By Mike Bodeen · 26 November 2018
The market is slowing! But according to Arizona’s most acknowledged local residential real estate expert, Michael Orr, it is a modest slowdown. He also points out that there is an increased likelihood that prices will not drop but continue to increase when we get past this current slowdown.
I’ve reprinted below, with permission, Michael’s November 21st daily observation to which we subscribe.
“If buyers are going on strike, waiting for prices to come down or interest rates to drop (or both), then they are likely to be disappointed.” – Michael Orr
“November 21 – To read the news you would [think] that the housing market was having a really hard time. A phrase like ‘the worst slowdown in years’ (Bloomberg) sounds ominous, but we need to remember that the housing market had been growing at an accelerating pace between 2015 and 2018 and a slowdown is inevitable at some point when prices rise for many years. Talking specifically about Greater Phoenix:
We are having a slowdown
It has been expected for at least a year
It is quite a modest slowdown, the least dramatic in the last 20 years
It is still the worst slowdown in years, because it is the only slowdown since 2013/2014. The 2013/2014 slowdown was much more severe that the current slowdown
Sales prices did not decline during the 2013/2014 slowdown, they merely stabilized for a while before resuming an upward trajectory
So far there is no sign that sales prices will decline due to the current slowdown
There are more cuts in list prices than we have seen for a good while, but these are not likely to lead to cuts in the average sales price per sq. ft. which is based on closed contract prices
There is no sign yet of sales prices even moderating, although that would be likely if the drop in demand continues for a long period
It would take a large increase in supply to start putting downward pressure on pricing, and the supply of new listings is currently getting weaker, not stronger.
To give you some idea of how benign the current slowdown is let us have a look at the average price per sq. ft. for listings under contract: This is for all types of dwellings within Greater Phoenix. The chart is a leading indicator of future sales pricing and shows a strong rise in prices for homes in escrow over the past 2 months.”
According to Orr, “If buyers are going on strike, waiting for prices to come down or interest rates to drop (or both), then they are likely to be disappointed. It is more likely that prices will rise (and who knows what interest rates will do?).”
– Mike