We’ve all seen the news headlines, we’ve heard the Goldman Sachs prediction that the AZ real estate market is headed toward a 2008 level “crash”. The stats just don’t show that. ARE THEY LYING?
A little back-story (bear with me for a moment and it will all make sense).
One of my favorite college professors taught my statistics course. He would give the entire class the same set of stats. The assignment was simple: half the class needed to prove “x” while the other half of the class needed to prove the opposite; all while using the same stats. Guess which half got it right….the whole class! This one assignment taught me a valuable life lesson…stats lie! You can manipulate numbers and pull from only certain categories to get whatever answer you want it to be. And that, my friends, is what is making headlines right now! Their goal is to get you to read their story and follow them. It’s marketing. Don’t fall for it.
What I’m actually seeing in the market:
Short Version: We’ve flattened out. We’re fine. Don’t panic.
Long Version: We have hit the normal seasonality of the market. This is something we haven’t seen in the pandemic years when people were buying at odd times and for odd reasons. Now, we’re back to normal. We slowed down over the holidays, like we are supposed to. We picked back up toward the end of January and even more this first part of February. Inventory dropped from December while demand picked back up a bit. Our contract ratio (active listings compared to those under contract) is at 52.3% which is exactly what we expect to see this time of year and was the “norm” prior to the pandemic.
The Cromford Index jumped 15 points this month, bringing it to 118. That puts us in a Balanced Market with a very slight edge toward Sellers. Yes, you read that right…Sellers (not Buyers). This is the norm for AZ, by the way. That Buyer’s Market everyone was screaming about. It was more of a Buyer’s Blip, lasting all of 4 weeks before returning to balanced.
Why the scary headlines and predictions then? They are focusing on Wall Street, not regular homeowners. Wall Street relies on volume to survive. Our total inventory (supply) is overall very low still with only 14,783 active listings. With 50% of those going under contract each month, it’s not a large enough supply to feed the Wall Street machines so they backed out of our market. AZ isn’t a viable market for them to make money anymore.
Why I’m NOT concerned:
Overall our supply is down but demand is matching its pace. That keeps us in balance.
With Wall Street getting out of the market it brings it back to the regular homeowners and the Ma & Pa investors. These are the people we want to be buying, selling, and renting homes. REAL PEOPLE bring stability to a market. Wall Street investors bring volatility.
In fact, the stats they don’t tell you in the headlines are looking rather positive. Those pesky iBuyers that were sucking up properties left and right (as much as 30% of purchases in certain areas at one point) are now down to purchasing only 1.6% of the market. That’s a massive drop! Primary Occupied and Second Property homeowners however, have jumped to making 75% of the purchases (investors take up the remaining portion). This is great news for those looking to purchase a home to live in! Homeowners have regained the market.
Overall, as rates stabilize we have seen buyers pop back into the market as the fear of never-ending rate hikes has dropped off. Rental prices increased just slightly month-over-month and average sale prices pretty much flatlined. Average days on market decreased as more buyers hopped back into the game and price reductions decreased to only 14% of listings. Seller concessions are still hanging around (and they should be in a normal market) with 49% of closings last month having some sort of seller concession (average concession is $10,000). Surprisingly, we still had 14% of closings that were above list price with an average of $5000 above list. This shows that if you list a home with proper pricing, good quality, it shows well, and great marketing (AKA hire me) you’re going to do just fine.
Moral of the Story:
Don’t fall for the flashy headlines. Read the real numbers. Talk to the people who are in this market day in and day out. If you’re considering Buying, this is probably one of the best times to get back into the game before everyone realizes the sky isn’t falling and competition increases. If you’re selling, go back to the basics. My 3P’s of selling: Prepare & Pre-launch, Proper Pricing, & Promotion (that’s an old blog of mine which you can read by clicking here if you want more info).
In the words of Ford Prefect “Don’t Panic” (wink wink to my fellow Hitchhikers Guide fans)
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