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December 8, 2018 Greater Phoenix Residential Real Estate Update

(Published on - 12/13/2018 11:53:59 PM)

To read the news you would think that the housing market was having a really hard time. But we need to remember that the housing market has been growing steadily between 2015 and 2018.

 

So a slowdown is inevitable at some point. When we speak specifically about the 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. But it is still the worst slowdown in years, because it is the ONLY slowdown since 2014.  The 2014 slowdown was much more severe, and Sales prices did NOT decline when the market slowed down. 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 market shift.

 

 

To give you some idea of how benign the current slowdown is, we look at the average price per square foot for listings under contract,  a leading indicator of future sales pricing... and we are showing a strong rise in prices for homes in escrow over the past 2 months. What this means is that we can expect prices to continue to rise.

 

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 you know what interest rates are doing).

 

If you have specific questions about the market or about your specific needs, please give me a call 602.980.07637 Denise@DutchGirlHomes.com

Cromford Dec 8 2018 infographic

For Buyers:
Remember when you would not eat your dinner as a kid and your parents would serve it to you for breakfast or lunch until it was gone?  Okay even if you can’t relate, you can imagine a kid’s disappointment in having to see the same thing day after day until they reluctantly eat it. Buyers may be feeling the same way this month as existing inventory has gotten stale and very little new inventory has been added in the first weeks of December. It’s down a whopping 26% from last December with nearly every price range under $1.5M participating in the decline.  This reluctance to list in December has offset the 16% decline in listings under contract and the market has managed to maintain a seller market, albeit a weaker one.  In the meantime, existing sellers are dressing up their leftovers with incentives.  Seller-assisted closing costs have risen on sales between $175K-$300K and price reductions were up 25% in the first week of December compared to last year.

For Sellers:
Seasonally, this is the calm before the storm in terms of buyer activity.  Every year, listings under contract drop sharply in the latter half of December before reaching their lowest point on January 1st.  Conversely, between January and April buyer contract activity will sharply accelerate.  How much it will increase this year remains to be seen depending on interest rates and other lending factors. The past 3 years has seen contracts rise roughly between 70-90%  in the first 4 months.  Despite this expectation, sellers need to be prepared to compete more in 2019 than they had to this year. The first 4 months are also typically strong for new listings to enter the market.  Even though 2019 looks like it will start off with a seller’s advantage, it will be much weaker than last year.  The market appears to be resisting higher prices for homes that don’t live up to buyers’ expectation of value for their money.

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