The race to balance is well underway in the Valley with many homeowners asking what might happen to the equity that they’ve built up in their home.
Meanwhile, buyers are pleasantly surprised by the increase in inventory and the potential to negotiate and we find both parties trying to establish their footing as seller’s hang on to the fact that there still are not enough houses for everyone who wants one.
We’ve watched closely as inventory has risen over the last two months due in part to buyer demand falling and in part due to new listings coming to the market at an increasingly rapid pace and have seen declining sales volume, increased number of price reductions, listing cancellations and expirations, increased days inventory, and the flattening of active list price dollar per square foot.
Taking a look at the May affidavit counts, we can see that closed sales are down about 10% year over year while the median sales price is up 21.8% year over year – meaning that although sales volume is declining, closed prices continue to increase.
Despite the feeling of many that the market has come to a screeching halt, the overall monthly median sales price increased 2.6% between April and June alone.
Taking a quick peek at new construction, we see that sales prices are increasing slightly faster than the resale market but only by about 4% while the rental market continues to cool with a 40% increase in new rental listings year over year and many of those leasing below the asking price.
Like the market shift that we saw suddenly at the beginning of COVID, we are starting to see some cities pull away from the strong sellers market they’d been in at a faster rate than others. That means that understanding what the market is doing in YOUR neighborhood and in YOUR town has never been more important.
Here in Gilbert, we’re seeing about three times the inventory we saw last quarter and about 30% more inventory than we saw two years ago however with current demand for the town’s available housing, we are still sitting at only about a month’s worth of inventory as opposed to the three to six months we’d need to be in balance.
Our sales per year have fallen but so has our days on market – which is another indicator that while headed towards balance, we’re not there quite yet. Under contract and closed prices have continued to rise but active listing $/sf has stabilized, still at more than $300/sf as compared to $185 just two years ago.
Homes are still selling on average for 102.18% of list price as compared to 98.99% two years ago but with both demand and supply below normal, it will be interesting to see how long we remain above 100%.
As market conditions continue to improve for buyers in spite of higher interest rates, we expect to see sellers compete with each other by offering concessions, buying down interest rates, and giving those without all cash offers a chance to win without waiving the appraisal, inspection period, or giving up their first born.
Expecting that interest rates will fluctuate and prices will continue to rise at least in the short term, buyers with a little more say in the negotiation process can expect opportunities in the future to refinance while building equity in their investment rather than waiting for rates or prices to decline.
While we’re certainly not in a buyers market – let alone a balanced market, for that matter – buyers should have a little more pep in their step after two years of intense warfare for homes in the Valley as they have more homes to choose from and a more prominent seat at the table.
The good news is that sellers haven’t lost any ground or equity, they’ll just need to pull up a chair alongside their buyer counterparts instead of always sitting at the head of the table.