The numbers for the month of December 2018, and a look at the 2019 Real Estate Market are painting a picture of what homeowners, new and current, can expect. The good news is, it is not a “Sky is falling” scenario, but we need to be realistic about the current state of the market. We have a lot of numbers to look at, so I’ll get straight to the point.
First, let’s take a look at the sales from Dec. 2018. These numbers, courtesy of the Arizona Regional Multiple Listing Service (ARMLS) show a continued slowing in sales month over month as well as year over year. There are a couple of factors that are causing this. One being the rising interest rates throughout 2018 that we have been discussing.
The other factor being (in my opinion) bad advise from listing agents to sellers. They spent 2018 seeing low inventory as well as rising prices and advised their clients to reach for higher and higher sale prices, as they would in a typical “Sellers Market”. However, buyers were simply not paying those prices. As you can see in the graph below, sales continued to slow month over month in the second half of 2018. Something I have pointed out repeatedly.
The “Low Inventory” aspect of the market continues as the amount of homes on the market dropped a touch. The prediction is that will add to the trend of higher asking prices in this faux seller’s market. I can tell you that as a “Man on the street”, I am seeing lots of “Price Reduced” notes recently. This shows that sellers have over priced (in a sense that buyers aren’t paying their asking price), and they are dropping the asking prices down trying to find the “sweet spot”. I call that chasing a falling market. Not a crashing market…simply an adjusting market.
The next two graphs are the most telling to me. The first graph shows the average list, or asking price around $389k. As you can see it is slowly adjusting down. Chasing a falling (adjusting) market.
The second graph show the actual average sale price around $326k.
On average it’s a $63,000 difference between what sellers want, and what buyers are willing to pay. This is not a sellers market…but it’s also not a crashing market. We are searching for the afore mentioned “Sweet Spot”.
I tend to approach things cautiously and my attention is drawn to one number that was released this month that needs attention, and that is the Distressed Property (REO, Foreclosure) number. ARMLS actually adjusted their numbers for the last 5 months as they had received bad data, and that number shows an ever so slight trend upwards.
The reason for this could be that homeowners who bought 5-8 years ago when prices were rock bottom made the typical mistake of cashing in on equity and over extending themselves to the point of not being able to pay the loan(s) on their homes now. That is speculation on my part, but experience tells me that cashing out equity is very appealing to some, and not always a great idea.
Whatever the case may be this number, while nowhere near a worrisome level, has been rising. It is one to watch.
The bottom line:
Sellers: Don’t be fooled. Your home is not worth more than what a buyer is willing to pay for it. An average asking price $63,000 over the average sale price should tell you that most sellers are getting bad advise from their agents. BE WARY OF AGENTS THAT PROMISE A WINDFALL!!!
If given the opportunity to earn your listing I will give you a realistic snapshot of ACTUAL comparable sales in your area, advise on how to sell your home fast and maximize your sales price.
I most certainly will not tell you what I think you want to hear simply to get your signature on the listing contract. Don’t fall in the “chasing falling prices” trap. Let me analyze the numbers with you, and get your home sold!
Buyers: I say it repeatedly. Now is the time to buy! Interest rates are continuing to trend upwards, and predictions are they will do so at a rapid pace in 2019. Historically, they are still fantastic, but you want the very best rate available and that opportunity is now.
Home prices are rising. Slowly, but they are. Waiting a few months will likely cost you a few thousand dollars more. Is that cash out of pocket, or do you give up your pool, 3rd garage, larger yard to offset the higher cost? Buy now, and don’t give up a thing!
I have an awesome team of professionals that I work with in all aspects of real estate. We have already helped many buyers set a path to home ownership whether they were ready to go, or needed guidance on credit etc. to get there. We are here to help you live your dream!
Call me, refer me, and THANK YOU! (602) 818-6065 – Kevin@GiantAgent.com
We have discussed at times in the last few months the fact that asking prices for re-sale homes have been rising at the same rate as new contracts are falling. This now has home sellers adjusting prices down to meet the “comfortable purchase price” that buyers are willing to pay. In a sense, sellers are beginning to chase a falling market.
How far it will fall is hard to determine, and there are many factors that will effect where the “bottom” will be, but personally, I don’t see a massive disruption coming. This feels like an adjustment, not a bubble.
ARMLS released the numbers from October, as well as some expert opinion that I’d like to share with you.
First, the total sales in October on the surface look pretty good. However digging deeper, for those that are inclined to do so like “The Cromford Report’s” Michael Orr, an expert in Real Estate trends, you’ll see that they are actually a tad weaker than they should be.
He explains that the month October had 1 more working day in it in 2018 than in 2017. You may ask, “What difference does one day make?”. According to Mr. Orr, it makes about a 6% difference. In his opinion, October 2018 should have finished with up to 6% more closings due to the extra “Work day” available.
Mr. Orr Stated:
What stands out to me in Mr. Orr’s comment was the last sentence. This is the message that I have been sending for some time now to sellers, “Buyer enthusiasm is fading”. Due to this, “Price cuts are getting more common.”
With my most recent listing I discussed this current market adjustment with the seller, and we priced the home at the current market value based on real trends. 3 weeks later we have a full price offer (which is in line with the comps).
A listing on the same street, with the same floor plan was priced based on the upward swing of selling prices this year and reaching for about $13,000 to 15,000 more than the high comps. It was listed a week prior to ours, and is today still on the market.
The market is falling away from that seller, whereas my client saw the trend for what it was, and got his home sold.
Let’s look at List Pricing vs. Sales Price from October.
As you can see below, the “New List Price” averages went up yet again, but look at the line on the chart. It seems to be leveling off. This seems to be reality setting in and agents (hopefully) are done with the “Reach for the starts” pricing advise.
Compare the “New List Price” line to the “Sale Price” line and notice how the trend up for “New” is not followed by the actual “Sale” trend. Buyers are not chasing the pricing up, it’s that simple.
What is not clear is why they aren’t. It could be rising rates, it could be that the demographics of “Millennials” simply prefer to rent, it could be folks are satisfied with their current situation? Whatever the cause buyers are, to paraphrase Mr. Orr, simply less than enthusiastic right now.
Overall, this quiet trend is not concerning to me. Buyers are out shopping. Fewer of them, but they are there.
What does concern me, just a little bit right now, is a very slight uptick in distressed sales. Foreclosures are up ever so slightly. This is a number I am going to watch in the coming months.
Right now they are still very low, so it’s not an issue, but something to watch in nonetheless…if you like watching number in real estate like I do that is.
So, bottom line, here’s my advise:
Sellers. Make your home “The One”! Put in some work tp freshen your property. Paint, perhaps new fixtures, flooring, make it stand out and give the buyers a feeling of “Move in ready”. In most cases you will fetch a more desirable sales price that will earn your investment back, maybe even a bit more, and your home should sell quicker than most.
Buyers. I have said it all year…NOW IS THE TIME! Even as pricing adjusts down, any rise in interest rates will offset the price drops. Our parents and grandparents had rates of 9, 10, even 18%…5% doesn’t look so bad when you consider what it could be.
I have a great team of professional lenders on my team with programs to fit every buyer. If you’re not ready yet, they will help you set a plan to get there with free advice and guidance. Give me a call if you would like to chat with them.
If you are ready to buy, or sell, or know someone that is, I would be honored to earn the business. Give me a call, let’s get started today! (602) 818-6065 or Kevin@GiantAgent.com