The holidays are a polarizing time for people. Some come alive with joy and others absolutely loathe this time of year. This holiday season, the dynamics between buyers and sellers are equally contrasting when it comes navigating the Greater Phoenix housing market.
If you’ve got more than two brain cells to rub together and follow real estate at all, you’re already aware of the 180-degree shift our market experienced earlier this year as a result of the Federal level fiddling with the interest rates. In an effort to control inflation, rates shot way up and buyer’s affordability and appetites took a free fall.
The three words that best described this happening were as follows, and I quote: Stink, stank, stunk! Because of this, inventory has risen, prices stopped climbing month over month and the November 2022 median sales price was lower than November 2021 price. This is a significant first as it relates to the year-over-year data that we’ve seen all year.
It’s no wonder many sellers are feeling more like the Grinch this holiday season. But should sellers’ hearts be two sizes too small this December?
Well, I’m not one to tell people how they should feel. Wait… yes, I am! So for those Grinches out there, here’s another way to consider this information:
According to data compiled by The Cromford Report on our local MLS, since 2013 the average sales price was increasing at a rate of about 6.6 percent annually that is until 2020. From 2020 until now, that average rate jumped to almost 18 percent. So although the median sales price has dipped compared to last year, sellers are likely are still ahead if you’ve owned even for just a couple of years.
Demand is very low right now, but there are still people buying homes and those who shop during the holidays in general are motivated. They wouldn’t be out looking and writing offers in December if they weren’t.
If you’re selling right now — whether you’re just considering putting your home on the market or it’s already there — you must respond to the market’s feedback on your home. There are two pieces of real feedback that matter the most — number of showings and how much the offers are. The market will respond to your property and if you don’t adjust accordingly, your home will become the forgotten old doll at the bottom of the toy box losing value every day it sits on market.
Good agents know to take into consideration the number of days on market when advising on an offer. Rarely will a full-price offer come your way if the home has been on the market for any real amount of time. Bottom line: homes are absolutely selling right now, but they must be well-presented and priced to the current market, not the one six months ago. Tis the season to not be greedy Grinches.
Although the tables have definitely turned for sellers during the last half of this year, buyers have their own challenges. A buyer simply cannot or will not buy a property if they cannot afford it and since interest rates can swing a month payment up into the stratosphere, many have been struggling to wrap their heads around the payment amounts required to buy a very basic home in a modest corner of Whoville (had to stay on theme there, forgive me).
The fact is interest rates can be changed but the price paid for a home cannot. Many of my buyers are negotiating hard for lower sales prices and or massive amounts of seller concessions that they can use to buy a lower rate (either permanently or as a temporary step down) which buys time for a refinance or to make significant property repairs that would have otherwise cost them out of pocket.
The hot rush of a few months back has cooled so buyers in the current market are also not contending with droves of competition. This allows them buyers to really look at the numbers, gather their family members’ opinions and make measured offers without the passion of competition driving them.
And as for December, many people view a New Year as a time of a fresh start… sellers included. You can often use a seller’s desire to close a chapter as additional leverage if you can pay them by December 31. If this isn’t a reason for the Whos in Whoville to rejoice, I don’t know what is.
While buyers are biding their time, you should be aware that supply is actually still on the low side in the Phoenix market and, according to loan application data, there are plenty of qualified buyers that are holding off until interest rates settle… and once they do, those buyers will be ready to jump back into the game — thus restoring demand.
It won’t be long for the pace to pick up and the potential for that competition to likely return. In fact, there are already indications that inflation is beginning to subside and this last week interest rates came down a touch.
My best advice to my little Whos who want to own in Whoville: make your offers now. Negotiate with these Grinches while you can. Create a deal that bridges a lower price and more affordability using the leverage of the holiday season. After all, as The Grinch himself said, “Be it ever so heinous, there’s no place like home.”
