'Crazy' returns to housing market amid slim stock – scottsdale.org

Clear skies. Low 74F. Winds WSW at 5 to 10 mph..
Clear skies. Low 74F. Winds WSW at 5 to 10 mph.
Updated: June 16, 2023 @ 5:33 pm
This 7,971-square-foot house on N. 82nd Street in Scottsdale sold this month for $3.2 million. With six bedrooms and seven baths, the gated estate sits on nearly 5 acres and sports a full-size basketball and volleyball court, a gigantic pool, custom movie theater, high-end chef’s kitchen and six-car garage, among other amenities. (Special to the Progress)

This 7,971-square-foot house on N. 82nd Street in Scottsdale sold this month for $3.2 million. With six bedrooms and seven baths, the gated estate sits on nearly 5 acres and sports a full-size basketball and volleyball court, a gigantic pool, custom movie theater, high-end chef’s kitchen and six-car garage, among other amenities. (Special to the Progress)
High mortgage rates are discouraging homeowners from selling and fueling a growing lack of homes for sale in the Valley, a leading analyst recently warned.
And that likely will fuel a price increase for those houses that are up for sale, according to the Cromford Report, which analyzes in the housing market in Maricopa and Pinal counties.
“With only 12,500 active listings without a contract,” it said, “we are once again approaching a dire shortage of homes for sale.”
“Even a modest increase in demand is likely to force prices higher and quickly recover the ground lost over the past 12 months,” it said. “The median sales price is down almost 9% compared to a year ago, but has recovered nearly 4% over the last three months.”
The Cromford Report said anxious buyers face a likely return of bidding wars already in Chandler, Glendale, Fountain Hills, Phoenix, Gilbert and Avondale. Those are cities where the Cromford Report’s analysis shows the market has tipped by more than 2-1 in favor of sellers.
Indeed, Cromford Report said last week that a Realtor reported, “Some of the crazy is coming back”
“I recently wrote an offer $25,000 over list and my clients were beaten out by other offers ‘with more attractive terms’ on a home that needed flooring and paint throughout, new AC units and had evidence of water intrusion around the windows and roof leaks,” the Realtor wrote. “This was in the 85248 zip code in Chandler.”
“She added, ‘I also had another agent saying how she didn’t want the insanity to start again, but would we waive inspections to beat the competing offer. Another home needing significant work. We also came in over list on that offer. Clean, no concessions, no home warranty.’”
The Cromford Report warned, “With sellers receiving multiple offers there will be fewer of them feeling pressure to be generous with concessions or agreeing to buy down the buyer’s mortgage rate.
“Many buyers will be surprised to find they have much less leverage than they expected in this so called ‘weak market,’” it continued. “Buyer’s agents will have to do a lot of explaining to get them to understand the true nature of today’s market, especially if they have been watching YouTube videos by inexperienced and alarmist commentators. These are often so far removed from reality that they rival the flat-earth proponents.
“There are many crazies on YouTube that seem to get far more views and subscribers than the sensible commentators. If you need an effective antidote to the crazy stuff, I can recommend Jon Schwartz’s YouTube channel. He only has just over 3,000 subscribers, but he should be commended for dealing in balanced facts and realism.”
Looking at total sales in April, the Cromford Report found they were down 28% from April 2022 and down 12.3% from March 2023. That translates in whole numbers into a drop from 10,141 in April 2022 to 6,662 last month and down from 8,935 this past March.
The median sales price last month was $425,000 versus $466,000 in April 2022, it said, but it crept up by 1.2% over the arch 2023 median of $419,000.
Taking a broader view, the Cromford Report said so far this year, only 33,506 homes have been listed for sale as opposed to 42,048 in the same four-month period of last year.
“To be down more than 20% from the prior year is very unusual and the flow of new listings is too low to compensate for the listings going under contract,” it said. “This means the active listing count has been in decline for over six months now and is still trending down at a steep angle.”
“A year ago, the market was weakening fast, but pricing was approaching its peak of $306.46 per square foot,” the Cromford Report said. “And closings were still running high, fueled by the unwise purchasing frenzy of institutional investors and iBuyers.
“The slump that followed in the second half of 2022 is now well behind us and the market is displaying increasing resilience despite interest rates that are far higher than during most of the last 10 years.”
Listings under contract in April recorded an 11.6% month-to-month increase, the Cromford Report noted, calling that “one of the largest month-to-month increases that we have ever seen for this time of year.”
“The net result is that demand is now growing again, while supply is falling even faster than before,” it warned.
“This is good news for sellers, but most home owners are still uninterested in selling, deterred by the large increase in mortgage interest rate that would incur.”
Meanwhile, it said builders apparently are having a renewed confidence as the “new-home market remains robust with most publicly listed home builders in an optimistic mood, supported by their stock prices hitting new highs in the last few days.”
The National Association of Home Builders last week echoed that observation, reporting, “Limited existing inventory, which has put a renewed emphasis on new construction, resulted in a solid gain for builder confidence in May even as the industry continues to face several challenges, including building material supply chain disruptions and tightening credit conditions for construction loans.”
Some of the most aggressive improvements in sellers’ markets have occurred in Paradise Valley and Tempe, the Cromford Report said, basing that on a number of factors it uses to analyze the condition of Valley submarkets.
“Not far behind are Buckeye, Cave Creek, Glendale, Avondale and Queen Creek,” it added. “Improvements for sellers are relatively modest in Surprise, Chandler and Scottsdale.”
All of this means that some buyers may have to cast a distant eye for more affordable homes, according to the Cromford Report said.
“To find a location that is still strongly favorable to buyers, we need to look at the secondary cities,” it said, pointing primarily to Casa Grande, which it called “the weakest market in Central Arizona.”
Overall, the Cromford Report said, while “the media have been full of stories for the last six months about the shortage of home buyers,” news organizations “have devoted very little coverage to the shortage of home sellers over the same period, which is in fact far more extreme and is having a bigger effect on the market.”
During most of 2022, it said, “we had plenty of sellers because those who saw their properties as investments were keen to avoid the risk of a major drop in value.
“Those were joined by the iBuyers who realized too late that they had purchased far too many homes for the market conditions since April. This caused a short-term stampede for the exits.”
Conditions began to reverse course in November, the Cromford Report added, “we now have a real problem getting enough homes listed.”
It also advised homeowners: “If your home has an existing mortgage, the odds are high that it has a much lower interest rate than anything available today.
“So unless you really have to move, it makes more financial sense to stay put and avoid redeeming that bargain mortgage only to replace it with a much more expensive one.
“Many are choosing to upgrade or expand their home … instead.”
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