By Sean Colón
Graphic: Cromford Report. (September 2023). Retrieved from https://cromfordreport.com/
In the ever-evolving world of real estate, understanding the dynamics of the market is key to success. Today, we take a closer look at the Phoenix metro area, providing realtors with valuable insights and statistics that can inform their strategies in this dynamic landscape. From the perspective of both buyers and sellers, we'll break down the current state of the market and highlight opportunities as we move into the final quarter of 2023.
Buyers:
When the conversation turns to mortgage rates, some may recall their parents or grandparents proudly reminiscing about securing a home in the '80s with interest rates ranging from 10% to a staggering 18%. For the Baby Boomer generation, this high mortgage rate, despite the economic uncertainties of their time, proved to be a wise investment. It's a testament to the value of a long-term mindset.
Fast forward to 2023, and while mortgage rates hover between 6.8% and 7.5%, many potential buyers are holding off, hoping for a rate reduction. They are, in some ways, similar to those who hesitated two years ago when rates were below 3%, only to regret their decision later. Waiting for the perfect alignment of price, timing, and mortgage rates can be a fruitless endeavor, as competition intensifies when all the stars align.
As we enter September, the Phoenix real estate market traditionally enters a buyer-friendly phase. Active listings increase, providing more choices for buyers. The median sales price is $40,000 lower than the peak observed in June 2022, and prices are currently stable. Despite this, 41% of sales involve seller-paid closing costs, often including rate buy-downs. However, these closing cost concessions are expected to decline as rates decrease and buyer competition rises.
Sellers:
For sellers, the median time for securing an accepted offer currently stands at 21 days. But, as the year-end holidays approach, it's wise to allow an extra week or two for properties listed in October. Historically, homes listed in October spend 2-4 days more on the market compared to those listed in September. Late October or early November listings tend to linger even longer, up to 10-14 days.
Real estate professionals often emphasize the importance of the first week a property is on the market. Analysis of the past month's sales data supports this advice. Properties that accepted offers within one week of listing achieved 68% of their original list price or more at closing. This percentage drops to 53% after two weeks on the market but remains a majority. By the end of the third week, 59% of sellers accepted offers below their initial asking price, rising to 81% after four weeks on the market.
As October progresses, longer marketing times typically result in increased active listings and price reductions. This year follows that pattern, with weekly price reductions rising by 34% since July, although still significantly down (63%) from the previous year. Sellers planning to list in the coming weeks may want to factor in at least one price reduction in their strategy.
Despite these nuances, it's important to note that the market continues to favor sellers. Year-to-date, sale prices have appreciated by 6-7% over the past eight months, with homes spending 12 fewer days on the market compared to the previous year. Negotiations remain tight, with sale prices typically settling within just 2% of the last list price on average. Mild price appreciation is anticipated to continue for the next three months.
Conclusion:
As we wrap up this September market snapshot, it's evident that both buyers and sellers have opportunities to capitalize on current conditions. Buyers can benefit from the increase in active listings and stable prices as we enter the final months of 2023. Meanwhile, sellers should be mindful of the importance of the first few weeks on the market, especially if listing in October. While market dynamics evolve, one thing remains constant: success in real estate comes to those who adapt and make well-informed decisions in this ever-changing landscape.
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