Hindsight is so much easier than predicting the future. I learned years ago that you had to learn from history in order to grow….if not you were doomed to relive the same mistakes over and over. If you are interested I thought I would do a 2014 Real Estate Market Review. It is a new year and a new perspective is in order. First lets go back a bit more and look at 2013.
The real estate market in 2013 was one in which there was a shortage of homes available for sale in comparison to the demand and proved to be a seller’s market. Due to the high demand and low supply, we saw prices rise and the amount of days a home stayed on the market decrease.
In 2014 however, we experienced a fairly balanced market, meaning the number of homes available for sale and the number of buyers is much closer to equal. Many homeowners had been sitting on the fence–wanting to sell but did not have equity in their home due to the housing crash and did not want to do a short sale. As these homeowners became aware of the increase in the value of the housing market in Phoenix, they began listing their homes, increasing the supply of homes available.These sellers were responding to the sellers market in 2013. They heard that the market was ‘hot’. They could sell high. Sadly they heard too late. As more people listed their homes the balance changed….we no longer has a high demand and a low supply.
At the same time, the investor buyers had been exiting the market for the same reason. Values had risen to a point that it did not make sense from an investment standpoint to purchase homes in our market. In 2014, we saw supply rise and demand drop, but the good news is that prices did not drop as a result since we were in a somewhat balanced market. There were more homes on the market competing for a fewer amount of buyers, but not to a degree that we saw the home prices drop, rather they leveled off.
In October, the number of transactions decreased from September by 2.3 percent. This is normal for this quarter of the year and it is historically the slowest quarter for the number of home sales. In any market the homes that are priced competitively and are staged to show the nicest always are quick to sell. We are seeing buyers being less negotiable with sellers who are unwilling to do repairs and not moving forward without an acceptable appraisal. Buyers want a home priced to sell and staged to incite.
Although it is a balanced market, the average sales price increased slightly from $255,518 in September to $257,581 in October; this is the first increase in the last five months. Sellers need to pay attention when the market is shifting and/or leveling off to be more competitive in pricing and condition. Last month we saw a 4.9 percent increase in the average days on market; it went up from 81 to 85 days. To put this in perspective, last year at this time we were at 56 days on the market. The longer a house is on the market for sale, the more money it will cost the seller in mortgage payments and other expenses associated with owning a home. Buyers are aware there are more homes to choose from and that homes on the market are staying active for more time than before. Therefore, they are not afraid to make aggressive offers to get the house for less. However, buyers need to keep in mind the best homes for sale will sell quickly and for the most money.
The inventory of homes on the market increased to 3.74 months, this number has been increasing over the last six months. This statistic measures the number of months it would take the homes currently on the market to be absorbed by buyers, given no other homes were to come on to the market. This is the highest since last February. Historically, January and February are the months when we experience a rise in inventory, due to the fact that sellers wait until after the holidays to get their homes ready to put on the market. Buyers are also aware of this fact. Last month we had an increase of 3.74 months of inventory compared to 1.29 two years ago. This puts the buyers in a better position to bargain than before.
The Cromford Report produced by Cromford Associates LLC, a local real estate market research company, is predicting that the market may shift away from a balance market to a seller’s market in early 2015 due to the “Boomerang Buyers.” These are the buyers that had been homeowners and lost their home to a short sale or foreclosure; in Maricopa County, one out of four homeowners were affected by this. The bulk of the families in this group will again be eligible to qualify for a loan in the early parts of 2015 and this will continue in waves for the next few years. Enough time has passed since the event of their short sale or foreclosure, which in turn will allow them to enjoy the benefits of homeownership again, thus calling them Boomerang Buyers.This will cause demand to increase and may lead to prices rising and days on market decreasing as inventory is absorbed by these buyers re-entering the market.
In any market it is always true that the best homes, the ones priced right and in the best condition, sell the quickest and for the most.