Seller–Paid Closing Cost Assistance Coming Back
This Price Point is Declining the Fastest in Greater Phoenix For Buyers:
Good news for buyers, the number of closings with seller-paid closing costs rose 27% in July compared to June equating to 7% of all closings for the month. That may not sound like much, but that’s the highest it’s been since March 2021. Prior to 2020, the established baseline for seller-paid closing cost assistance averaged 25-28% of MLS sales and over the past 15 months the average has been just 3-4.5%. The increase is expected to continue as large cash-based investors have pulled back their acquisitions, leaving many sellers to cater to normal buyers once again.
For most of 2021 and the first part of 2022, buyers had very little time to decide on a property before it went under contract. Last May, half of all homes that went under contract were on the market for only 7 days or less. This month homes are on the market a median of 21 days prior to an accepted contract, giving buyers more breathing room for a second showing and less pressure to make a decision on the spot.
More evidence of a growing buyer’s advantage, the percentage of properties closing over list price has declined from 58% in April to 24% August-to-date and continues to decline. The median amount over list has also declined from $20,000 to $7,000. As the current balanced market continues, expect to see this measure drop to just 10%-15% closing over list.
The last week in July saw 4,172 price reductions on Greater Phoenix listings, equating to 26% of active supply for that week. The median price reduction was $15,000 and 78% were over $5,000.
The peak of price for 2022 so far was May, since then the median sales price has declined 6.25% from $480K to $450K. That’s an average of 2% per month* thus far, however the downward trend has not been consistent across all price ranges; a detail not reflected in the median sale price measure. To analyze the price response by sales price range, we use the sales price per square foot. In May, the peak sales price per square foot overall was $305.99, August-to-date is $289.89, a 5.3% drop averaging 1.8% per month*. This is a similar result to the change in median sale price, but by price range the distribution looks like this:
|Price Range||May 2022 Measure||August-to-Date Measure||% Total Change since May||Average % Change per Month since May*|
|Up to $300K||$213.89||$212.50||-0.6%||-0.2%|
The table shows that properties between $1M-$1.5M have seen the strongest decline than any other price point since May, with an average decline of 3.2% per month. This is the only price range above the overall average decline of 1.8%. The runner up is the $500K-$800K with an average decline of 1.2% per month. All other price points are within 0.6% of May’s average 3 months ago as of August 9th.
*Not a calendar month
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report ©2022 Cromford Associates LLC and Tamboer Consulting LLC
Things are shifting towards a normal market right now, which I think is a relief for a lot of people. For buyers, this means you have time to think! What a concept, right? You can see a home with a private showing and potentially a second showing if needed. This may not sound like a big deal, but believe me, for buyers that battled crowded open houses, booked-up, back-to-back showings- this is HUGE. Not only can you think, but you can ask for concessions (credits from the seller to help pay closing costs, etc). This brings a bit of the fun back to house hunting. Interest rates went down a bit this month as well- so it’s been a great month to be a buyer and we believe this trend will continue, so keep looking for your home sweet home.
For sellers, the balanced market means a return to normalcy for you as well. The positive in this is that if you are looking to sell and then buy, you know how difficult it has been to coordinate the timing and wonder if you will find the right home when you’re in the buyer’s seat. With a balance brought back to the process, you have time to list, shop, and can even write contingent offers again! You may be worried about pricing and all the price reductions you are seeing- but this again, is a normal market. The last two years of multiple offers on day one was not normal- it takes time to sell (sometimes). What I tell my sellers is that special homes will always sell quickly. If you have a home that is exceptional, the market still has a healthy appetite.
I am particularly pleased to see a return to normalcy. My team and I enjoy spending time with our clients, getting to know each other, hunting for properties, and taking our time to get listings perfect before hitting the market.