By Mike Bodeen · 12 May 2025
There is a pent-up demand for housing in Phoenix Metro and much of the nation. Values are now falling (see chart) and could very well continue. Mostly, buyers have been watching mortgage rates, hoping they’ll drop to levels to bring about affordability for them to jump into the market. Dropping home values could be an added bonus, or so it would seem, but in reality, it could backfire.
For the regular readers of The Snapshot, you’ll recall that we’ve been encouraging (exhorting) would be buyers to buy a house sooner rather than later, if posssible if they were able. But if prices are now dropping shouldn’t buyers wait? It’s a fair question for sure.
But here’s the possible downside to this scenario – in Phoenix at least. The pent-up demand to buy, when unleashed as rates and prices drop, will be the catalyst for many buyers entering the market. The deeper the drops, the greater the number of buyers come onto the scene. Now, the potential for the market to switch gears goes into high gear, from a buyer’s market to a seller’s market – seemingly overnight.
“What happens when that happens? Greater competition inevitably sends listing and sales prices higher – and unaffordability for many returns.”
What happens when that happens? Greater competition inevitably sends listing and sales prices higher – and voila, unaffordability for many returns.
But that’s not all.
There’s another Catch 22 for buyers which we discussed in a number of writings well over a year ago about the commission change in the market. We’ve not seen the ramifications of this yet because of our buyer’s market, but that will change in a seller’s market. In a seller’s market most buyers will have to pay their real estate agent a fee out of their own pocket, rather than having the seller pay it out of the closing. Right now, sellers have been providing buyers with compensation in the deal so that the buyer can get paid by his agent, but in a seller’s market, many, perhaps most sellers will no longer provide that concession. It’s a double whammy.
But what about waiting for lower pricing? For sure, this risky strategy will work for some. But their timing will need to be perfect. What buyers are unaware of now is that they have a stronger advantage in negotiating than they’ve had in many years. A good agent will help them find that lower pricing.
We’ll look into this important advantage in an upcoming Snapshot.