December is a time of reflection and anticipation - digesting what has happened and accordingly what we might expect and need to plan for moving forward.
Yes, there's speculation they'll reverse course, but it would be a mistake to bank on that (pardon the pun).
- The consequences of higher rates have been dramatic in terms of unit sales (demand) in most market segments, though, from the industry's point-of-view there's the caveat that appreciation has mostly sustained our Sales Volume.
- The consequence to sellers in terms of prices is yet to be realized. Note:
- Prices are a lagging indicator.
- This is what we need to prepare for...
- As prices have been mostly maintained for those properties that are selling, the percentage selling has dropped significantly (demand).
- This is evidenced in the dramatic downward trend in the Listing Success Rate or Ninja's Odds of Selling.
- The result is accruing inventory, as the number of Active Listings are generally on the rise (supply).
The law of supply & demand: As demand drops relative to supply it eventually must show up in Sold Prices -
- Keep in mind again, price consequences are delayed and also dependent on Price Range (affordability) factors.
- Keep in mind also, predicting is tricky business.
- I don't know if prices will begin to moderate in Q1.
- What I do know is if the current dynamics of increased supply relative to demand continues, more price adjustments are inevitable AND in any case, we want to avoid setting up our sellers for increased marketing times and the potential of chasing a shifting market.
Here's what the recent trend in interest rates looks like ~
But what I wanted to point out is just how direct a correlation there is between interest rates and demand.
As interest rates rose the Cromford Market Index anticipated a corresponding drop in Demand, which materialized very quickly evidenced in Listings Under Contract, which, of course, you experienced firsthand. ~
Even so, the low supply (relative to low demand) has sustained a Sellers Market AND Sales Prices, though the general movement since Q1 of 2023 toward a Balanced Market is now at hand, with a Buyers Market evidenced by an increase in price changes and marketing times in a growing number of locations and price ranges.
Note: Yes, the graph below is sourced from the Valley-centric Cromford Market Index, but applicable statewide, as the dynamics of interest rates, inventory (supply) and unit sales (demand) are essentially the same.
- On average properties that undergo price adjustments have triple the marketing time!
- And if they do sell they often sell for less than had they accurately priced (competitively positioned) to begin with.
- We have the metrics to prove this.
When you miss that early, most motivated activity - from 'the hovers', as I call them, you've lost them.They don't come back - reason being they've figured out there's always competition for the best, so the action is with new, competitively priced homes.
This is a fundamental message!
Communicating this message regarding the merits of competitive positioning is 'counter-intuitive' to sellers.
- You think their home is special.
- You see no downside to testing the market.
- You posture that they can wait for the right buyer.
- Etc, etc.
It's a no-brainer! Yet, it's not understood, even by many agents!
1. Specifically how to competitively position a listing in any market segment using simple formulas and built-in FlexMLS tools and
2. Share the metrics that prove that avoiding price changes cuts the marketing time by 2/3rds and generally increases the sellers net!
Here's a sample:
Scottsdale Sales over the past 12 months; between $1M and $2M ~
Note that of the 1,489 properties that sold in Scottsdale in the past year between $1M and $2M, the 839 with No Price Changes (competitively positioned) on average sold in 37 days with an average of a 2.7% discount at time of sale off their original price.
By contrast, the 650 sold properties that had 1+ Price Changes took an average of 116 days to sell - TRIPLE the marketing time; took a 12.7% discount off their original list price only to net less than those priced accurately to begin with!
- This is your proof of the efficacy of competitive positioning.
- This is powerful in terms of seller education - influencing them to do what's in their best interest, though often counter-intuitive.
- This is differentiating, as most agents are ill-prepared to make the case that will deliver the most successful seller outcome, as they simply don't have the rationale or the metrics to make the case.