The Valley housing market’s cool-down is occurring at different rates in different cities and towns and high-end homes in Scottsdale and three other communities are being impacted by plummeting demand, according to a leading analyst of the Phoenix Metro market.
The Cromford Report said that Queen Creek, Buckeye and Maricopa already have become the most attractive areas for homebuyers to score a big deal while Phoenix is among the cities where buyers will have to wait a month before they can try to barter their way to a better deal.
The balance between supply and demand is now so tilted toward buyers, that they could be now calling the shots in Buckeye, Queen Creek and Maricopa, the Cromford Report said, adding that it may depend on their experience in the real estate game.
“Here buyers now hold a distinct negotiating advantage and have a total of 2,243 active single-family detached listings to choose from,” it said. “This compares with 675 just three months ago.
“Because the majority of these areas cater largely to first-time buyers who are less experienced, it can take a few weeks for these buyers to realize how strong a hand of cards they hold.”
The Cromford Report identified five other communities whether neither buyer nor seller has a distinct advantage in sale negotiations. They include Tempe, Chandler, Surprise, Peoria and Gilbert.
But it’s sellers in those five areas that need to be a little nervous, it added.
“Astute sellers will realize that the situation is very fluid and slipping away from them,” the report said.
“At the current rate of change, Gilbert will become a buyer’s market by the end of the first week in August. Tempe is only a day or two behind Gilbert, while Surprise, Chandler and Peoria will probably become buyer’s markets by mid-August.”
Phoenix is in the same boat as Glendale and Mesa in Cromford Report’s opinion.
They “are seller’s markets but within a couple of days will enter the balance zone between 90 and 110. At the current rate of change, they will become buyer’s market before the end of August. Goodyear and Avondale are two weeks behind these but unlikely to be still seller’s market by the end of next month.”
Four Valley cities – Fountain Hills, Paradise Valley, part of Scottsdale and Cave Creek – are in a different situation and, in a way, a different world from the average buyer and seller.
Those four communities are largely considered in the domain of luxury housing, where homes $1.5 million and above have not been tilting as sharply and quickly from a sellers’ market to a buyers’ market as the rest of the Valley, according to the report.
However, the Cromford Report said part of Scottsdale is appearing as it will soon join the overall trend dominating the rest of the Valley.
“The luxury market over $1.5 million is seeing far less of a surge in supply and although the market is deteriorating through weakening demand, the deterioration is much slower,” it said. “However in Scottsdale, the less expensive end of the market is behaving similarly to the rest of the Greater Phoenix area.”
Last week, the Cromford Report said that while the recent increase in homes for sale appears to be slowing down, “demand not only remains very poor, it is getting weaker still.”
It said the 7,887 listings recorded in July not only were 28% lower than a year earlier, but the lowest for the end of July since 2007.
The Cromford Report also suggested bigger changes in the Valley’s housing market could occur before the end of the year.
“Prices have looked wobbly for the last two months,” it said. “But as buyers start to flex their muscles, we should be prepared for more serious consequences. While we cannot forecast accurately several months out, it would be reasonable based on current trends to expect significant declines in average prices, median prices and average price per square foot by the end of 2022. Current trends can – and often do – change, so this is not baked in, just a reasonable base case.”
It also said the rapid growth in inventory might slow down soon but without a corresponding uptick in demand.
“What is going to re-start demand?” it asked. “The most obvious answers are that either interest rates have to come down or home prices have to come down. Either or both of these can increase demand so we can get back to a balanced market again.”
Builders apparently are slowly reacting to the changing housing scene.
“Single-family permits are now dropping in response to the weak demand but probably not as fast as they should,” the Cromford Report said.
It reported that as of June 30, 17,788 single-family building permits have been issued so far this year in Maricopa and Pinal counties year-to-date – down only slightly from 18,803 last year for the first six months of 2021.
“There were only 2,248 single-family permits issued in June, which is the lowest monthly total since May 2020,” the Cromford Report said.
At the same time, multifamily developers aren’t slowing down at all and are at what the Cromford Report called “a full-bore gung-ho status.”
In the first six months of this year, a record 8,640 multi-family permits were issued in Maricopa and Pinal counties.
“Last year there were 6,871 at the same point and that was considered a lot,” the Cromford Report said. “There were 1,890 issued in June, making it the fourth busiest month ever.”