The Worst Market In 14 Years | Phoenix Real Estate Market Update

The Phoenix real estate market is the worst market for sellers that we've seen in 14 years. That's right, this is the lowest CMI that we've seen since 2010, which means it's the worst market for sellers since 2010. But that also means it's the best market for buyers since 2010, so depending on whether you're a buyer or a seller, this could be good or bad news. We are also seeing buyer's markets spread throughout the country, and we're gonna talk about that today. So let's get into it. First, we're talking about these active listings. We have been following this week over week, and we have seen a lot of increase in active listings starting in August, which was a little bit earlier than typical, and we have seen this just continue to go forward. And usually we start to see a tapering off in the fall. Now, the Cromford Report says that if we, it's usually that week of Thanksgiving is the very last week where we see an increase in active listings, and then we most certainly see those taper off. So we're kind of at the turning point this week, you guys. Happy Thanksgiving, by the way. We will see if these start to taper off from here. I don't know, you can see between last week and this week, there is the slightest bit of a downturn, a little bit of a lower number at 21,994 versus 22,086. I don't think that's enough to say that we're going in the right direction with active listings, but we'll see what happens when we come back next week. So why does this matter? Well, right now we're seeing more listings than buyers. That is what is putting us into a buyer's market. And that's great news as a buyer because you have options and choices out there, and sellers can be a bit more negotiable. And for sellers, you have more competition on the market, which is not ideal, and you tend to be more flexible with price because you don't have as many takers, or you have buyers that are negotiating pretty hard, and it's kind of like take it or leave it. Now, we're not in that type of a buyer's market just yet, but that is what it begins to feel like as we have more listings on the market and fewer buyers actually absorbing those. Now, there's a few other places that are talking about this too. So Mortgage News Daily, I'm always sharing what they're talking about here as far as mortgage rates are concerned. And they had this article saying, uncommon pattern emerging in existing home inventory. So they're talking about, you know, in 2022, how we had high rates started to jump up and we saw a big spike in our existing home inventory, but then we also saw existing home sales decrease because there just wasn't a lot of activity. So we've kind of been in this low number of home sales since 2022 when interest rates went up, prices have remained pretty stable. And so there just hasn't been as much buyer demand and therefore not as many transactions taking place in the real estate market. But they're saying that we typically, they're talking about existing home inventory, and this is on a national scale. But when we look at Phoenix, we're seeing something similar. This particular data series has one other interesting nuance, inventory levels. Existing home inventory has a very reliable pattern of peaking in the summer and bottoming out at around the new year. 2023's inventory peaked much later in the year, and now this year, the peak has yet to show up. So you can see that on this chart here, we are still awaiting the peak for existing home inventory on a national scale. They're saying, what should we make of this? Are more people listing their homes or are fewer people buying the homes that are listed? Redfins Housing Data Center, the suggestion is that the sales slowdown has more to do with the inventory building. So they don't really have an answer on this either, but it is something that we're seeing nationally and not just here in Phoenix. So we're gonna keep an eye on the active inventory. Again, I don't love that the Cromford Report said they might be worried last week, but we'll see what happens from here. So 54 of the nation's 200 largest housing markets are now above pre-pandemic inventory, and it was only 17 markets last year. So very similar article here talking about how we're seeing an increase in inventory throughout the country. 54 of the 200 largest housing markets are now seeing this. They're finally above pre-pandemic levels. And last year, there were only 17, so more than doubled that increase in these large markets. Now, I will say this is actually a very good thing. There was a few weeks ago where I did a video sharing about kind of normal level of inventory and as compared to buyer demand on a national scale and how low inventory got through those pandemic years, which is exactly why we saw what happened with prices, et cetera. So we need to be at a healthy level of inventory. So seeing this increase is actually a good thing, not something we should be alarmed of. It says that in October of 2021, there were 565,707 active listings. That was 53% below the 1.2 million active listings in October of 2019. In October, 2021, every single one of the nation's 200 largest housing markets was below pre-pandemic October 2019 inventory levels. But we're slowly starting to see a bounce back. The active listings in October came in at 953,000, which is down only 21% from that October of 2019 level. So all in all, it's a good thing. The only thing that's strange is that it's just not seasonal for us right now. So it's great. We wanna see more homes come to the market. We want to balance out that buyer demand. However, it's just not typical for us to be seeing so many coming to the market this time of year. So kind of leaves a little bit of a question mark, but we shall see. So I mentioned that we are beginning to see buyers markets throughout the US entirely. Let's take a look at that before we get there. If any of this is helpful for you, make sure you hit that subscribe button and consider joining us every week. Would love for you to be part of this community. Buyers markets spread from the South as inventory recovers. Does this sound similar? Very similar story. We've got a lot of this going on out there. It's saying that home buyers are gaining leverage in negotiations across the US. Zillow's market heat index shows competition nationwide remains in neutral balance territory, but is creeping closer to becoming a buyer's market as the shopping season winds down. Now we know that here in Phoenix, we are technically in a buyer's market and we are at a lower level on the CMI than we were last week. I'll share that here shortly. But this is starting to happen throughout the country as well. It talks about where mortgage rates were at, bounced up again from September lows back towards 7%. We all know that. But the latest report is showing