It’s a Buyer’s Market Once Again In These 8 Cities
Median Seller Incentive Hits a New High
For Buyers:
Buyers who felt they lost out on the buyer’s market last year will be getting another chance this year. The Greater Phoenix housing market, on the whole, only has a few days left before it enters a balanced market. However, as 18 cities are still in seller’s markets, there are 11 that are either already in balance or in buyer’s markets. What does a buyer’s market mean for buyers? Most buyers assume it means that sales prices will come down, but by the time sales price measures show a decline the buyer’s market could be 2 months old, or already over like it was last year. The first thing to move isn’t a sales price, but a list price combined with higher seller incentives for buyers. Over the past 2 months, as mortgage rates peaked at 8%, weekly price reductions increased in number by 33%. Meanwhile, the median seller incentive to buyers increased from $8,000 to a new high of $9,900 so far this November, the previous high was recorded last January at $9,700. Increases in the dollar amount and percentage of sales with incentives were most noticeable in the first-time homebuyer price range of $300K-$400K and also in cities with a significant number of competing new home communities. How long this trend will last is unclear as conventional mortgage rates fell sharply this month to 7.3% and FHA/VA fell to 6.7%. The higher mortgage rates are, the higher the cost to the seller to buy them down. Mortgage rates have been near impossible for experts to predict over the past 18 months, however there are strong feelings that the end is near for rate hikes by the Federal Reserve. If mortgage rates decline in response, then the current market decline will be short lived.
In short, it’s a good idea for buyers to stay engaged and vigilant in identifying opportunities in November and December. Once 2024 begins, the peak homebuying season is back in swing with more buyer competition.
For Sellers:
This is not a good time to test a price higher than market value for your home. As the seller’s market weakens on a daily basis, it’s the outskirts of town that are affected first as the interior cities follow quickly. As of November 9th, the following cities are in buyer’s markets: Surprise, Litchfield Park, Goodyear, Buckeye, Maricopa, Casa Grande, Gold Canyon, and Queen Creek. Balanced markets are Cave Creek, Peoria, and Sun City. All others are still seller’s markets, but weakening fast. Seasonally, the best time to list your home is not in the 4th quarter. However, sellers always want to be selling in a seller’s market. While it’s not a bad idea to wait until the 1st quarter typically, under these circumstances the benefit could be offset by a weaker buyer’s market. That means more competition from new listings, more days on market, and more price reductions. The determining factor that could change the course of the current market trend is mortgage rates, which have been unpredictable and volatile this year.
For those who are in need of selling, you may get your asking price, but at a higher expense as long as rates are elevated. As a result, sales price measures will not show a decline, but the sellers’ net proceeds will be squeezed. It may not be the market we love, but it’s the market we’re with.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2023 Cromford Associates LLC and Tamboer Consulting LLC
Misha’s commentary:
The market right now feels a lot like the market at this same time last year. Prices were being reduced more frequently, the buyer pool was shrinking, rates were increasing and everyone was sitting on the sidelines. If I recall correctly, September 2022 was the low point in terms of contract success and price reductions. Since then, we have been slowly improving in both categories, until the last two months, when rates kept creeping up and buyer’s started to bow out, one by one.
Well, if the past is any indication of what we may see in the New Year, get ready to see things level out again and go back into sellers market territory. Buyers markets have been short lived, this one may be just a bit longer than the last, but I would count on it sticking around.
For buyers out there, if my clients are anything like you- we are taking a little pause from the market, unless of course the dream home comes available. With rates hitting 8%, everyone had just about all they could take. Now most buyer’s are benched while they enjoy the holidays and see what 2024 has in store. If you have a lease ending, or need to make a move for location, size, etc- I would do it now, while you have a bit of a rate drop and more seller concessions than ever. If you want to move but don’t NEED to move, then maybe wait it out just a bit longer until rates ease just a bit more- just know that when they do, there will be more demand from buyers that want to jump back in.
For sellers out there, I will just say this, price to sell! If you are in a position where you might be in the red if you sell, explore your options- what I mean by that is discuss what a loss looks like with your accountant, take a look at renting your home both short and long term, make sure you look at every option. With the listing rate success percentage becoming lower, that means you may not sell! Even if you are priced fairly and look great, it’s wild but true. Make sure you have options at the ready and you will feel more at ease with the change to buyers market we are all experiencing.