If you are feeling a little deja vu, you aren't alone. We've been singing the same tune for months now: high interest rates are keeping buyers at bay, but low inventories are keeping prices higher in some communities. Many of you are wondering how long this can continue. Well, there is some hope on the horizon.
The recent CPI report showing a slight decrease in inflation, plus a softening jobs report, has led to some optimism that there may be some Fed rate cuts on the horizon, possibly as early as the September Fed meeting. While the Fed opted not to cut rates in June (marking 12 months of steady Fed rates), when the CPI was reported, mortgage rates dropped from 7.16% to 6.98% in one day. This was a positive step for buyers, but still too high to bring many off the sidelines. If the anticipated cut in rates happens in September, it's possible we could see rates at around 6% by the end of 2024 (do we dare hope for under 6%?).
Right now, though, with demand still sluggish, some communities are seeing the advantage swing toward buyers. In the most recent Cromford Report, the Cromford Market Index dropped in 14 of the 17 communities, moving the needle closer to a buyers' market. A CMI of 100 is a perfectly balanced market; below 100 is a buyers' market, and above 100 is a sellers' market. CMIs in the 200s or more have not been uncommon in the last 24 months, and most of the Greater Phoenix area is still above 100. However, in a single month, Tempe dropped 17% to 126.1, and Gilbert lost 14% to 125.2. Chandler, Fountain Hills, Glendale, Paradise Valley, Goodyear, and Cave Creek all dropped by double digit percentages.
What does this mean for buyers and sellers? As the CMI inches closer to 100, seller accommodations become more plentiful, as we have seen already happening in some areas. While price negotiations are a common seller concession, interest rate or monthly payment-sensitive buyers are opting for interest rate buy-downs or closing cost assistance (or all of the above). For buyers above $1M, interest rates and monthly payments aren't as much of an issue, so most luxury buyers are negotiating price. With all concessions combined, buyers in the $400,000 price range are receiving around $14,600 in seller concessions as of June, according to Cromford.
For sellers, getting the maximum value for your home is going to mean paying attention to the details. Take care of deferred maintenance, ensure your home shows well, and make strategic updates that get buyer's attention. We can help sellers determine the most profitable updates and fixes to attract serious buyers.
We are watching interest rates closely, especially as we approach the September Fed meeting. A big question mark: what will happen if pent-up buyer demand responds to lower interest rates by flooding the market, without an equivalent rise in inventory? We could see the merry-go-round make another pass, with inadequate supply fueling rising prices. We shall see.
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We are here to help! If you want to find out how much your home is worth in this strong market, email me at [email protected]. We would be happy to help you determine if the time is right for you to sell your home or buy a new home.
Photo featured: 94 Biltmore Estates | Phoenix | Offered at $4,500,000
