July 2022 Market Update

Dated: July 14 2022

Views: 624

Extreme Seller's Market Over

Sellers: DON'T DO A PRICE REDUCTION!

July 2022 Market Update

For Buyers:

Welcome to a balanced market*, how quickly the tables have turned! While seller markets are ideal for the not-so-perfect home, balanced markets are ideal for the not-so-perfect buyer. This means that buyers who have been recently rejected due to lower down payments, non-conventional financing, or need for closing cost assistance will find sellers are now willing to work with them in this new environment. Supply across all price points is up, with 53% of active listings added by new home developers and investors. Builders especially are dropping prices and offering unique buyer incentives to compete. Experts don’t know how long this period will last as it depends on what interest rates do over the next few months, but home buying just became fun again.

*The market is considered in balance when the contract ratio is between 30-60. Calculated by dividing what’s under contract (8,680) by what’s active (15,033) and multiplying by 100, the contract ratio as of July 7th, 2022 is 58.

For Sellers:

The proverbial “Dump Your Junk” season is over, that loving phrase the industry uses when demand is significantly higher than supply and even the smelliest dilapidated property gets multiple offers over asking price. That is no longer the case as of this writing. Get ready for longer marketing times, multiple price reductions, Realtor® tours, price opinions, staging, repairs, seller-paid closing costs and price negotiations. The extreme seller market is over.

It’s no surprise that the market has been shifting since February, with the primary influence being large mortgage rate increases. However, over the past 6 weeks mortgage rates have been particularly volatile, fluctuating from 5.1% to 5.8% within 3 weeks only to drop to 5.3% over the next 2 weeks, and then back up to 5.8% a week later. History tells us that buyers do not like sharp, rapid fluctuations in mortgage rates. It causes buying activity to freeze until a level of stability and certainty can be achieved. This market is no different, contract activity has dropped 28% in the last 6 weeks. The number of listings under contract at this time of year should be around 10,000, putting today’s count of 8,680 well below normal.

In the meantime, a 220% increase in supply over the past 15 weeks has put pressure on sellers to compete. With cash buyers offering significantly below list price recently, attention is back on traditional buyers, many of whom have been priced out of the market due to affordability. Price reductions have gone up 500% since March, but have done little to increase demand as mortgage rate increases offset their effect and continue to keep payments high.

But not all is lost! Cue the interest rate buy-down, a seller concession tool that has been collecting dust, unneeded, for well over a decade. The reason price reductions have had little effect on affordability is a $10,000 price reduction only saves a buyer $53 on their mortgage payment at 5.8%. However, for a similar cost a seller can buy down a buyer’s mortgage rate and save them $100’s on their monthly mortgage payment, either permanently or temporarily depending on the plan; thus putting their property at a higher competitive advantage than just a straight up price reduction.

Price reduction vs. rate buy-down options:


Median Price
$475,000, 10% Down
5.8%*

Full Price
No Concessions

Price
Reduction

Permanent
Buy-down
to 4.8%*

2/1 Buy-down
to 3.8% for 1st year
then 4.8% for 2nd Year*

Estimated Cost to Seller

$0

$15,000

$12,825**

$9,405***

Estimated P&I Payment

$2,508

$2,429

$2,243

$1,992

Monthly Savings to Buyer

$0

$79

$265

$514

DOWNLOAD YOUR COPY

Contact the real estate experts at NextHome Valleywide at 480-621-6828 for more information.

If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area, and are not sure where to turn . . . we can help!

  • Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more.

  • Visit our blog at Nexthome Valleywide News for a monthly Phoenix Area Market Update.

Blog author image

Craig Akers

Craig was raised in the Valley of the  Sun and loves the Phoenix area.  Graduating from Corona del Sol high school in 1982, Craig attended Arizona State University on the prestigious ASU Leadership ....

Latest Blog Posts

August 2022 Market Update

Seller Closing Cost Assistance Rising$1-1.5 Million Declining FastestFor Buyers:Good news for buyers, the number of closings with seller-paid closing costs rose 27% in July compared to June equating

Read More

7 Costly Mistakes Home Seller Make

No matter what’s going on in the housing market, the process of selling a home can be challenging. Some sellers have a hard time saying goodbye to a treasured family residence. Others want to

Read More

July 2022 Market Update

Extreme Seller's Market OverSellers: DON'T DO A PRICE REDUCTION!For Buyers:Welcome to a balanced market*, how quickly the tables have turned! While seller markets are ideal for the not-so-perfect

Read More

Higher Rates and Short Supply

The last two years caught many of us off guard—and not just because of the pandemic. They also ushered in the hottest housing market on record, with home prices rising nationally by nearly 19%

Read More