After months of a frenzied buying craze, the Phoenix real estate market appears to have shifted toward a buyers market. Notice I said TOWARD a buyers market. That doesnt mean we are IN a buyers market (yet). On a scale of 1 to 10, with a 5 being a neutral market, a 1 being a ridiculously strong buyers market and a 10 being an insane sellers market, Id say the current market should be labeled as a 7 (and dropping). Just a couple of months ago, it was an 11. So the shift has been significant, but we are still in a sellers market. Some people would argue my assessment and claim we have shifted to a buyers market. Everyone is entitled to their own opinion. What evidence do I have of a change in market conditions? Lots of anecdotal evidence, not too many hard numbers 1) Inventory is up, significantly. Im still waiting on September numbers, but the inventory of existing homes that are listed has probably tripled in the last couple of months. WHOA! You say. Tripled' Thats HUGE. Yes, it is. But remember the inventory was incredibly low at one point. Despite tripling, there still arent enough homes listed to push us in to a buyers market. Yet. 2) The number of homes in the MLS that have had price reductions has increased quite a bit. 3 or 4 months ago, you NEVER saw price reductions. Heck, sometimes you saw price INCREASES. Now its not difficult to find a listing that has a price reduction. Please note, price reductions is not meant to imply that the values in Phoenix homes is dropping. On the contrary, our average appreciation rate year-to-date is a stunning 40 - 50%, depending on whose numbers you use. Compare this to a national appreciation rate of 10 - 15% (which is still really good!). Now, in my opinion, there is **NO WAY** we can sustain 45% appreciation rates. No way. I think appreciation will slow, a lot, and return to more normal rates. Listing prices are being reduced in the MLS because people are still used to the previous months buying frenzy and are, to be blunt, getting greedy when they set prices. People are still setting prices with 45% annual appreciation rates in mind. Then when homes dont sell, they drop list prices in order to generqate more interest and the dropped price reflects current reality better. Again, home prices arent dropping in the Phoenix area. They just arent accelerating and the torrid pace of the past several months. Thats actually a good thing as it stabalizes the market. 3) Open houses. Just a couple of months ago the only time you saw an Open House sign was with a FSBO (For Sale By Owner). Now Open House signs are *everywhere*. The reason for this is simplehouses are staying on the market longer than they used to. Which leads to. 4) Time on Market is increasing. Back in April, the average time on the market was just a few days. Homes often sold just hours after they were listed. They often got multiple offers OVER list price. This was a buying FRENZY. It was nuts. That frenzy has ended. Its not unusual for homes to be listed for a few weeks now. (Agents from other parts of the country that just read that are shaking their heads. There are places in the US where average time on market can be measured in months.) These are significant changes. If they continue, we may indeed find ourselves crossing over from a sellers market to a buyers market. We are not quite to that point yet. My guess, and its purely a guess, is that the factors I listed above will continue to shift and we will over the next few months find ourselves in a neutral market, where we may stay for awhile. Economists will tell you that all markets want to be neutral, and there is nothing wrong with a neutral market. Should something change, and it can be just about anything, then we could swing back toward a stronger sellers market, or swing into a strong buyers market. No one really knows for sure. If you could predict what the any market will do in the future (be that the stock market, commodities market, futures market or real estate market), you wouldnt be reading this article. Youd be sipping mai-tais on the beach in Tahiti. Stay tuned, its going to be fun!!!! |
