The housing market, along with much of everything else, has taken us on quite a wild ride this past year. Things are currently shifting in Arizona, and with the help of the Cromford Report, we’ve put together a short summary and action steps you can take to prepare for the next market swing.
Throughout the state, we are seeing a surge of new listings. Since March, active listings have increased by 138% and buyers are seeing anywhere from 800 to 900 new listings on the MLS each week, particularly those within the $400K and over price point. The rising interest rates are to blame for the lack of demand on housing under $400K. The home inventory is most likely from wealthier sellers off-loading a second house, landlords getting rid of properties, or short-term rental owners (think Airbnb) who have decided to sell. If this trend of inventory continues, it’s possible to see a market balance by mid-August.
That being said, we are still not in a buyers market. The good news is mortgage rates change. We’ve seen this historically and by now we know they don’t stay high or low forever. In fact, the Mortgage Bankers Association expects rates to decline from the current 5.2% to 4.4% by 2024.
Though the market feels like it’s shifting toward the buyer, it still favors the seller. You can see in the graphic below that there’s been a significant increase in supply and a decrease in demand which is making the market feel like it’s balancing out.
Demand still outweighs the supply despite the increase in inventory above $400K. Sellers are still seeing an increase of prices over asking. In fact, in April the median closing price was $20K over listing. However, closings over asking are expected to drop over the next four weeks.
Because of the rapid shift from sellers market v buyers market, many of us want to know when is the best time to buy or sell? Unfortunately, most buyers don’t realize when the timing is right to purchase a home until it’s too late. The best plan is to hold your property for the long term and take refinance options as they come along to better your position. After all, we don’t know when the market will level off.
We understand this isn’t always possible for everyone. Here are a few ways you can prepare for the impact of the changing market:
- Adjust expectations when selling. Be prepared for less offers and longer hold times. Having cash on hand is critical at this stage to cover holding costs, repairs, etc.
- Structure sales differently. You may need to sweeten the deal by offering seller concessions, home warranties, etc.
- Decrease your leverage. If you own multiple properties and are highly leveraged, it may be wise to sell one or two to increase your cash position.
- Find more deals. If you’re a fix and flip investor, when the market balances, you’ll need to search for deals at a discount in order to turn a profit. You will no longer be able to count solely on the appreciation.
- Start mentally shifting. It can be difficult to do, but you’ll need to shift your thinking to that of a buyer’s market. Ask yourself, “how will I build up a cash reserve?”
It’s important to make preparations now. Once the market shift is over, there will be opportunities for investors.
If you have questions about the market and want to speak to one of our wise advisors, connect with us today!
This blog was written by Mike Zins and Jean Klinkhamer who is a licensed Real Estate Agent