REAL ESTATE

from The Chandler Arizonan, June 26, 2022

by Times Media Group

OPINION

From Uptown to Downtown, we cover Chandler like the sun

Listings suddenly flooding Valley home market

BY PAUL MARYNIAK

Arizonan Executive Editor

Whether you’re selling your home or looking to buy, better wear seatbelts.

And that may especially be true right now for sellers, who are flooding the Phoenix Metro housing market with a record number of listings, according to the Cromford Report.

The Cromford Report, the Valley’s leading analyst of the market in Pinal and Maricopa counties said a whopping 1,845 homes were added to the Arizona Regional Multiple Listing – 34% more than average. “If we were just suffering deflating demand,” it said, “the market would be cooling off pretty gently. But if 34% more new listings are arriving every four weeks, supply is increasing just at the wrong time and it just cannot be absorbed. This is why we are seeing the fastest cooling trend that the Greater Phoenix housing market has ever experienced. “

The Cromford Report two weeks ago said “uncertainty is compounded by the unusual speed of change” and that the Phoenix Metro housing scene “is shifting faster than we have seen at any time in the last 22 years.”

Other analysts weighing in the day after the Federal Reserve on June 15 raised interest rates 0.75% and MarketWatch.com said even before that hike, Freddie Mac reported mortgage rates had surged 55 basis points for the largest one-week increase since 1987.

All this spells bad news for both sellers and buyers.

Sellers are quickly losing the catbird seat they’ve enjoyed in negotiations with prospective buyers for more than a year. Slower demand and quickly rising inventory are weakening their position, according to various analysts.

But buyers need not break out the champagne as no one is predicting any sharp price drops in the cost of housing and mortgage rates continue to climb, they said.

“Further increases in mortgage rates are kicking a big hole in demand while supply continues to grow extremely fast,” Cromford reported. “It would appear that some owners who do not need their property as a home for themselves are timing the market and prefer to be in cash right now. “Sales prices are finally expected to reflect the shift by stepping backwards. The predicted fall is small so far, and coincides with a period when prices usually drift lower each year.”

Two weeks ago, the Cromford Report said, “Demand continues to fall in most areas but the dominant effect is now the rise in supply, with new listings arriving at a pace that is well above average.”

It said Buckeye, Queen Creek and Maricopa already are close to a balanced market, where demand and supply are basically equal.

That report was buttressed by a news release two weeks ago from Sam Khater, Freddie Mac’s chief economist, who said: “Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market.”

Nevertheless, the news also doesn’t offer much hope for buyers looking for “moderate” prices. Indeed, the meaning of “moderate” may not be at a new normal in the Valley and elsewhere in the country.

“The upper end of the market is slowing, but to a lesser degree than the midrange between $400,000 and $1 million,” the Cromford Report said. “Supply below $400,000 remains very low and that segment of the market remains strong.”

Cromford said data from May sales drawn from County recorder records show closed sales dropped 11% from where they were in May 2021 regardless of whether the deals involved new or used houses.

Even so, the overall median sales price in the Phoenix Metro area last month was $490,000 – up 24.8% from May 2021 with the new home median at $500,490 (up 27.8% over May 2021) and the median for resales at $486,000 (up 23.7% from May 2021), The Cromford Report said. Those Valley price figures far exceed the national median sales price of $428,700 in the first quarter of 2022, although that nationwide number is up 30% from $329,000 in the first quarter of 2020. Mortgage rates jumped from 2.75% in the fall for a 30-year fixed to over 5.25%.

An even more staggering blow to those in search of affordable homes, according to the real estate brokerage Redfin is that 8.2% of homes – about six million houses – are valued at $1 million or higher – double what those figures were two years ago.

Realtor.com said “Pandemic-era prices, as they currently stand, may be here to stay.” “It is entirely possible that prices level out and just don’t change very much for the next few years,” Greg McBride, chief financial analyst at personal-finance site Bankrate.com, told Realtor.com. “This would benefit first-time buyers by allowing their incomes to ‘catch-up’ to the cost of homeownership somewhat, but this would unfold over a 2- to 4-year period, not the next 2 to 4 months.”

McBride cautioned would-be buyers who hope for a significant price correction: “Sellers have been putting homes on the market and asking for moonshot prices. In a neighborhood where homes were selling for $600,000 one year ago, a seller may now be asking $800,000. Sure, they may need to cut the price a bit and eventually sell for say, $725,000, but that is still much higher than the $600,000 it would’ve sold for one year ago.”

Meanwhile, both Cromford and Mar-

This 2,978-square-foot house on W. Jupiter Way in Chandler recently sold for $950,000. Built in 1977, the four-bedroom, 2 ½-bath home was billed as “the last opportunity to buy at Stellar Airpark for less than $1 million.”

ketWatch.com kept a wary eye on the overall economy and how that might impact the housing market.

MarketWatch said the U.S. housing sector might be heading for the biggest slowdown in a decade, citing Len Kiefer, deputy chief economist for Freddie Mac.

“The U.S. housing market is at the beginning stages of the most significant contraction in activity since 2006,” he said, adding: “I don’t think that home sales are going to grind to a complete halt. They’ll just slow. People will still be able to sell homes, but it may take you just a little bit longer than what it’s been.’

He also was quoted as saying, “It hasn’t shown up in many data series yet, but mortgage applications are pointing to a large decline over summer,” and that mortgage applications already have tumbled 40% from their most recent peak in 2021. Purchases and refinance applications are in fact down to the lowest level in 22 years, Realtor.com said.

Mortgage applications as a data point “gives you a sense of where the market might be headed,” Kiefer told MarketWatch, “because that’s the early stages of when people are looking to buy a home. And if the volume of applications falls, that tends to indicate that in a month, month and a half, mortgage originations of home closings will also decline.”

Kiefer expects home sales to henceforth “slow quite a bit over the summer.” Meanwhile, the Cromford Report called May sales data “worrisome” because of a 16% year-over-year decline in home sales in the Phoenix Metro market.

“This leads me to conclude that the market is serious about this change of direction and the new trend is likely to continue for some considerable time,” it said.

“There two things that concern me about the sales decline in 2022,” it continued: “It is taking place in May, which in a healthy market should be one of the busiest months for closing

“We are seeing a very steep drop in a short period. In this environment, selling a home is no longer like falling off a log. Showings will be fewer in number and offers far less easy to get than they were in March. Once buyers realize what is going one, expect them to start flexing their negotiating muscles. They might even ask for the seller to pay for a Home Warranty (shocking I know).”

ANIL SINGH (NEIL), REALTOR® HOMESMART MY PRIORITIES AS A REALTOR:

• Listen to my clients needs to achieve the best outcomes in any real estate transaction – buying, selling, finding a home or investment property. • Make the home buying and selling experience stress free; keeping my clients updated and informed during the entire process. Put My Experience, Knowledge, Service and Professionalism To Work For You!