Spring Season was a Snoozer. Will Summer be the New Spring?
Greater Phoenix is in a Balanced Market – What Sellers Need to Do
For Buyers:
“So we keep waiting, waiting on the world to change.†~ John Mayer
Mortgage rates have remained stubbornly high in 2024, continuing to suppress demand. As a result, the spring buyingseason was a dud this year for sellers. For active buyers, higher mortgage rates have led to less competition, fewer properties with multiple offers, accommodating sellers, more homes to shop in good condition, and a relaxed buying process.
As supply gradually rises, new listings have lingered on the market 5 days longer than last year and weekly price reductions are up 63%. How long this condition will last is as predictable as mortgage rates, which have been volatile and unpredictable for 2 years. If they do in fact decline this year as expected, then buyer demand will return in kind. After peaking in April at 7.5%, average rates have already declined to 7.1% in response to a stabilizing job market. However, they’re still too high for the housing market to see a measurable shift in buyer demand. Recent history has shown a sustained increase in activity when rates have fallen below 6.5%. Industry leaders and the Federal Reserve have expressed their expectation that rates will decline this year, with both Fannie Mae and the Mortgage Bankers Association predicting 6.4% by the end of 2024. If they are correct this time, then summer could be the new spring for home buying this year.
For Sellers:
The Greater Phoenix market is officially in a balanced state, which means the days of “dump your junk†are over for now. When there was little competition for sellers in 2021 and 2022, it was common for buyers to purchase homes in “as is†condition. These homes needed roof repairs, new A/C units, carpet replacement, paint, updating, and other renovations to bring them up to par, but they sold anyway with little effort due to the extreme market conditions.
By 2023, the seller’s market had weakened. Low supply meant properties in sub-par condition would still sell but with allowances for carpet, paint, negotiated repairs, and lower prices.
Now in 2024, most cities are either in a much weaker seller’s market, balance, or a full-blown buyer’s market. Supply is up 44% over last year and has reached a level similar to pre-pandemic 2017-2019. Supply is still 27% below normal, but it’s balanced out by demand that is also 20% below normal, suppressed by high mortgage rates. Under these conditions the market has seen higher marketing times and an abnormal spike in cancelled listings. In a balanced market, it’s important to prepare homes for sale prior to listing and dismiss the idea that a buyer will accept a carpet allowance and credit for repairs over competing homes that are move-in ready. Buyers don’t want to choose their own carpet and paint. They don’t want to do repairs. It pays to take care of these items in advance prior to the
first showing to reduce the time on market. As supply rises, the effort is not about increasing the sale price, it’s about ensuring it will sell at all.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2024 Cromford Associates LLC and Tamboer Consulting LLC
Misha’s commentary:
With rates still in the 7’s, it’s been a bit sluggish with buyer’s and sellers are stressed!
Buyer’s are relishing in the new inventory and time they have to make decisions. Buyer’s are also second guessing themselves when it comes to this big investment- no one wants to feel like they bought at the wrong time….but believe me, that’s always how it feels to be a buyer no matter what’s happening in the market. If you are a buyer you should definitely take advantage of this small surplus of homes and less competition to negotiate price, repairs, closing cost assistance, etc. Don’t let this moment pass you by for a future rate. It’s also a great time to be a contingent buyer- seller’s are more lenient with contingencies, as long as you are on market and ready to sell.
For sellers, think of your home like any business with lots of competition- what would you do to stand out? First, make sure your store looks amazing, is clean, maintenance items are cared for, you might be having a little sale…the list goes on. Welcome your guests as if they were a high-end client; music on, candles lit, beautiful brochures, water features on, etc. It’s about making that first impression last as well as leaving your client/buyer with useful information. If you’re not willing to be the discount store, then you should be ready to be the luxury experience.