By Jonathan Bodeen · 23 July 2018
Buyers in our fair Metropolis (or not so fair – 117 tomorrow, Yikes!) Are having as rough a time as ever snagging affordable homes. We’ve talked a lot about rising prices but that’s not the only issue these prospective home owners face. Rising Interest rates are no longer a talking point, they are a reality. Inventory is shrinking, and so the amount of homes available to choose from is dismal to say the least.
It’s so dismal in fact that based on the numbers it would appear that buyer demand is actually waning. Traditionally we’ve measured demand in the Phoenix Metro by the amount of new contracts per month. It’s not a perfect scale, because it doesn’t tell us exactly how many people out there are looking for homes, only how many have just decided to pull the trigger on one.
Even though the numbers suggest weakening of buyer demand, my sense is this is a reflection of buyer discouragement from what is available in their price range, not a lack of actual buyers. My guess is that the amount of buyers searching online hasn’t waned at all, they just aren’t seeing the homes they want for the prices they want. The neighborhoods they could have afforded 2 or 3 years ago are now out of their price range and they are faced with either buying something that doesn’t serve their needs as well, or buying in a location or neighborhood that is less than ideal for them.
Even with this decrease in overall sales, sellers still have the heavy advantage, because while sales have decreased, the supply of homes have decreased more so. For whatever reason, sellers have decided to sit on their investments in greater numbers than normal, even though it really is a great time to sell. Perhaps they like seeing their equity increase, or perhaps they don’t see good enough deals to encourage them to move on to their next home, just like their would-be buyers.
Whatever the case, buyers will need a reprieve soon, because they won’t find it in the rental market where in many areas rents are increasing even faster than purchase prices.
My advice to first time home buyers? Don’t look for your dream home right now, look for a house that will work and build equity so that when you are ready to buy that dream-house, you will have equity that will convert to the capital you will need. You may have to make a compromise somewhere, whether it’s location, condition, or size, but staying out of the market entirely could be even more detrimental to your future goals.