market. The math doesn’t support a crash but a correction.
Paradise Valley is like “What interest rates? The rich don’t care; it’s a seller’s market there. And the top four markets are the highest priced. Each zip code matter as well. I can get you a copy of your zip if you’d like. West valley markets are the biggest buyer markets right now.
New listings per week, in 2008 ish there were 3000-4000 listings per week added. This is a market for only serious sellers in this market.
Builders have scaled back tremendously.
A tired, desperate seller is even more desperate in December. Expect this to still climb in December.
Tons of price reductions happening right now, and sellers are finally getting the message they won’t make 25% per year in price appreciation.
It’s ok to offend the seller now with a list price offer, but sellers are still getting 97% of their list price.
It’s not that dramatic compared to the news. Looks like May was the peak.
Employment is still robust

To get an individual market report for your neighborhood or zip code, email or text me the address at jay@jaybrugroup.com or 480-466-4917

Jay Bru

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