Navigating the Real Estate Seesaw: Is There Finally Equilibrium?

By Joseph Callaway

Are we back to a balanced market? Okay, let’s get ready to do some tricky math. First, what is a balanced market? Some markets are referred to as a sellers’ market which means there is a shortage of inventory and an excess of buyers. This is what we’ve experienced in recent years leading to complacent sellers who felt they could sell easily, or even sell to an investor or direct buyer for top dollar.

With only 7,000 homes for sale, buyers were frustrated with bidding wars and a seller preference for cash buyers. Prior to this sellers’ market we had a buyers’ market with as many as 60,000 homes for sale and buyers putting in less than full price offers, which often got accepted.

Before these two wild swings, we had a balanced market. For those of you who can’t remember, a balanced market is just the right number of homes for sale to meet the number of buyers looking to buy. Sellers can still get what they deserve, and buyers can still find and buy a home.

That market was an inventory of 20,000 homes for sale in Maricopa County. Now here is the tricky math part.

All this is based on demand for about 7,000 to 8,000 homes sold per month. Well, that demand is down about 30% since interest rates took a dramatic upward turn. So, is the 20,000-inventory valid with a sustained reduction in demand?

What if we reduce that 20,000 by 30% to match the drop in demand? Well, that takes us to 14,000 homes for sale being a balanced market. Got it? Feel free to read that back. Today, inventory is just over 14,000 homes. If this premise is correct, we are finally back to a balanced market.

The last balanced market lasted 14 years, from 1990 to 2004. It is the best of all possible worlds because most sellers are also buying, and now they can do so with ease and confidence.

Let’s hope my math is right, because if it is, we are about to enjoy a surety in real estate that’s been missing for a long time. Cheers.

Joseph Callaway is with Those Callaways eXp Realty and has been selling houses in The Magic 85254 Zip Code for more than 26 years.