By Jamie Thompson
With spring already upon us, many families are thinking about their next move. I always get calls and questions this time of year – and this year I seem to be getting a lot more.
A lot of potential sellers are wondering whether or not they “missed the boat.” These days, the real estate market seems tough to decode. For ten months we’ve been hearing about bank-breaking interest rates, buyer demand hitting the floor, and how much “cooler” the market is; meanwhile, prices have remained relatively high and it still feels like a seller’s market.
All this has homeowners wondering: How is the market changing? Why are prices still high? What should sellers expect in the months ahead?
How the market is changing
We’ve been in a raging seller’s market seemingly forever, and last summer this began to loosen up. Interest rates have slowed demand, most notably among first-time buyers. Sellers are working a harder and buyers are having an easier time compared to last year.
The most dramatic change I’m seeing as an agent is transaction volume. In Phoenix, 1.044 total homes were sold in January, which is down a full 43 percent year-over-year (February’s numbers won’t be out until the end of March). A reduction in volume can be due to fewer listings hitting the market (which would drive prices up) or fewer buyers buying them (driving prices down). In our case, it’s both. As we’ll explore below, this is why prices remain somewhat steady compared to last year, but aren’t getting higher.
How quickly homes are selling is also changing. Currently, Phoenix listings are taking 71 days to enter contract, compared to 32 days last January. This trend began back in June, when our “Days on Market” started increasing year-over-year instead of decreasing. This pace should pick up as the season progresses, but won’t be as fast as last spring.
Supply and demand drive prices
Normally, when demand decreases, prices go down. But prices haven’t been going down much (when compared to the same period last year) because new listing volume has also decreased.
Until recently, supply was contracting while demand surged. Now, supply and demand are both contracting. Although there are fewer buyers competing against each other, they are competing for fewer newly listed homes.
Here in Phoenix, our median sale price for January was $404,000, which is down 4.3 percent over January 2022. This is a modest correction considering last January’s price had shot up 30 percent from the year before; in fact, today’s prices are a full $80,000 higher than in January 2021. We should see a bump in prices in the months ahead, as the median tends to increase in the spring and summer – this is due to a higher volume of buyers and a larger proportion of big “family” homes being sold.
Although prices remain relatively high, we’re seeing longer sale times, more price reductions, and higher levels of active “on-the-market” inventory. And right now, only 11 percent of home are selling over asking, compared to 33 percent last January.
What this means for sellers
Sellers who plan ahead and use the right strategies should expect a great price in the months ahead, but also a longer contract cycle and a little more give-and-take.
This spring, relying on market leverage alone won’t cut it for sellers. Homes will need to be intentionally positioned for success. This means: doing repairs and touch-ups to make the home feel “modern and move-in ready,” staging and using professional photos, getting in front of brokers pre-listing, and deploying a targeted marketing campaign. Bonuses attractive to today’s buyers, like rate buydowns, may also help.
For competing listings prepared and marketed equally well, pricing will separate the winners and losers this spring. Sellers or their agents are often tempted to match current list prices, rather than doing a deep-dive price analysis. Some even knowingly overshoot (to, figuring they can just reduce the price later.
Experienced agents know this “strategy” always backfires. Overpriced homes lament, knock their prices down, and end up with “market stigma.” This usually results in a sale price below the market. Homes that are priced well from the beginning this year will get faster, better offers (probably competing offers) – and a final price at the top of the market.
If you’re considering a move anytime soon, give us a call today at (602) 753-0177. I’ve been helping Phoenix sellers get the best price possible for many years, across a wide range of conditions. I’m eager to help you get the highest price and fastest sale, too!
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Data from https://www.redfin.com/city/14240/AZ/Phoenix/housing-market
