GSN Real Estate 091822

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REAL ESTATE

GILBERT SUN NEWS | SEPTEMBER 18, 2022

Prime time is now for homebuyers, sellers

BY MINDY JONES GSN Columnist

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omebuyers and sellers got distressing news on Aug. 14 as Realtor.com and MarketWatch said a jump in mortgage rates is dampening the market.

“A surge in mortgage rates to 6% is giving home shoppers chills, pushing them to wait to refinance or buy a home,” Realtor.com said, calling it “ significant mile-

stone, albeit a negative one, for buyers.”

Noting the rate is now the highest since November 2008, various news services noted it also is twice what the average mortgage rate was just a year ago.

“With rates doubling from where they were a year ago, demand from buyers continues to weaken, as reflected in the Market Composite Index, a measure of

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GSN NEWS STAFF

That makes it prime picking season for our buyers now.

The shift in consumer sentiment about the real estate market has been anything but rapid. I would describe it as cautiously optimistic in the sense that most homeowners have significant equity in their home and want to believe that they can use it to make a purchase that addresses many of the life changes they have experienced over the last three years, when the market was profitable but simply not accessible to everyone.

They hear the messaging that there are options to purchase and that they can get help with closing costs and rate buydowns but they can’t help but feel like

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Mortgage rates hit 14-year high

costs on the settlement statement, sellers should expect offers to come in with these requests and know how to negotiate them.

Analysts are projecting a strong purchase market to return in 2023 as we settle into our typical seasonal bustle of real estate activity, and we see the return of massive crowd gathering events such as the Super Bowl, Phoenix Open and Spring Training that tend to bring more eyes to our market during an already busy time of year for Arizona real estate.

While closing costs and other programs designed to help buyers with the impacts of volatile interest rates are readily available now, it is unclear if these tools and tactics will be available once the pace of the market picks up.

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ometime between the primary and the general election in Gilbert, the weather starts to dip below 100 on more consecutive days than not, pumpkin spice makes its way back into our lives, fall markets start to pop up around downtown and in town square, and historically it becomes one of the best times for buyers to buy houses in Arizona.

With the kids off to school and the landscape returning to its pre-summer blooms, we start our steady seasonal in-

cline in activity that will last through May, giving buyers more options to choose from and more sellers who are interested in closing out their home sale before the end of the year.

Over the last five months, we have seen a massive increase in pricing followed by a speedy correction that has resulted in prices looking very similar to those in January or February of this year.

Consumers who have been in their home for the last few years may or may not be focused on this rise and fall as their equity position remains strong. But most considering entering the market are well aware that negotiations will look different than they did just a few months ago.

With more than 10% of homes closing having some form of seller-paid closing

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REAL ESTATE

GILBERT SUN NEWS | SEPTEMBER 18, 2022

Valley home sales still on roller coaster GSN NEWS STAFF

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razy times have hit the Valley ‘s residential market these days, judging by some of the latest data posted by The Cromford Report, the leading analyst of the Phoenix Metro housing market.

It reported last week that the average sale price of $549,861 for a house between Aug. 10 and Sept. 9 was $840 less than the average closed home price of $550,701 recorded between Sept.

10,2021 and this past Sept. 9.

What’s astonishing is that as recently as this past June the year-over-year average sale price of a house in the Valley was $66,000.

“The gap has dropped dramatically in less than three months,” the Cromford Report noted.

It said that such a steep drop has occurred during other “periods of weak buyer confidence” for a few weeks in the early stages of the pandemic in 2020 and in 2014 and 2015.

“It is never a good sign when the shortterm average is lower than the long term average,” the Cromford report said, noting that the highest gap wasn’t all that long ago.

“A negative $840 number is not terrible but far from good,” it said. “The highest we have ever measured was a positive $79,365 in May 2021, which we can look back on as following a peak in buyer optimism. The worst we have seen was negative $62,429 in March 2009.”

The Cromford Report didn’t reflect any panic about the narrow different between the latest short-term and longterm average sale price.

“It will be a more important sign if the short-term average stays below the longterm average for an extended time,” it said, adding: “A week or 3 is nothing to worry about, but several months means a long-term down-trend has started. This happened between September 2007 and October 2009. It would not be good to relive those

years and at this stage it looks unlikely that we will.”