that buyers even further afield are enjoying some of the time in the driver's seat. So Pittsburgh and Louisville joined 11 other major metros where buyers have an edge over sellers in negotiations. You can see on this heat map where we're seeing more of those buyer's markets according to Zillow with the blue, and then seller's markets still in yellow and strong seller's markets, just only a couple there in orange. So it's not just here in Phoenix Metro where we are seeing this dip into a buyer's market and increasing inventory. Again, more inventory is a good thing as long as we don't go too far past the point of having so much inventory and no buyers. So a lot of that, of course, depends on prices and rates. And we gotta talk about rates as we do every week. So according to Mortgage News Daily, last week was a boring week for mortgage rates. And hey, I will take it. We didn't have as much volatility last week. There has been a lot of volatility over the last couple months. So this is good. It says the average 30-year fixed rate held inside a narrow 0.05% range and ended at the exact same levels as seen last Friday. So this was from last week, they're saying. They say, in other words, rates arguably hit some sort of a ceiling as early as October 28th and have simply been honing in on the middle ground. This is the best victory that we could have hoped for in the near term. Rates are afraid of stronger economic data, more persistent inflation, and an overabundance of government debt. In order to see a big drop to lower levels, we need to see the most closely watched economic reports come in much weaker for inflation to drop below target levels month over month, likely for a few months in a row. So in summary, it doesn't sound like Mortgage News Daily anticipates rates going down too significantly anytime soon. I would say probably for the next month. My guess is we won't see too much volatility or too much change in rates. So let's talk about what's going on with the CMI. We're at 86.8. We are below 90, which 90 is the very end of that balanced market according to the Cromford Market Index. So we are technically in a buyer's market. Our demand is at 76.9. Really hasn't changed all that much. A little bit of fluctuation downwards actually. And supply at 88.5. That has increased quite a bit. And most of the time, I would say for most of this year, we were in the 70s for supply. Now this just means that we're about 12% below normal for supply, but we're about 14% below normal for demand. So supply is higher than demand, which is putting us in this buyer's market. Now, one of the things that I always like to look at to kind of understand what's going on with demand is our number of listings under contract. Because when we start to see more listings going under contract, that means that there is more buyer demand, more buyers out there willing to make a deal with a seller, write an offer on a property. So I took a peek at what's going on with listings under contract, and it's not really telling much of a story. We did see a little bit of an increase here. And I believe this was probably right after we saw those lower rates in August, September. And then listings under contract has come down. Now, traditionally, we do start to see this taper off this time of year because there are fewer transactions taking place, holidays, et cetera. So that's pretty normal. But I figured it would just be a good idea to check and see if there's anything different going on, whether it be a dip or a spike in listings under contract. And so far, it looks like that is pretty normal, but this is definitely delayed based on what happens with inventory, what happens with rates, because these listings under contract are only being recorded once a listing goes under contract, once something has been negotiated. But we'll keep an eye on this. So if we look at the CMI for every single major city, you can see, as expected, there are a lot of red arrows here. We did have a pretty big change with Fountain Hills at negative 28% month over month, but the overall change month over month was only negative 4.2%. And last week, it was negative 4.8%. So we did not accelerate as quickly as we have been in the direction towards the buyer's market over the last month. That being said, it doesn't mean we're not still heading in that direction, so we'll have to keep an eye on this. But you can see that we have a few cities still in a seller's market, so Chandler, Fountain Hills, Scottsdale, Phoenix, Cave Creek, and Avondale, Glendale just on the cusp there. And then Tempe, Mesa, Gilbert, Paradise Valley, and Peoria are all technically a balanced market with Surprise down to Buckeye being a buyer's market. This is always the best time of year to be a buyer, regardless of what's going on right now with inventory and all of these other things we're talking about. This time of year is historically the best time to be a buyer because you have more negotiating power, typically have more inventory to choose from, and we always see home prices dipping a little bit in December and January. So if you're on the fence about buying right now, it could be to your advantage if you are ready to go and have the time to do so during the holidays. So check the description below. I have a link to our MLS where you could search for homes there. Now, we've been also looking at the contract ratio every single week, and this map of the various zip codes and their contract ratios is always a great visual, I think, to see what's going on. Now, contract ratio just means it's the number of homes that are actively listed on the market versus the number of those that are actually under contract. And as we see here on this little key on the left-hand side, the lower the number, the cooler the market. And I'm just gonna move this back here to November 23rd, the most up-to-date that we can get. And we still only have two zip codes that are in this hot zone, which is Tullesen 85353 and Glendale 85303. Otherwise, we're seeing a lot of blue and a lot of green. Green is a balanced warm market, so you do see a good number of green, but there are some blue zip codes throughout Scottsdale, Phoenix, and then most certainly more on kind of the outskirts of the city that are seeing more of that cold market. Now, although it's not the best time of year to be a seller, it doesn't mean you can't be successful selling your home this time of year, but it's also great to plan ahead because our spring market is the busiest time. So if you're curious about what your home value could be, check the description. I have a link for an instant home valuation, or just send me an email directly. I'd be happy to take a look at your address and put together a custom home value analysis for you. Wishing you all a very happy Thanksgiving, and I will see you next week on my next market update.