Listings Suddenly Flood the Valley’s Domestic Market |

Whether you’re selling your home or looking to buy, it’s best to wear a seat belt.

And that may be especially true right now for sellers, who are flooding the Phoenix metro housing market with record numbers of listings, according to the Cromford report.

The Cromford Report, the Valley’s leading market analyst in Pinal and Maricopa counties, said 1,845 homes were added to the Arizona regional multiple listing, 34% more than the average.

“If we were just suffering from deflated demand,” he said, “the market would cool down pretty gently. it just can’t be absorbed. That’s why we’re seeing the fastest cooling trend the Greater Phoenix housing market has ever seen.”

Two weeks ago, the Cromford Report said the “uncertainty is compounded by the unusual speed of change” and that the Phoenix metro housing scene “is changing faster than we have seen at any time in the past. over the past 22 years”.

Other analysts weighing the day after the Federal Reserve raised interest rates by 0.75% on June 15 and MarketWatch.com said that even before that hike, Freddie Mac reported that mortgage rates had jumped 55 basis points for the largest one-week increase since 1987.

All of this is bad news for sellers and buyers.

Sellers are rapidly losing the catbird seat they have enjoyed in negotiations with potential buyers for over a year. Slowing demand and rapidly rising inventories are weakening their position, according to various analysts.

But buyers needn’t break the champagne because no one is predicting big price drops in the cost of housing and mortgage rates continue to climb, they said.

“Further increases in mortgage rates are creating a big hole in demand while supply continues to grow extremely rapidly,” Cromford reported. “It would appear that some homeowners who don’t need their property as a home for themselves are timing the market and prefer to be cash right now.

“Selling prices should finally reflect the change by pulling back. The predicted fall is small so far and coincides with a period when prices generally fall each year.

Two weeks ago, the Cromford report stated: “Demand continues to fall in most areas, but the dominant effect is now increased supply, with new listings arriving at a well above average rate. .

He said Buckeye, Queen Creek and Maricopa are already close to a balanced market, where demand and supply are basically equal.

This report was backed up by a press release two weeks ago from Sam Khater, Freddie Mac’s chief economist, who said: ‘Rising mortgage rates will provide moderation from the blistering pace of activity real estate we experienced coming out of the pandemic, ultimately resulting in a more balanced housing market.

However, the news also doesn’t offer much hope for buyers looking for “moderate” prices. Indeed, the meaning of “moderate” may not be at a new normal in the Valley and elsewhere in the country.

“The high end of the market is slowing, but to a lesser extent than the mid-range between $400,000 and $1 million,” the Cromford report states. “The sub-$400,000 supply remains very low and this segment of the market remains strong.”

Cromford said May sales data taken from county recorder records shows closed sales fell 11% from May 2021, whether transactions were for new or used homes.

Even so, the overall median sale price in the Phoenix metro area last month was $490,000 – up 24.8% from May 2021 with the median for new homes at $500,490 (up from 27.8% from May 2021) and the median resale at $486,000 (up 23.7% from May 2021), the Cromford report said.

These Valley price numbers far exceed the national median selling price of $428,700 in the first quarter of 2022, although that number nationally is up 30% from $329,000 in the first quarter. of 2020. Mortgage rates jumped 2.75% in the fall to a 30-year peg at over 5.25%.

An even more staggering blow for those looking for affordable homes, according to real estate brokerage firm Redfin, is that 8.2% of homes — about six million homes — are valued at $1 million or more — double that. figures two years ago.

Realtor.com said “pandemic-era pricing, as it stands now, may be here to stay.”

“It’s entirely possible that prices will stabilize and just not change much over the next few years,” Greg McBride, chief financial analyst at personal finance site Bankrate.com, told Realtor.com. “This would benefit first-time buyers by allowing their income to ‘catch up’ somewhat with the cost of home ownership, but it would take place over a 2-4 year period, not the next 2-4 months. .”

McBride warned potential buyers hoping for a major price correction: “Sellers have been putting homes on the market and asking astronomical prices. In a neighborhood where homes were selling for $600,000 a year ago, a seller can now ask for $800,000. Sure, they might have to lower the price a bit and eventually sell for, say, $725,000, but that’s still much higher than the $600,000 they would have sold a year ago.

Meanwhile, Cromford and MarketWatch.com have kept a cautious eye on the overall economy and its impact on the housing market.

MarketWatch said the U.S. housing sector could be heading for the biggest downturn in a decade, citing Len Kiefer, deputy chief economist at Freddie Mac.

“The U.S. housing market is at the start of the largest contraction in activity since 2006,” he said, adding:

“I don’t think home sales are going to stop completely. They’ll just slow down. People will still be able to sell houses, but it may take you a little longer than before.

He was also quoted as saying, “This hasn’t shown up in many data sets yet, but mortgage applications are showing a big drop over the summer,” and that mortgage applications have already dropped 40% from their last peak in 2021.

Purchases and requests for refinancing are actually at a 22-year low, Realtor.com said.

Mortgage applications as a data point “give you an idea of ​​where the market might go,” Kiefer told MarketWatch, “because these are the early stages of when people are looking to buy a home. And if the volume of applications drops, that tends to indicate that in a month, a month and a half, the mortgage originations of the closings of houses will also decrease.

Kiefer expects home sales to “slow down a bit over the summer.”

Meanwhile, the Cromford Report called the May sales data “worrying” due to a 16% year-over-year decline in home sales in the Phoenix metro market.

“This leads me to conclude that the market is serious about this change in direction and that the new trend is likely to continue for a considerable time,” he said.

“There are two things that concern me about the decline in sales in 2022,” he continued: “It’s happening in May, which in a healthy market should be one of the busier for closing

“We are seeing a very sharp drop in a short time. In this environment, selling a home is no longer like falling off a log. Visits will be fewer and offers much less easy to obtain than they were in March. Once buyers realize what’s going on, expect them to start flexing their negotiating muscles. They might even ask the seller to pay for a home warranty (shocking, I know).