By Mike Bodeen · 16 May 2022
Buyers Want More Supply – 3,000 New Listings in One Week!
Buyers have been wanting more supply for years, and now it’s happening! From May 7th to 14th, 3000 new residential listings have been added to the Arizona Regional Multiple Listing Service (MLS). This has not happened since 2010, per the Cromford Report. In addition, with demand dropping below normal, this large increase is growing the MLS’ inventory faster than at anytime since 2005.
I think much of the increase is due to seller’s jumping on the selling bandwagon, hoping they can still sell at a top price.
I recall in late 2007, a neighbor’s home in Scottsdale, with a similar size as ours, though ours was more updated, sold for almost $500,000, which was amazing considering no other home of that size sold for close to that in our neighborhood. 3-4 months after that home sold, and with the market in a price decline, we put our home on the market for $459,000 and 59 days later we closed for $388,000. Needless to say we missed the top of that market. In other words, in that market that market’s downward spiral changed rapidly.
So, our seller’s advantage is beginning to diminish, and buyers are beginning to get supply help. How long can it persist? No one knows.
Interestingly, over the past year, (April 21 to April 22) Maricopa County purchases for owner occupied as a primary residence, decreased 19.4%. Second home buyers’ purchases decreased 8.5%. That leaves the investor buyer. These buyers now represent 21% of all home sales. We expect the owner-occupied sales will decrease further due to still very high prices and high mortgage rates.
We’re also seeing “Days of Inventory” rise. From March 11th at 16 days on the market till May 15th, homes increased to 27 – in just a little over 2 months.
Last week we discussed the possibility that smart investors will likely also pull back until they see prices drop, which will further increase supply, and which will apply downward pressures on pricing.
So, what should a buyer do? A buyer should buy a home. I think it’s deadly to wait and guess the market. Our market is not 2008. Not even close. I think this is a short term window of opportunity. Yes, you might have to bite off a 6% mortgage rate. I’m not the guy to whine to about that, having worked through 17% mortgage rates in the Jimmy Carter era.
If you can afford it, find the house of your dreams and buy it. When rates drop following inflation dropping, then refi your mortgage. If rates don’t back down you then you’ll be glad you moved now.
Market data referenced in this article comes from The Cromford Report.