By Holly Henbest, Realtor
We’re starting to see some shifts in the market. When I say shift, I’d like to emphasize that we aren’t seeing any major changes, but there are small little shifts happening that show we are now heading toward a more balanced market. However, as we head toward that balance, it will probably be at least another year before we see any significant difference in the imbalance of supply and demand. So, don’t take this news for more than it is. A slight shift does not mean a bubble or a collapse of pricing. It is simply a few small steps toward a more balanced market.
So, what are the small shifts? First, in April we saw an increase in “Coming Soon” listings. That means more homes are getting listed for sale and ready to hit the market. We also saw an increase in single family home rentals and a decrease in the price per square foot list price of rentals.
I’d like to clarify what a reduction in the average price per square foot means. That does not mean that the average price of an individual home has been reduced or lost value. It really means that more lower priced homes have been listed. This is a critical item to understand. A lot of people assume that prices are going down when they see the average price per square foot decreasing, but that is not a direct correlation. It just means that more homes are being listed for a lesser price. That, however, is good news because it means there are more rental options coming available that are more affordable.
The reason it’s good to see more rentals available at a more affordable price is because it will allow people who want to move to have more options. Therefore, more people may list their home for sale since they are now more comfortable knowing that more rental options may be available for them to live in while they wait to find a home to buy. This is a very common tactic for people who want to move: sell your house, move into a rental, and then buy a home when the right one comes on the market. With the market so low in inventory of homes for sale, a lot of people are hesitant to list their home for sale, because where will they go? Now, with more rentals becoming available, there are more options, so it should help to get more sellers off the fence and their homes listed. With the market so competitive for buyers, it’s also important to have fewer contingencies in your offer, so if you need the money out of your home to put toward your purchase, it’s wise to get your home listed and sold prior to buying. Another option is to list your home for sale and then rent back from the buyer until you find a new home. It really depends on which option you’re most comfortable with.
Another factor contributing to a more balanced market is interest rates. Interest rates are still relatively low but they have gone up over the last few months. Some buyers are more impacted by this than others, especially buyers in lower price ranges. Inevitably, some buyers have or will exit their search process because of interest rates. That means there are fewer buyers making offers. We’re still seeing multiple offers but the numbers have decreased.
Another impact we’re feeling currently is buyer burn-out. This has been a growing problem for the last year. No one likes to be a loser and if you are a buyer and you’ve made multiple offers and never won, that gets old and depressing. So, some buyers are stepping back from the emotional roller coaster and taking a break. However, it is likely that, after a break, they will want to return to the search process.
The most significant impact to a balanced market will be more homes listed for sale. Ultimately people decide to move because life happens. People get married, have babies, retire, get relocated, kids go to college, incomes change, and all of those life events contribute to the need to move. People have put plans on hold for a long time between the pandemic and a tight housing market, but at some point, you just have to get on with your life plans and I think that’s what we will see more of in the coming months.
Before you get all excited that the market is going to be stabilized and all will be back to a more “normal” state, please know that we are a long way away from normal, but we can appreciate the small shifts that are guiding us toward a more balanced supply and demand market. Do you have any questions about your home value or your neighborhood? If so, please reach out at firstname.lastname@example.org or 480-266-8785.
Holly has been a Desert Ridge resident since 2000 and has been a Realtor since 2006. She is the leader of The Henbest Team with Realty One Group. Holly is ranked in the top ½ of 1 percent of Realtors in Arizona and is a certified luxury marketing expert. She has been ranked #24 in the Top 50 Realtors by the “Phoenix Business Journal” for the past several years and recognized by “So Scottsdale!” magazine as a Real Estate Superstar for 2019, 2020 and 2021. She’s also been the #1 ranked realtor at Realty One Group/North Scottsdale for the past several years. Learn more at henbest.com.