Thursday, March 17, 2022 / by Bryan Baylon
Over the last month, 8 of the 17 cities have improved for sellers while 9 have deteriorated for sellers. The average change in the CMI over the past month is 0.3%, down from 2.0% last week. We can expect next week's table to show a negative percentage.
Although this indicates the market is gradually cooling, it remains extremely hot and the cooling trend is about as weak as it can be without becoming no trend at all. At this pace of change it would take several years for the market to reach normality.
The top performing cities in the last month are Peoria, Tempe, Mesa and Paradise Valley, while the weakest are Goodyear, Avondale and Surprise.
We need to remind ourselves that CMIs over 110 indicate a seller's market where prices will rise faster than general inflation. Between 90 and 110, prices tend to rise in line with inflation. Below 90 home prices tend to fall or at least rise slower than inflation (which has become a significant number over the last year).
Home prices do not fall without a good reason. Few home owners want less than top price for their home. The weakest hands are always homeowners who wish they did not own the homes. In normal markets, these are banks and other lenders. However these organizations have an extremely low inventory of homes, so they are close to irrelevant at the moment.
The idea that home prices will automatically "correct" is a silly one. The housing market is not like a stock market, where the balance between supply and demand can flip several times a day. The housing market moves extremely slowly. The last time the CMI was below 110 was in January 2015 and the last it time it was below 90 was in November 2010. So the last buyer's market was more than 11 years ago. This is normal for the housing market and it is quite possible that the next buyer's market could still be many years away.
To create a situation which will force prices down, we first have to see more sellers than buyers. This is what a CMI below below 100 means. With the lowest CMI in the table above at 270.5, this is not likely for a very long time. If some of these were to drop below 150, then we might be a few quarters away from prices stabilizing. At the moment this is at least 12 months away, even in the most negative scenario we can imagine.
Sun City stands at 235.6 and is the lowest CMI we have at the moment. However the market there is looking pretty stable. With a median sales price of $350,000 it is also one of the most affordable location in central Arizona.
Market incites provided by the Cromford report.