Real Estate Market is Correcting Itself, So What Can You Do?

Beyond a shadow of a doubt, the Housing Market has begun to shift. Most of us have seen this coming, and I have to say it’s about time.

Price increases in an average year sit around 6-7%. Nearly every market in the country has exploded way above average, exceeding that percentage by double, triple, quadruple… simply unfathomable amounts. Between an extreme lack in inventory of homes for sale, incredibly low interest rates, and skyrocketing home prices, a market correction was long overdue.

Fortunately it seems this is not a complete about-face like we saw during the Real Estate crash of the late 2000s. This appears to be (at least right now in its infancy) a measured turn-around that will readjust our market to something that more resembles normal.

What is causing the Real Estate market to correct itself? There are three critical contributing factors:

Inventory has picked up. In the Phoenix Valley, the number of homes on the market in mid May is about 40% higher than in January of this year.
Interest rates are rising. The FED raised interest rates in an attempt to slow inflation. As a result and as expected, Mortgage rates, having maintained historic lows for several years, are now increasing.
Prices are stabilizing. Though the market is still competitive, there are fewer multiple offers. Homes are remaining on the market for longer periods of time, and buyers are beginning to loose interest in anything they consider overpriced.

But more important than the actual cause is your reaction to it.

Home Buyers, aware that they are paying top-dollar, have become much more mindful about location and condition and more cognizant of demands made by the Home Seller that may sound excessive.

Make no mistake, the market is a long way from stable. This is a complex and dynamic Real Estate market. Conditions are changing daily, so it’s important to find the right Realtor to represent you and your investment. Listen to their advice- It is in your agent’s best interest to do what is in your best interest. After all, Realtors don’t collect a pay check, so your satisfaction is your Realtors only possibility of success.

Here are a few tips to get you started, then give us a call. We’ll walk you through, not just one option, but all of your options. We’ll explain how ‘Cash Buyers’ and ‘iBuyers’ work, and the affect that rising prices have had on them. We’ll discuss the ‘Quick Sale’ alternatives as opposed to traditional transactions. Whatever your preferred method, we can help.

So what can you do to weather an uncertain Real Estate market?

Avoid unreasonable demands. Under these conditions, nether Seller nor Buyer holds all the cards. There are several points of negotiation during which a Buyer or Seller can implode their transaction. Think before you act and consult your Realtor before making any decisions.
Be realistic about price. Home sale statistics used in appraisals are generally 30-60 days old but they use other statistics as well. It is imperative that you be aware of not only what has sold in your neighborhood, but what is currently on the market and more importantly what is pending or under contract. Knowing the condition and individual features of each of these homes is also crucial.
1. Home Sellers can no longer expect what I recently heard an appraiser describe as a “Unicorn Buyer”. He went on to explain that even during the most over-the-top moments in the past 2 years or so, only 15% of sales have been all-cash here in the Valley.
2. Home Buyers must also be practical. Just because the market is beginning to shift, this does not mean you have all the power. Of course the condition of the home can be a deal breaker, but it doesn’t always need to be that way. This is where thorough analysis of the issues and thoughtful negotiation come in.
Investors will likely be less relevant. For Sellers and Buyers the affect is equal though opposite. With a major market shift there comes natural uncertainty. When home prices rise, so do rents. Investors looking to purchase a home in order to rent it out, put the most weight on the cost of rent in the neighborhood where the home is situated. As home prices adjust, the cost of rent commonly follows. For Home Sellers this could mean less competition for their home i.e. fewer offers. For Home Buyers… the same is true, less competition for the listing they are interested in.
Have your house in order. Buyers… I’ll direct this one at you first. Consult a lender before you even start shopping for a home. Home Buyers often feel that this obligates them to proceed with a purchase. Not so! A good lender will pre-qualify you at no charge. A pre-qualification ensures that you won’t be disappointed later in the game. Looking at homes above your price range might be amusing but you’ll be quickly discouraged when you discover that the mortgage payment is out of reach. Indeed a pre-qualification is absolutely necessary. Your Realtor can not present an offer on a home here in Arizona without it.

For Home Sellers, needing to ‘Have your house in order’ might come as a bit of a surprise. As recent as this past March your Realtor may have suggested that you need to do nothing or very little before putting your home on the market. This is no longer the case. Start by noticing what the Buyer will notice, fix the minor issues and present your home in a condition that justifies the price.

Please let me know if you have any questions about the shifting market, or anything else related to Real Estate. I’m always happy to help!