THE PARTY IS OVER.
Well, that was fast. While in the midst of enjoying the Party, it stopped. Poof and just like that, it’s over. Scant notice it was ending. The “Party” I am referring to is the real estate market Phoenix and Corte Bella have enjoyed for the past two years. Read on for the Good, Bad, and Ugly about our housing market.
THE GOOD.
There isn’t any.
THE BAD.
Things have changed decidedly since last week. Recent data shows the last two months having been brutal, with demand fading sharply and supply growing at one of the fastest paces ever in Phoenix. Either trend would have been negative but with both coming together we have had a very chilly wind blowing through the market.
There were just 1,558 accepted contracts during last week in Maricopa County, down from 1,898 the week before and 2,274 during the same week in 2021. This makes it by far the least productive week in over two years, if we exclude the week between Christmas and New Year, when most people are not signing contracts. This collapse in demand is very unusual and with another round of interest rate rises likely within a few short weeks, I cannot imagine it improving in the near term.
THE UGLY.
We have a full-on buyer's strike developing. More homes are being newly listed for sale than at any time since 2011. We are witnessing a full-on seller's stampede. We are not, however, seeing forced selling, like we experienced during the foreclosure wave of 2007 to 2011. What we are seeing is people electing to sell because they fear a fall in home prices. That fear is likely to be self-fulfilling. When so many attempt to make it to the exit door ahead of everyone else, people get hurt.
The stampede for the exit is now large enough it is certain to do significant damage to home values. The latest data suggests that it is already impossible for home prices to rise under the current market conditions. As people get more eager to dispose of their housing assets, price cuts are growing in number and size. The very top and bottom ranges of the market are least affected. The mid-range ($400,000 - $1,000,000), where the vast majority of transactions occur, is experiencing a big freeze. When a buyer's strike and a seller's stampede occur at the same time, the market stalls in mid-flight. A price correction becomes inevitable.
The Federal Reserve has stated that they want to see a "reset in the housing market", and it looks increasingly likely that their wish will come true.
HOPE.
OK, it’s not all bad and ugly. I’m reasonably certain the sun will shine tomorrow, and Football training camps are just around the corner.
Keep in mind that the 55+ communities like Corte Bella march to a slightly different drummer than the typical residential community. Roughly 1/3rd of our buyers are cash buyers, so interest rates are not a factor in their buying decision. This does not completely insulate Corte Bella from market chaos, but it does temper the impact of negative market conditions during a downturn.
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