If you spent any time studying economics in school, you probably remember something about supply & demand... it impacts pricing... blah, blah. What you may not remember is that this delicate balance impacts just about every marketplace and every industry. Real estate, is no exception.
Year to date, Maricopa county has experienced an unusually low supply of inventory (homes for sale) in our market. Data from the Cromford Report shows that 2014 has had the lowest number of listings to come to market since before 2001.
Look back to a few of my previous posts from 2011-2012 (Where Have all the Properties Gone??? ARMLS: Active 10,014 listings in Maricopa County). You could easily see that we had few active listings. Then in 2012, our "normal" resale market rebounded in a big way.
Low inventory and high demand throughout the Phoenix & Scottsdale area maintained record sales volume & continued to boost pricing. From Paradise Valley, to Tempe, Avondale & beyond, Buyers took advantage of the low rates and fiercely competed with cash-rich investors to buy up all of the cheap, distressed inventory (REO, HUD & short sale). Eventually as "distressed" inventory fell back sharply, "normal" sales began to make up the bulk of the market.
Sales surged and prices spiked in the middle of 2013. Which, in turn, spurred pent up supply of supply from all of the sellers who had been sitting on the side lines for years waiting for precisely the right moment to sell. They jumped in with asking prices that seemed unsustainable. Some analysts even started to cry "bubble".
What's the difference between then (seller's market) and now (buyer's market)? The answer lies with demand. According the the Cromford Report, "it is only the tepid demand that is preventing us from experiencing a shortage of homes for sale."
At about that point in mid-2013, buyers started to reign themselves in... Even though today's existing homes on the market sell for a premium over their challenged foreclosure & short sale counter parts, the median sales price continues to increase but at a much slower pace.
Concurrently, the boom in the stock market that's occurred over the last few years fuel luxury home sales of $1M+) (the DJIA is awfully close to 18,000 after nearly dropping to 7,000 in '09...). This artificially inflates the median sale price because there are more homes selling at the higher price points so the median or "point where exactly half of the data points are higher and half are lower" rises due to lower sales volume in the lower price ranges. Today, demand is at about the lowest it's been since the collapse of the sub-prime lending market in mid-2007 to mid-2008.
Another place where market weakness is evident? "Days on Market"- or the amount of time it takes to sell a home.
The lesson to be learned here? 1) Buyers are not stupid. They watch and are very quick to react to market changes. 2) Buyers using financing have an advantage- the appraisal value (which has also been an issue of late for some sellers...). It's pretty hard to overpay for a home. Keep in mind, buyers (of anything) want a deal. I have NEVER had a buyer say "I want it and will pay what ever I have to to get it...".
So, sellers be patient AND watch the data, including your pricing. Keep in mind, if my prediction about an increase in demand from newly eligible borrowers comes to light, we could be seeing a very favorable scenario for sellers in 2015... So stay tuned!
In the meantime, you should know what's happening in the market before and during the time your home is on the market. If you don't know what's going on or where trends are headed, it's to your disadvantage. I watch this info closely for all of my clients and can help you determine where you should be strategically priced versus where you actually are.