Market Summary for August

Here are the basics - the ARMLS numbers for August 1, 2022 compared with August 1, 2021 for all areas & types:

  • Active Listings (excluding UCB & CCBS): 17,957 versus 7,105 last year - up 152.7% - and up 24.6% from 14,406 last month 
  • Active Listings (including UCB & CCBS): 20,724 versus 10,913 last year - up 89.9% - and up 20.1% compared with 17,261 last month
  • Pending Listings: 5,291 versus 7,236 last year - down 26.9% - and down 8.2% from 5,766 last month 
  • Under Contract Listings (including Pending, CCBS & UCB): 8,058 versus 11,044 last year - down 27.0% - and down 6.5% from 8,621 last month 
  • Monthly Sales: 6,171 versus 9,139 last year - down 32.5% - and down 24.0% from 8,115 last month
  • Monthly Average Sales Price per Sq. Ft.: $285.93 versus $250.59 last year - up 14.1% - but down 4.8% from $300.38 last month 
  • Monthly Median Sales Price: $452,500 versus $400,000 last year - up 13.1% - but down 4.6% from $474,374 last month

We described June as dismal but July was worse. There has been a slight let-up in the supply of new listings, but they are still arriving much faster than demand can cope with. This means an ever-increasing number of active listings - the total without a contract having grown another 25% in the last month. This is for the market as a whole, but the high-end is not seeing the same increase. Areas like Paradise Valley, Fountain Hills, far North Scottsdale, Carefree and Cave Creek still have fairly modest numbers of active listings. Other modestly-priced areas like Buckeye, Maricopa, Florence and Queen Creek (including San Tan Valley) already have more active listings than their long-term average.

The real downer is the demand. Closed sales dropped 24% compared with June and they are almost 33% lower than last year. This is obviously bad news for those whose incomes are derived from closings, such as real estate agents, title company staff and mortgage brokers. Listings under contract slipped again, down more than 8% from last month, meaning that we do not expect much joy from August numbers this time next month. Even in the high-end of the market, demand is low, so the modest number of active listings is still plenty.

Prices are reacting much more quickly to the poor market conditions than we expected. In 2005 and 2006, it took a long time for prices to change direction. In 2022, the change has happened almost overnight. This is probably because people are primed to believe price drops are likely whereas in 2005 most people still believed that home price never go down. Whatever the reason, sellers in 2022 have been willing to make quick and frequent cuts in their asking prices and accept offers well below those. The average percentage of list achieved has dropped from 99.81% on July 1 to 98.74% on August 1 and the trend is strongly downward.

Further falls in price are likely until a recovery in demand takes place. There is very little distress in the market with foreclosures still extremely low. Pressures to sell at lower prices are coming from the sellers themselves. Low demand mean they are competing with other sellers and a lower price is an obvious tool for them.

Demand from iBuyers has remained surprisingly strong for the last few months and they have built up large inventories. These have to be a concern to them, so we expect far fewer iBuyer purchases and much more effort focused on selling their existing stock of homes. These two factors will unfortunately compound the problem of too little demand and too much supply, driving prices lower. Many iBuyer homes are already being closed at sale prices lower than their purchase prices. This will probably become commonplace in the next few months.

Institutional investors have mostly continued their homes buying sprees, but in the July numbers we are seeing clear signs of their enthusiasm waning. If more of them stop buying this will cause further falls in demand measures. If they also start to dispose of any of their rental properties, this might add to supply.

The listing success rate has dropped from over 91% on May 1 to under 73% on August 1. This is a crucial statistic and it is in free fall. The long term average stands at 67.5% and it looks as though we will drop below this percentage during August. If more than 1 out of 3 listings fail to sell, it creates an atmosphere of worry that is hard to escape. We are nowhere near the dreadful 20.4% that we experienced in January 2008, but the listing success rate is a reliable and crucial indicator that is flashing red. We need this to stabilize and start increasing if we are to be optimistic in our outlook.We recommend watching this number closely.

All in all, there are few reasons to expect an improvement in market conditions just around the corner. A large drop in interest rates would almost certainly help, but this is not something that is widely expected at the moment.

Seller-Paid Closing Cost Assistance Coming Back
This Price Point is Declining the Fastest in Greater Phoenix

For Buyers:
Good news for buyers, the number of closings with seller-paid closing costs rose 27% in July compared to June equating to 7% of all closings for the month. That may not sound like much, but that’s the highest it’s been since March 2021. Prior to 2020, the established baseline for seller-paid closing cost assistance averaged 25-28% of MLS sales and over the past 15 months the average has been just 3-4.5%. The increase is expected to continue as large cash-based investors have pulled back their acquisitions, leaving many sellers to cater to normal buyers once again. For most of 2021 and the first part of 2022, buyers had very little time to decide on a property before it went under contract. Last May, half of all homes that went under contract were on the market for only 7 days or less. This month homes are on the market a median of 21 days prior to an accepted contract, giving buyers more breathing room for a second showing and less pressure to make a decision on the spot. More evidence of a growing buyer’s advantage, the percentage of properties closing over list price has declined from 58% in April to 24% August-to-date and continues to decline. The median amount over list has also declined from $20,000 to $7,000. As the current balanced market continues, expect to see this measure drop to just 10%-15% closing over list.

For Sellers: 
The last week in July saw 4,172 price reductions on Greater Phoenix listings, equating to 26% of active supply for that week. The median price reduction was $15,000 and 78% were over $5,000. The peak of price for 2022 so far was May, since then the median sales price has declined 6.25% from $480K to $450K. That’s an average of 2% per month* thus far, however the downward trend has not been consistent across all price ranges; a detail not reflected in the median sale price measure. To analyze the price response by sales price range, we use the sales price per square foot. In May, the peak sales price per square foot overall was $305.99, August-to-date is $289.89, a 5.3% drop averaging 1.8% per month*. This is a similar result to the change in median sale price, but by price range the distribution looks like this:


Price Range

May 2022 Measure

August-to-Date Measure

% Total Change since May

Average % Change per Month since May*

Up to $300K

$213.89

$212.50

-0.6%

-0.2%

$300K-$500K

$261.18

$257.36

-1.5%

-0.5%

$500K-$800K

$287.30

$277.15

-3.5%

-1.2%

$800K-$1M

$333.11

$327.41

-1.7%

-0.6%

$1M-$1.5M

$384.36

$347.26

-9.7%

-3.2%

Over $1.5M

$583.57

$586.60

+0.5%

+0.2%

The table shows that properties between $1M-$1.5M have seen the strongest decline since May, with an average decline of 3.2% per month. This is the only price range above the overall average decline of 1.8%. The runner up is the $500K-$800K with an average decline of 1.2% per month. All other price points are within 0.6% of May’s average 3 months ago as of August 9th.
*Not a calendar month

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2022 Cromford Associates LLC and Tamboer Consulting LLC

 If you, or anyone you know, is looking to buy or sell, Please let me know!

Troy Holland

Cell:  480-773-5792

Email:  TroyHolland44@yahoo.com

Web:  www.AZ-RealEstateGroup.com 

Raving Fans: Client Reviews Here

 

Information provided courtesy The Cromford Report.