All in all, the Cromford Report has been a slightly more optimistic in its assessment of how sellers are faring in the Valley market than it had been at the beginning of September.

Earlier this month, it said the average price per square foot for homes sold increased over August.

While that increase was only from $285 per square foot to $289, the Cromford Report said, “This is not consistent with the idea that the market is crashing.”

On the other hand, the report said sale prices had dropped below final list prices, prompting it to warn this “confirms that sellers’ negotiation power is far weaker than it has been in many years.”

It also noted the four-week trend last month showed square-foot prices for listings under contract had steadily fallen.

The Cromford Report also noted that the trend in successful sales rates declined to 70.4% in August – “the lowest

Buying or Selling a Home?

we have seen for late August since the year 2010.”

“Mind you, in 2010 the reading was a dismal 58.1%, thanks to all the short sales and pre-foreclosures crowding the market at the time,” it said, but added: “Any new sellers need to be realistic: 30% of listings fail to sell these days. At the end of March, the percentage was less than 8%. Listing agents now need to focus on marketing instead of worrying about how to handle the deluge of offers in the first few days.”

It also saw a decline in the number of “coming soon” listings, prompting it to note, “It is no longer a matter of great excitement that your home is shortly to be listed for sale.”

One aspect of the market the Cromford Report singled out last week was the number of houses owned by iBuyer companies like Opendoor.

“We do have excessive inventory of

see MARKET page RE3

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mortgage application volume,” Realtor. com said, adding that mortgage applications are at their lowest in nearly 13 years, according to the Mortgage Bankers Association.

Higher rates have pushed buyers to rethink refinancing and contributed to other prospective buyers’ staying on the sidelines, the association said.

The only bright spot was in Veterans Administration and U./S. Department of Agriculture loans, it said, stating appli-

cations for those increased among firsttime buyers Realtor. com predicted more pain could await if the Federal Reserve decides to hike interest rates again – something many experts are predicting as the federal government tries to curb rampant inflation.

“Higher rates are likely to cool demand even further – which means that the downturn in housing continues,” Realtor. com said.

empty homes in the hands of iBuyers,” it said. “They continued to buy homes in large numbers during the second quarter and have ended up with far too many homes in their possession during the third quarter.

“These homes are empty and racking up expenses,” it continued, adding their inventory “has to be driven lower.”

It noted that Opendoor is slashing prices to reduce that inventory, but that’s resulted in impacting the overall market – and the pocketbooks of sales agents.

“With lots of bargain homes on offer below market value, this is partially succeeding in moving homes from active to pending, but it also has the effect of a lowering average prices for the market as a whole,” it said, calling Opendoor “large enough to be a significant competitor for other sellers.”

It added, “It certainly is bad news for people who depend on healthy sales volume for their income. This includes title company staff, real estate agents and mortgage lenders.”

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that means it’s a good time to buy but not to sell. And for many one comes with the other.

The problem with trying to time the market is that it doesn’t usually work.

Any gain you have from pulling the trigger at a tipping point, you lose from waiting to make a decision on the incline or decline from that point.

While real estate works over time every time there are unintended consequence of injecting high-volume buyers into the real estate market making main street look a little more like wall street.

While iBuyer activity in part drove our prices up dramatically over the last year, their strategy, inventory management and purchase history impacts pricing and inventory in a different way than consumer driven purchases.

An excess of inventory in the hands of many of these companies that made massive purchases over the last couple of years continue to exert downward pressure on pricing and interest rate volatility creates waves of buyer demand and inactivity. Meanwhile, Gilbert’s active list-

ing count appears to have stopped rising while listings under contract have risen by more than 10% in just the last month.

Days on market have inched up while the months of supply remain steady due in part to rising demand and a more moderate rise in supply.

While we do not quite have an excess of supply in Gilbert based on historical averages, an increase in demand fueled by lower interest rates and continued growth in the manufacturing and healthcare sectors will be welcome and could quickly move our supply situation back into deficit territory.

Mindy Jones, a Gilbert Realtor and owner of the Amy Jones Group brokered by EXP Realty, can be reached at 480-250-3857, Mindy@AmyJonesGroup.com or AmyJonesGroup.com.

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Contact Paul Maryniak at 480-898-5647 or pmaryniak@timeslocalmedia.com

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REAL ESTATE

GILBERT SUN NEWS | SEPTEMBER 18, 2022

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