Thursday, July 28, 2022 / by Bryan Baylon
The average monthly change in CMI was -32%. This is an improvement on last week when the reading was -34%. It is still a very large deterioration in a very short time. New listings are still coming at us faster than last year, but not as fast as they were three weeks ago. Demand is still weak and showing only a few modest signs of stabilizing.
We now have 3 cities in a buyer's market - Buckeye, Queen Creek and Maricopa. Here buyers now hold a distinct negotiating advantage and have a total of 2,243 active single-family detached listings to choose from. This compares with 675 just three months ago. Because the majority of these areas cater largely to first-time buyers who are less experienced, it can take a few weeks for these buyers to realize how strong a hand of cards they hold.
Above them we have Gilbert, Tempe, Surprise, Chandler and Peoria in a balanced market where the buyers and sellers have no particular advantage. However astute sellers will realize that the situation is very fluid and slipping away from them. At the current rate of change, Gilbert will become a buyer's market by the end of the first week in August. Tempe is only a day or two behind Gilbert, while Surprise, Chandler and Peoria will probably become buyer's markets by mid-August.
Glendale, Phoenix and Mesa are seller's markets but within a couple of days will enter the balance zone between 90 and 110. At the current rate of change they will become buyer's market before the end of August. Goodyear and Avondale are 2 weeks behind these but unlikely to be still seller's market by the end of next month.
The 4 cities at the top of the table are in a different situation. The luxury market over $1.5 million is seeing far less of a surge in supply and although the market is deteriorating through weakening demand, the deterioration is much slower. However in Scottsdale, the less expensive end of the market is behaving similarly to the rest of the Greater Phoenix area.
Prices have looked wobbly for the last 2 months, but as buyers start to flex their muscles, we should be prepared for more serious consequences. While we cannot forecast accurately several months out, it would be reasonable based on current trends to expect significant declines in average prices, median prices and average $/SF by the end of 2022. Current trends can (and often do) change, so this is not baked in, just a reasonable base case.
We would not be surprised if the growth in supply started to slow down, but what is going to re-start demand? The most obvious answers are that either interest rates have to come down or home prices have to come down. Either or both of these can increase demand so we can get back to a balanced market again.
Market incites provided by the Cromford report.