For the last few years we have worked with desperate buyers who struggled to get a home and had to compete with multiple offers on homes in hopes of winning a bid. It was a very frustrating time. Buyer's always wonder when they will get a break and that time is now. For those of you who like to "predict" the market and then make a move, well if you are a buyer NOW is your time. Prices are flattening which gives YOU more negotiating power and leverage. So buyer's don't sit this out and wait to jump when the market reverts back to a seller's market AND it will...take advantage of YOUR market now.
16 of the 17 cities have deteriorated for sellers over the past month and only 1 (Glendale) has improved. Paradise Valley and Buckeye have fallen the most, representing both the top and bottom end of the price spectrum. The Southeast Valley mid-range strongholds of Chandler, Gilbert and Mesa are all down 7 to 9% while the Northeast Valley's Scottsdale and Fountain Hills are down 8%. The big West valley cities including Peoria and Surprise are holding up reasonably well in comparison. Phoenix continues to drift lower as it has for many months now.
The rest of the USA has been reporting weaker demand for several months now. It seems that Greater Phoenix is joining the rest of the country. However we must emphasize that the current figures represent "a return to normality" rather than a dire situation. Loan delinquency is very low and most home owners have substantial equity, so there are almost none of the dangerous conditions that prevailed in 2006 and 2007.
The market is cooling fast with weakened demand being the primary culprit. Supply remains low and still inadequate to meet demand, so sales prices continue to rise. However the fall in seller negotiation power is leading to a flattening trend in asking prices across many price ranges.
What we are witnessing in the Greater Phoenix housing market right now is nothing like a crash or a bubble deflating. However there are many clear signs that the market is softening after 3 years of growing strength. So far we have not seen enough to make any dent in the upward progress of average sales price per sq. ft. In fact this measure looks very strong in October as the market from $500K up to $3M is holding on to more momentum than the mid-range from $250K up to $500K. We should not expect to see negative changes in sales price $/SF any time soon because it is very much a trailing indicator. There are many other places to look for a change in the market and we will cover one of them today - the listing success rate.
Since exceeding 85% in mid-April the listing success rate has been gently moving lower and on October 22 we measure it below 78%.
This is still well above the long-term average but is the lowest we have seen for a long time. This means 22 out of 100 listings are failing to find a buyer instead of 15 out of 100 six months ago. Inverting the measure, the listing failure rate has increased by about 50% from below 15% to more than 22%. It sounds worse when we put it that way, but whatever way you look at it, sellers are not feeling as secure and confident as they did just a few months ago.
(Data courtesy of the Cromford Report)