By Mike Bodeen · 26 August 2024
Are We at Market Bottom?
For month’s we’ve been reporting on the Phoenix Metro residential real estate market’s downward market direction (sales and prices) and that this was a “window of time” for buyers to strongly consider making their move, because this window of opportunity, though open now, will close again. It always does. The question is always when?
Less than current price reporting, such as the Case-Shiller Price Index (a lagging indicator) showed that just 3 months ago, Phoenix was still rising in value, albeit much less than Phoenix has experienced in years prior. But in the current market, values are dropping. (see chart) This widely watched index will soon be reporting lower prices based on current activity where prices have been dropping.
Therefore, the current temperature is perfect for buyers.
This week’s chart shows Price Per Square Foot (PSF) in three categories over the past 60 days. The green line is the average list price of homes under contract. We’ll call that the “Wishful Thinking” line. The wishful thinking line is at $322 PSF.
The brown line represents the closed list price PSF average of the home at the time of closing. This is currently at $284 PSF – an incredible $38 PSF difference – a 12% difference. The brown line nears reality.
Finally, the red line is the actual sale price average PSF, which is $278 PSF. This is reality of which the media will be reporting, but indications are that market forces are now changing to benefit sellers.
In anticipation of the Fed’s readiness to lower rates, mortgage rates have already begun falling, now at 6.5%. This past Thursday, as the Fed was slumming it in Jackson Hole, WY, they announced in no uncertain terms that they will be lowering rates in September. This will further lower mortgage rates, more motivation for buyers.
So, lower prices and lower mortgage rates will feed buyers desire to enter the market in larger numbers than we’ve seen in years.
What happens when lots of buyers vie for homes? Competition increases which will reverse the market, raising values again. I would also not be surprised to see corporate institutional investors get back in the game as well further drying up available homes for sale.
Michael Orr of the Cromford Report, recently stated: “The (Phoenix) Market is starting to improve for sellers and I hope buyers took advantage of their opportunity to negotiate harder over the past 3 months.”
Simply stated, there are indications that our short-lived market drop has bottomed out.
Ahhh, further motivation to buy – at the bottom!
Market data referenced in this article comes from The Cromford Report.