Markets Can Change That Fast....

There are lots of list price cuts going on at the moment. In the last 7 days we have seen a total of 2,843 price reductions for active / UCB / pending / TOM listings across Greater Phoenix and just 256 price increases. The total dollar amount of the reductions was $31.5M and the increases amounted to $4.1M. Compared with the same week in 2013, there were 61.7% more price cuts and 26.2% fewer price increases. In dollar terms, the reductions were not quite so impressive - up 45.2% from the same time last year. Increases were down 24.1% in dollar terms.

This is a far more negative reading of seller confidence than we had in January 2013. Although we had a brief respite from the wave of price cuts between Thanksgiving and New Year we are now back up to the peak levels we saw in late October.

Negotiation power for buyers is probably the best it has been since 2011.

Correction: Last week I created a Pending Chart for Scottsdale noting that the distress sector was down 37%. It was actually 64% for that prior graph (I must have inverted the percentage) and currently more like 70% as shown in the updated 'replacement' graph below. Thanks for the correction Jeff Reich. This is an important stat / trend, as Jeff points out, showing that the 'steals' (average $ / Sq Ft of distress properties vs. normal) are a rapidly diminishing opportunity. The greater point of last weeks graphs and my commentary stands - that the reduction in sales activity is disproportionately tied to the reduction in the distress market.

The opportunity today, as the above Demand Index signifies and the sample Pending Sales trend in the graph below affirms, is sellers needing to be realistic and negotiable on price to attract today's smaller pool of buyers.

 

The latest Cromford® Market Index numbers for single family homes by city indicate where the market is strengthening or weakening:

·  Chandler continues to enjoy a seller's market at 116.5, up from 113.9 last week

·  Avondale is balanced at 102.4, up from 101.6 last week

·  Glendale remains balanced at 100.3, down slightly from 100.5 last week

·  Mesa is balanced at 99.5, up from 98.7 last week.

·  Scottsdale is balanced at 98.7, the same as last week

·  Tempe is balanced at 92.5, up strongly from 89.8 last week

·  Phoenix is a buyer's market at 88.7, down slightly from 88.8 last week

·  Peoria is a buyer's market at 83.9 and is down from 85.2 last week

·  Gilbert is a buyer's market at 81.8, but at least it is up from 80.1 last week

·  Goodyear is a buyer's market at 78.3, but is up from 77.7 last week.

·  Surprise is very much a buyer's market at 69.4, but is up from 68.6 last week

·  Queen Creek (including unincorporated San Tan Valley) is very much a buyer's market at 56.4, but is up from 55.8 last week

Far more cities moved up than down over the last week. Only Peoria deteriorated significantly. However the dominant cities of Phoenix and Scottsdale barely changed.

Just because a city is a buyer's market does not mean prices will come down. It takes a long time in a buyer's market for prices to react, typically 9 to 18 months. The balance of power can easily change before this happens, given the volatility we have seen in the past.