Real Estate Market is “Normalizing”… What Does That Mean?
The headlines are starting to change a little bit… by now, you’ve probably heard about the Real Estate market cooling off somewhat. Well, let’s dig deeper into this!
First of all, real estate is always local… each area will differ and price segments vary as well within the same overall market. Right now I am going to speak to the Phoenix Metro Market.
Since 2013, we have seen some rapid price appreciation… due to the super low prices we started with after the mid 2000’s recession and historically low interest rates, affordability hasn’t been a concern really. We have seen buyers of all types jump into the market. However, during this year (2018), we have seen interest rates rise about a full percentage point… this means the same home can cost several hundred dollars more per month on the mortgage payment versus 9-months ago. That doesn’t even account for this year’s price appreciation as well.
Ultimately, wages have not gone up as fast so affordability is now coming into question. Buyers have begun to be more selective and aren’t as willing to throw money around so quickly.
Remember how I mentioned markets can be segmented? Well, ours sure is. The entry level price points are still extremely competitive, but some buyers are being priced out altogether and can no longer buy. The rental market is still fierce so this just makes that aspect more so.
The mid-level market has leveled off a bit with it not so much a Seller’s Market, nor Buyer’s Market, but rather an even market where people are negotiating. It can take a little longer to sell and sellers cannot reach so far with their asking prices. If they do, they might sit and end up taking less in the end.
Seasons also play a part and now that we are into October, the “Snowbird” buyer will make their return; however, they aren’t in the market for every type of home.
Do we still have a shortage of inventory? Yes.
Do we now have some buyers showing reluctance? Yes.
What does this all mean?
Buyers will continue to ask for more repair requests during the inspection period, negotiate more up front and be more choosy in their home selection.
Sellers will not want to price on the high side, if they want to sell and not sit. I’m not suggesting to under price, but am definitely saying pricing will be crucial to the overall end result and success going forward.