In comparison to 2013, the 2014 Arizona real estate market experienced a fairly balanced market, meaning the number of homes that were available for sale and the number of buyers for those homes was approximately equal. The 2013 market favored sellers because there was a shortage of homes available for sale in comparison to buyer’s demand. Due to high demand and low supply, we saw prices rise and the number of days on market decrease.
Many homeowners in 2013 had been sitting on the fence. They wanted to sell, but did not have enough equity in their home to avoid having to short sale. As these homeowners became aware of increasing home values during 2014 they began offering their homes for sale, which increased the supply of homes available. At the same time, the investor buyers had been exiting the market for the same reason. Home values had risen to a point that it did not make sense from an investment standpoint to purchase in the Arizona market. In 2014, we saw supply rise and demand drop. The good news is that prices did not drop with demand, rather prices leveled off.
In October, the number of transactions decreased from September by 2.3 percent. This is normal for this quarter of the year and it is historically the slowest quarter for the number of home sales. The good news is that the average sales price actually increased slightly from $255,518 in September to $257,581 in October; this is the first increase in the last five months.
However in November we saw a 4.9 percent increase in the average days on market; it went up from 81 to 85 days. To put this in perspective, in November of 2013 we were at 56 days on the market. The longer a house is on the market for sale, the more money it will cost the seller in mortgage payments and other expenses associated with owning a home. Sellers need to pay attention when the market is shifting and/or leveling off to be more competitive in pricing and condition. Buyers are aware there are more homes to choose from. Therefore, they are not afraid to make aggressive offers to get the house for less. We are seeing buyers being less negotiable with sellers who are unwilling to do repairs and not moving forward without an acceptable appraisal. However, buyers need to keep in mind the best homes for sale will sell quickly and for the most money.
The absorption rate for homes on the market increased to 3.74 months and has been increasing over the last six months. This statistic measures the number of months it would take the homes currently on the market to be absorbed by buyers, given no other homes were to come on to the market. This is the highest since last February. Historically, January and February are the months when we experience a rise in inventory, due to the fact that sellers wait until after the holidays to get their homes ready to put on the market. Buyers are also aware of this fact. Last month we had an increase of 3.74 months of inventory compared to 1.29 two years ago. This puts the buyers in a better position to bargain than before.
The Cromford Report produced by Cromford Associates LLC, a local real estate market research company, is predicting that the market may shift away from a balance market to a seller’s market in early 2015 due to the “Boomerang Buyers.”These are the buyers that had been homeowners and lost their home to a short sale or foreclosure; in Maricopa County, one out of four homeowners were affected by this. The bulk of the families in this group will again be eligible to qualify for a loan in the early parts of 2015 and this will continue in waves for the next few years. Enough time has passed since the event of their short sale or foreclosure, which in turn will allow them to enjoy the benefits of homeownership again, thus calling them Boomerang Buyers.This will cause demand to increase and may lead to prices rising and days on market decreasing as inventory is absorbed by these buyers re-entering the market.
In any market it is always true that the best homes, the ones priced right, staged to sell and in the best condition, sell the quickest and for the most money the market will allow.
For more information about your home’s worth or if you’re ready to make a real estate purchase, please contact me at 602-320-4253 or JPCook@JPCookAZ.com.