𝗦𝗸𝗲𝗽𝘁𝗶𝗰𝗶𝘀𝗺 𝗟𝗶𝗻𝗴𝗲𝗿𝘀 𝗗𝗲𝘀𝗽𝗶𝘁𝗲 𝗮 𝗦𝘁𝗿𝗲𝗻𝗴𝘁𝗵𝗲𝗻𝗶𝗻𝗴 𝗛𝗼𝘂𝘀𝗶𝗻𝗴 𝗠𝗮𝗿𝗸𝗲𝘁
“I'm skeptical that the world is round
What keeps it up and what keeps me down?”
~Kim Carnes, from the song “Skeptical Shuffle”~
The average person could be forgiven for being skeptical of this real estate market. After all, it was just over a year ago that sellers were dancing on the tables in euphoria as they achieved record pricing for their homes. By May the music had stopped and June ended the party for the rest of the year. 2022 closed in the doldrums.
But this is 2023. Valley homebuyers might be in for a surprise as they enter the market. Two more cities, Surprise and Goodyear, have entered seller's markets this month, bringing the total to 14 out of the 17 biggest cities now in favor of sellers. Only 3 cities remain in a buyer’s market: Queen Creek, Maricopa, and Buckeye. Queen creek will soon be a balanced market, and conditions in Maricopa and Buckeye continue to improve and they may well join in.
This shift in the market is not unexpected, as leading indicators have been pointing in this direction since January. Despite bank failures, fed funds rate hikes, and the most volatile mortgage rates we have seen in a long time – sale prices have rising for 4 straight months. The average sales price per square foot has recovered by 5.7% since December according to the Cromford Report. All while demand hovers around 18% below normal.
How can this be? It is the same answer we have been giving for months: supply. Supply is a shocking 40% below normal and shows no signs of increasing. New listings being added to MLS are not even close to replacing the homes going under contract. Since April 1st the deficit has been running on average 54 listings a day (meaning 54 more a day are removed vs. new additions) Gulp.
Where can the new supply of homes come from? Builders, the main source of new supply, are not the answer as single family permits have dropped by 74% between March and December of 2022. Foreclosures are at record lows. There is some faint hope that short term rental properties may come to market as restrictive regulations begin to be implemented. Or increasing pricing may induce sellers to sell to “not miss out this round of price increases”. It is very uncertain that any significant supply is the offing. Until it shows up, prices will continue to push up. Buyers who are on the fence should act quickly. As agents like to say “date the rate, marry the house”.
Russell & Wendy Shaw