Articles Tagged "multiple offers"

Sold in 3 days! Sold thousands over asking price! Watching these ads may give you the impression you're getting something out of the ordinary. In this brief market update, I review the Phoenix market conditions so you have a clear and accurate picture of what's normal. Those high-dollar ads come at a price. Find out how to choose the best real estate agent when it's time to sell or purchase a home. 

Cindy Nelson is an Arizona native and Realtor with Realty ONE Group and serves the Phoenix Metro area and the White Mountain region. This includes Phoenix, Gilbert, Mesa, Chandler, Tempe, Apache Junction, Queen Creek, Gold Canyon, Maricopa, Scottsdale, Phoenix, Glendale, Buckeye, Peoria, Surprise, Tolleson, Laveen, Sun City, Sun City Grand, Fountain Hills, Sun Lakes, Goodyear, Litchfield Park, San Tan Valley, Pinetop, Lakeside and Show Low.

For Buyers: 
Does anyone know what a normal, or balanced, housing market looks like anymore?  In Greater Phoenix, the supply and demand indices have only come together twice in the past 21 years to form a balanced market.  First from 2000-2003, then again from 2014-2015.  There have only been two buyer markets recorded during that same time frame, from 2006-2009 (extreme) and a brief 3 months in 2010 (mild).  Seller markets were recorded from 2003-2005, 2011-2013, and 2015-2021. The last 18 months have been extreme to say the least.

Over the past 21 years, Greater Phoenix has been in a buyer market for a combined total of 43 months (3.6 years), a balanced market for 55 months (4.6 years) and a seller market for 155 months (12.9 years).  This is important to discuss because the longer seller markets last, the more human beings change their definition of what "normal" looks and feels like. 

"Normal" for Greater Phoenix is not a balanced market, it's a seller market. The years from 2015-2019 got us used to 2-3 months to sell a home, 15-19% of sales closing over list price, $2,500 over list considered an amazing offer, 25-28% of sales with closing cost assistance and 5-9% annual appreciation.

The last 18 months have shifted our expectations to 1 month to sell a home start-to-finish, 40-60% of sales closing over list price, $10,000 over asking price to start the bid, only 2-3% of sales with closing cost assistance and 27-39% annual appreciation.

So when national analysts suggest the housing market will cool off in 2022, many (if not most) local housing analysts believe it will remain a seller market, but a weaker one.  Prices don't decline in seller markets, but listings may stay active for a few more days before accepting a contract. A full price offer may be enough to win a home. Buyers may have less pressure to waive appraisal and repairs.

However, after the last 18 months of extreme seller market conditions, anything less than sheer lunacy could feel like the sky is falling.

For Sellers:
With all the talk of 2022 predictions and uncertainty, it's important for sellers to stay in the moment and lean into what is known.  The reality of the Greater Phoenix housing market is that supply is 67% below normal and dropping.  Demand is 23% above normal and stable for now.  Until these two indicators start moving towards each other, the housing market will not see prices stabilize. If anything were to negatively affect Wall-Street-financed corporate iBuyers and institutional landlords, then that would cause a shift downward in demand.  That could happen someday, but it isn't happening today.

Even if demand were to decline tomorrow, sale price measures are the last to change in a shifting market. The first thing to go up would be the cost of the sale for the seller.  For example, days on market will increase, list price reductions will increase and then eventually seller concessions will increase before anything is reflected in the final sales price.  The pattern goes like this; homes are on the market longer than expected as sellers push the boundaries on price. If the market resists in the form of zero offers, a price reduction is recorded in response.  If demand dwindles to where only one offer is received instead of multiple offers, more pressure is placed on sellers to offer home warranties, do repairs, or consent to closing cost assistance in order to secure closing at their desired price. None of these indicators appear to be shifting at the moment, but that could change.  The key for sellers in 2022 is to stay on top of current market trends, listen to your REALTOR®, and be the first to shift expectations if buyer demand drops.  A wise REALTOR® once said, "If you can't be with the buyer you love, love the one you're with."

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 Cromford Associates LLC and Tamboer Consulting LLC

How long will it be before we hit a balanced market in the Phoenix metro area? In this brief video, I'll compare the 2005 real estate market to 2021, plus I'll explain what you can expect in the months ahead for both buyers and sellers.

Good News for Buyers. What's Ahead for Sellers as Demand Weakens.
Median Sales Price Up 29%, Fewer Contracts

For Buyers:
Buyers with budgets over $300,000 may be noticing that they have more listings to choose from compared to a few months ago. This is especially true in the price points between $400,000 and $800,000 where inventory has grown 92% since February. When a buyer has, for example, 4 or 5 homes available that meet their criteria instead of just one, they are less inclined to throw all of their ammunition into one home in order to win it. They may still offer full price or more, but may not be under as much pressure to waive contingencies and
shorten inspection periods.

As this subtle change proliferates with more inventory, the buyer experience will become less stressful. As the median sale price continues to rise, affordability is something to pay attention to. Not what's affordable to you necessarily, especially if you're out of state, but what percentage of the local population can afford your home if you need to sell right away or sometime in the future. A family making the median income in Greater Phoenix could afford 63% of what sold in the 1st quarter of 2021. That was within the normal range of 60-75%, indicating a good time to buy or sell. While we wait until August for the 2nd quarter measures to be released, we expect the new measure to land around 57%, slightly below normal. This does not indicate that the market will plunge into a buyer market causing prices to decline, but it does indicate a reason to expect prices to rise much slower going forward.

For Sellers:
The Greater Phoenix AZ housing market continues to shift from an extreme seller market into a less extreme seller market. As prices continue to rise, more new sellers are motivated to put their home on the market and fewer buyers are able or willing to pay the higher price. Over the next 5 months, give or take, the market is expected to move into a weaker seller market, driven in part by dwindling affordability and buyer fatigue.

The first half of 2021 has been so insane with contingency waivers and exorbitant offers over asking price that many sellers may not know what a normal seller market looks like. Here are a few things to expect: 

• Sales price appreciation will not average 3.1% per month. April 2021 saw prices appreciate 5.1% within 4 weeks. May was 2.3%. June was 1.1%. From 2015-2019, a long-term seller market but much weaker than today, prices appreciated at an average of 0.5% per month with a range between 0.3% and 0.8%.

• There will be more list price reductions. It's important to remember that the sales price is the LAST thing to respond in a shifting market. One of the first things to respond is a list price, in the form of a price reduction. When a seller overshoots what the market can bear, they will get the silent treatment in the form of zero offers. That triggers a price reduction by the seller. Weekly price reductions have risen 112% since mid-February from 317 in a week to 672. In a weaker seller market, expect between 1,500-2,000 price reductions every week.

• Sellers will get their price, but pay more in concessions. If a seller prices their home high in anticipation of excess demand but only gets one offer instead of multiple offers, they are more likely to accept home warranties, do repairs and offer concessions. Currently, the percentage of sales involving concessions is very low at 4%, up from 2.7% the week prior. In 2019, a good seller market, 25% of closed sales involved seller concessions.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 Cromford Associates LLC and Tamboer Consulting LLC

Here's a quick look at the Phoenix Arizona real estate market for November 2020.  You might be surprised at what's impacting the market the most. Hint: It's not all price increases. You'll also find out why first time home buyers and investors have far fewer homes to choose from.

Cindy Nelson is an Arizona native and Realtor with Realty ONE Group and serves the Phoenix Metro area and the White Mountain region.