Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Glendale is now the only holdout where market conditions improved for sellers over the last month. The other 16 cities saw conditions improve for buyers, many dramatically so. Cave Creek, Peoria and Paradise Valley saw their CMI drop by 25% or more, while Fountain Hills and Buckeye fell 19%.

We have not seen such a precipitous drop in the CMI since the second quarter of last year.

However, this does not mean the market is cool. In Phoenix, for example, the reading of 435 means there are more than 4 buyers for every home available for sale. Even in Buckeye, the bottom ranked city, there are more than 2 buyers for every home available for sale.

For prices to go down, we need to have more sellers than buyers. If we had twice the number of homes for sale and half the current demand, conditions would be right for a balanced market. A cursory glance tells us that situation is still a long way away.

Where would double the supply come from? Not from existing normal owner-occupiers, who would probably need to find a replacement home for the one they are selling and would be unimpressed by the prospect of exchanging their current mortgage for a much more expensive one. Both demand and supply are likely to keep trending down from these normal home-owners.

The most likely source of more homes for sale would be investors who have lost the desire to hold onto their investments. If they cannot find a tenant, then their asset has significant holding costs (HOA fees, property taxes, maintenance, utilities, etc.) that they could do without. Although finding a landlord with a long-term empty property has been difficult over the past several years, it is not so hard to imagine this at some point in the future.

This is why we are advising our subscribers to keep an eye on rental supply and rental rates. Look out especially for signs of landlord distress. First month rent-free, rent price cuts and other creative incentives offered to tenants are signs that all is not well in landlord-land.

If this scenario does NOT come to pass then all we are seeing is the gradually cooling of an overly-hot market with the softest of soft landings. Prices will continue to climb in these conditions, though at rates closer to overall inflation. This is still a pretty high rate because inflation appears to be out of control right now.

If it does come to pass, it is conceivable that there is a race to exit the market by the financially-weakest landlords and those with the least appetite for risk. In these circumstances we would see a growing inventory of homes to rent, followed by a growing inventory of those same homes for sale.


Market incites provided by the Cromford report.