Buyer’s Market!
So, we are about to be officially in a buyer’s market. Look at this chart from the Cromford Report showing where the Cromford Index sits. It’s right on the crucial 100 mark.
Remember, when the index drops below 100 it is a buyers market. We’ve not seen this since 2010!
That buyer’s market is why you are seeing so many price drops and opportunities to negotiate.
Prices have definitely dropped. Not nearly as far as they did 15 years ago (30%, and that is not remotely likely).
More along the lines of 1% to 3%, and that varies depending on the market sector.
We know why this happened. Interest rates doubled over the last year. People are holding off, hoping that prices continue to drop.
But the problem with that approach is that, if they wait too long and the Federal Reserve increases interest rates again, they will erase any savings that they might have seen from price drops with higher interest rates. I detailed that in this blog post last month.
We are seeing some efforts by lenders to adapt, finally. They are recommending a thing called a 2-1 Buydown, in which you get a lower interest rate for the first two years, before the rate goes up to the higher level permanently.
Our friend Jeff Ohm is doing weekly educational webinars on those starting the first week of October. ….
One market analyst told me that she felt that lenders were in denial over the last few months that interest rates were going to go up again, and so they did not educate buyers about these options when they could. I can’t speak to whether that is true, but I can tell you that buyers are now in an odd position.
We know that the long-term demand is not going to go away. We’ve addressed previously about how Arizona can expect to need to build about 270,000 living units (apartments or homes) over the next decade. Even if we can address the scourge of short term rentals and investment buyers shrinking inventory so home prices are unattainable for many, we will still need more homes.
In other words, if you buy now, your long-term prospects for selling higher are still good. Believe it or not.
If you are listing, don’t kid yourself. It’s a buyer’s market. You won’t get multiple offers, you need to spruce up your property and you will have to price aggressively. This has basically been true since about March, but many sellers were in denial and have paid the price.
