As I have been telling you for months now, real estate in the Phoenix area has been a bit non-traditional for the last year or two. Market adjustments are happening, and the numbers are reflecting that, but it’s not an adjustment based on inventory as in normal circumstances, this seems to be an adjustment in mindset.
Let’s take a look at the latest numbers from the Arizona Multiple Listing Service (ARMLS) from February.
First, the sales in the month of February 2019 looked really good. In keeping with “seasonal trends” the are up from the last quarter of 2018 and we would expect that to have continued through March. Spring is typically very good for sales overall.
Also keeping with the seasonal trends are the amount of new listings coming on the market. This typically reflects most sellers getting their homes on the market after the holidays and before the spring buying season.
While the inventory of available homes grew in January, it is important to note that total inventory is still lower than normal. The best explanation for this is that many homeowners purchased when the market was at its lowest or still recovering after the downfall. Simply put, they got a great deal then, likely an historically low interest rate, and now have lots of equity that they don’t care to lose by selling and purchasing a new home that would cost more. They truly have a nest-egg and are “sittin’ pretty”.
Now, we get into where the market adjustments or mindset adjustment is reflected in the market, and it is positive overall. The adjustment? Asking prices of homes for sale.
As I have been shouting from the hilltop for months, sellers have been reaching for the stars with their asking prices. In my opinion, this came from bad advice from their real estate professionals.
Typically low inventory lends itself to higher prices, it is simple supply and demand, right? Well, if your agent was really watching the numbers they would have identified that the “demand” was simply not there. Buyers are buying, but they were not comfortable with the increases in pricing. It felt like a bubble to them, and they weren’t scrambling to buy. As pricing went up, the sales slowed. If your home was priced fairly, it would sell quickly, if not, it would sit on the market until the price was reduced.
See the chart below and you will notice that “New List Prices” have been creeping down. This is good for our market. The pricing is coming back to where the buyers are more comfortable. These are closer to “fair” prices…buyers are willing to take a fair deal, and sellers are not sitting in wait as much as they have been.
Make note of the “Sales Price” graph below. It is a flat line for the past 5-6 months. That is where the buyer is, and they are not budging.
So, where are we headed for the remaineder of the spring selling season?
According to the ARMLS projection, we are staying put where we are. Buyers are comfortable with the current sale prices, so sellers should take note and meet them there. We should see more pricing adjustments down, or better yet, new listings at the fair market value and not reaching for the false premise of “Low supply means high demand, so reach for more and more”. In most cases, supply and demand does effect pricing, pushing it up. As for the Phoenix real estate market…I’ve been saying this for months (scroll down to previous blogs to see) low supply doesn’t equal sale prices higher than actual value.
Sellers: You are getting great offers on homes that are priced fairly. Pricing has risen considerably in the last few years, but that was a return to normal, NOT supply and demand. Your agent should be knowledgeable and show you what homes in your area are actually selling for. They should NOT promise the highest price in the neighborhood by thousands more than your comparable sales…if they do, they are likely trying to get you to sign the listing contract knowing that they will simply drop the price later. Please feel free to reach out to me for a free, no obligation market analysis so you know what your home is worth.
Buyers: Stay the course. You are in control of this market. You will probably not get the amazing deal where you buy a home for tens of thousands less than value as in years past, but you will get a fair deal and know that you paid the correct price for your new home.
Are you ready to buy or sell your home? I have an awesome team of professionals in our corner to ensure a smooth transaction.
If you’re not ready yet, we can help you set a plan to get there with free advice and guidance.
I would be honored to earn your trust, your business, and your referrals. Give me a call, let’s get started today! (602) 818-6065 or Kevin@GiantAgent.com
Posted on April 4, 2019 at 6:11 pm Kevin Jacobs | |