By Mike Bodeen · 24 June 2024
As the Market Changes
Our changing market didn’t start changing this last week. But certain market evidences have continued to manifest which are pointing to an inevitable conclusion – residential real estate prices will, in many cases, drop – but just for the short term! This is not just Phoenix, it’s nationwide.
Here’s why: Continued high unmoving mortgage rates.
No surprise right? So, if rates continue their current level, or increase, affordability movement will have to happen. It’s currently happening: The numbers please!
Active Listings have increased 53% from one year ago
Listings Under Contract have decreased 8% from last month, 7% from one year ago
Active Listings $ per square foot (PSF) have dropped 3% since last month
Monthly Sales $PSF has dropped 3% since last month
The 7% mortgage continues to be the death knell of sales activity. If that continues, then prices will continue to drop, probably at a quicker and greater pace, because there’s a dual pent-up demand happening. Of course, first time home buyers are one. But also, many existing homeowners have been waiting to move on as well. Many prospective sellers want to move for various reasons, but with a really low mortgage rate, they feel stuck, but for many, sooner or later, they will pull the switch.
A Vicious Cycle
Ahh, but then there’s another scenario which could flip our market back to a seller’s market – in a hurry. If and when rates begin to drop and buyers jump into the market, and if they’re in the larger numbers, many experts think will occur, demand will pick up again. When combined with lower prices, as could very well be the case, it could again become a raging seller’s market which will again decrease supply and raise prices – but only for the short term as we fall back into a potentially unhealthy and stagnant market of unaffordability.
Sounds like a vicious cycle.
So Mike, what do you propose?
Buyers should be pro-active to begin to search for “that” home. When you find it, be aggressive in your offer. Sellers are now becoming more open to reasonably lower offers. The longer their home stays on the market unsold. Yes, rates are still higher, but you can counter some of that with a lower price. And refi’s remain a future option should rates drop more – but if that never happens, at least you’re in a home – sweet home!
Finally, current sellers take note. Our market is not what it was two years ago. Back then, we had 43 days of inventory on the market. Today we have 93 – a 116% increase! Your home’s value has done well, so be flexible and reasonable.