Valley home sales

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Crazy times have hit the Valley's residential market these days, judging by some of the latest data posted by The Cromford Report, the leading analyst of the Phoenix Metro housing market.

It reported last week that the average sale price of $549,861 for a house between Aug. 10 and Sept. 9 was $840 less than the average closed home price of $550,701 recorded between Sept. 10,2021 and this past Sept. 9.

What’s astonishing is that as recently as this past June the year-over-year average sale price of a house in the Valley was $66,000.

“The gap has dropped dramatically in less than three months,” the Cromford Report noted.

It said that such a steep drop has occurred during other “periods of weak buyer confidence” for a few weeks in the early stages of the pandemic in 2020 and in 2014 and 2015.

“It is never a good sign when the short-term average is lower than the long term average,” the Cromford report said, noting that the highest gap wasn’t all that long ago.

“A negative $840 number is not terrible but far from good,” it said. “The highest we have ever measured was a positive $79,365 in May 2021, which we can look back on as following a peak in buyer optimism. The worst we have seen was negative $62,429 in March 2009.”

The Cromford Report didn’t reflect any panic about the narrow different between the latest short-term and long-term average sale price.

“It will be a more important sign if the short-term average stays below the long-term average for an extended time,” it said, adding: 

“A week or 3 is nothing to worry about, but several months means a long-term down-trend has started. This happened between September 2007 and October 2009. It would not be good to relive those years and at this stage it looks unlikely that we will.”

All in all, the Cromford Report has been slightly more optimistic in its assessment of how sellers are faring in the Valley market than it had been at the beginning of September.

Earlier this month, it said the average price per square foot for homes sold increased over August.

While that increase was only from $285 per square foot to $289, the Cromford Report said, “This is not consistent with the idea that the market is crashing.”

On the other hand, the report said sale prices had dropped below final list prices, prompting it to warn this “confirms that sellers’ negotiation power is far weaker than it has been in many years.”

It also noted the four-week trend last month showed square-foot prices for listings under contract had steadily fallen.

The Cromford Report also noted that the trend in successful sales rates declined to 70.4% in August – “the lowest we have seen for late August since the year 2010.”

“Mind you, in 2010 the reading was a dismal 58.1%, thanks to all the short sales and pre-foreclosures crowding the market at the time,” it said, but added:

“Any new sellers need to be realistic: 30% of listings fail to sell these days. At the end of March, the percentage was less than 8%. Listing agents now need to focus on marketing instead of worrying about how to handle the deluge of offers in the first few days.”

It also saw a decline in the number of “coming soon” listings, prompting it to note, “It is no longer a matter of great excitement that your home is shortly to be listed for sale.”

One aspect of the market the Cromford Report singled out last week was the number of houses owned by iBuyer companies like Opendoor.

“We do have excessive inventory of empty homes in the hands of iBuyers,” it said. “They continued to buy homes in large numbers during the second quarter and have ended up with far too many homes in their possession during the third quarter. 

“These homes are empty and racking up expenses,” it continued, adding their inventory “has to be driven lower.”

It noted that Opendoor is slashing prices to reduce that inventory, but that’s resulted in impacting the overall market – and the pocketbooks of sales agents.

“With lots of bargain homes on offer below market value, this is partially succeeding in moving homes from active to pending, but it also has the effect of lowering average prices for the market as a whole,” it said, calling Opendoor “large enough to be a significant competitor for other sellers.”

“This discounting also has the unpleasant side-effect of lowering the intrinsic value of the remaining unsold inventory.” 

And that means, it said, “It certainly is bad news for people who depend on healthy sales volume for their income. This includes title company staff, real estate agents and mortgage lenders.”

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