The Scales of Supply and Demand Continue to Tip

July 2, 2014 by · Leave a Comment 

When demand started declining near the end of 2013, the inception of the buyer’s market had begun.  Market watchers held their breath praying for demand to show up – fearing without demand jumping the pile up of inventory that typically occurs in the back half of the year would become an avalanche – but the market shifted again. The normal pile-up of supply failed to show up in significant numbers.  To date, 2014 has proven to be a bit of a head scratcher.  Where does that leave us now?

The best summary of the market comes from our favorite pundit Michael Orr of the Cromford Report:

“The total number of active listings has dropped every day since May 31. Although demand remains very low by normal standards, the lack of a build up in inventory is a slightly encouraging sign for sellers….. Phoenix and Scottsdale have seen a 6% fall in active listings over the last month, while Surprise is down 10%. Chandler is the only major city showing a large gain in inventory with 9% more than one month ago.

As is often the case for this time of year, we see massive drops in inventory for Sun Lakes (down 23%), and for Sun City and Sun City West (both down 13%)

Sellers would dearly like to see a more balanced market than we have experienced in the last 8 months. If demand won’t increase, then a reduction in supply (after adjusting for seasonality) will have the equally welcome effect of improving their negotiating power.

The market balance is still weighted towards buyers, but not quite as much as in April. Demand fell back again in May after some improvement in April, but supply dropped a little faster during May than we expected and this has compensated for the weakening demand. Overall we are not seeing much change over the last few months and we are still eagerly waiting for some more significant developments, one way or the other. Boring is the worst situation if you are in the analysis and commentary business. Luckily Phoenix rarely stays boring for long.

Some misguided souls are still blaming the weak demand on interest rates. Given that rates have moved lower over the last few months and are not far about historic lows, this does not hold water. The best I can say about that point of view is that it is more credible than blaming the weather, especially across the southwest where demand has fallen hardest.

Now we are seeing an increasing number of commentators adding to the discussion of what we believe are more realistic causes of the continued weak demand for homes to buy, not just in Phoenix but across much of the country:

  • low participation by first time home buyers
  • the inhibiting effects of massive student loan debt
  • millennials preference for the flexibility of renting
  • the foreclosure wave in 2008 through 2012 which has introduced a new sensitivity to the fact that home ownership can sometimes be financially hazardous
  • a large tranche of former home owners who have not yet repaired their credit enough to re-enter the market
  • low rates of household formation, especially among 20-30 year-olds
  • a growing wealth gap causing stronger demand for high end homes but leaving large numbers of people renting for the foreseeable future

…With demand having been so weak over the last 10 months it is natural to assume that the market might see an improvement in demand as the next step. This might be dampened by the usual seasonal increase in supply that tends to occur in the second half of each year. However, the current readings suggest the opposite of what we might have expected. Demand is actually weakening a little compared with last month. On the other hand supply is also failing to show any strength and is now fading to a greater degree than demand.  In other words the market for homes to buy is contracting in size….”

So again, we ask ‘where does that leave the valley’s real estate market at the moment?’  We remain in a gentle buyer’s market.  However, a tip in either demand or supply will change the market dynamic. History says demand can increase rather rapidly – especially if buyer’s find a reason to buy (higher rents, lower interest rates, flat or declining prices, etc.)  Will it?  We will keep you posted as the future unfolds.

Market Values – Who really knows?

June 18, 2014 by · Leave a Comment 

Prediction Is Very Difficult, Especially About the Future – Niels Bohr (1885-1962)

Niels Bohr certainly knew what he was talking about –and the intervening years have done nothing to change that sentiment.  Buyers and sellers, and their agents, have continued to struggle to interpret our market movements.  As most of our readers know, demand – and the lack thereof – has been the defining element in this market.  Much speculation has formed around this issue – with some just ignoring 2014 altogether and predicting demand will be “normal” by 2015. Any lacking demand in the resale market has most assuredly shown up in the rental market as people must live somewhere – causing available rentals to drop to very low numbers, in the range of only a 30 day supply.  Escalating demand for rentals eventually result in escalating demand for homeownership as rental rates rise.  At some point it becomes much more attractive financially to own than to rent.

If dramatic market shifts aren’t stressful enough to try to predict and understand, now add in valuation challenges.  Whether buying or selling, determining the value of the home in a highly unpredictable market can be difficult.  The more challenging the establishment of value, the more consumers seem to want to take research in to their own hands.  Uncertainty seems to create the need for multiple sources of information- i.e. automated valuations from the internet. The most famous of these sources (or in our opinion, infamous) is Zillow.  This begs the question – to whom should you trust the valuation of your largest asset or purchase?  To whom should you turn to understand the market trends and shifts?  Understandably, we have our own bias – but let us defer this issue to the one and only Michael Orr of the Cromford Report:  

“Unfortunately Zillow® has decided to provide 12-month forecasts for home values. Since the figure given is a forecast for the Zestimate® value, it does not necessarily have any relationship to real market value. On the other hand, this means it can never really be challenged because the Zestimate is created by Zillow in the first place. In the past Zillow Zestimate’s have often been greatly divergent from real market values. In the cases I have watched they have often been extremely volatile for no apparent reason, sometimes rising or falling by 10% or more in just a few weeks. I have also seen Zestimates that were 80% below or 200% above true market value, though this sort of aberration seems to be getting rarer.

In the past Zillow forecasts for the wider market have not proven to be at all accurate, so I despair at the thought that ordinary members of the public will take them seriously for individual homes. Giving a percentage change to one decimal place gives a false impression of precision for a number that is more likely to be wildly wrong than close to accurate.

In the case of my own home, Zillow is forecasting a loss in Zestimate of 1.3% over the next 12 months. That doesn’t seem too unlikely, quite frankly, but their Zestimate for my home has dropped 2.9% in just the last month and 8.2% in the last 6 months. In fact 6 months ago their Zestimate for my home was ludicrously high – some 20% higher than any other automated valuation I could find. Meanwhile Trulia’s estimated value for the same home has rocketed upward in the opposite direction during the same 6 months and they are now higher than Zillow. Home owners tend to believe the highest number they can find. The variation between these automated valuation tools is enormous and there is no evidence that Zillow’s is better (or indeed any worse) than the 25 or so other tools I have seen.

The fact is that a real appraisal or professional CMA are the only sensible ways to estimate a home value. Even these can vary a lot depending on who conducted them, and Zillow’s Zestimate numbers really should be used for entertainment purposes only. As long as they are used purely for entertainment value they not a problem. Unfortunately ordinary members of the public tend to think there is some real world basis for them, which provides nothing but problems for real estate professions who actually know what they are talking about.

For those interested in how accurate Zillow’s forecasts have been in the past … Zillow Chief Economist: Stan Humphries … in February 2012 predicted that Phoenix metro home values would increase by 0.6% between December 31, 2011 and December 31, 2012.

The actual change in average $/SF was 29.5%, so Zillow was only wrong by 28.9 percentage points.

For the country as a whole, Stan predicted a 3.7% decline in values during 2012 and no housing bottom before 2013. Funny how they never mention that any more.

The Zillow prediction for 2013 was for national home values to rise by 3.3%. Phoenix area values were predicted to rise by 8.5%. Phoenix actually rose by 16.7% in 2013 and the national increase was about 13%. Again there is almost no correlation between Zillow’s forecast and what actually happens. However I must admit that the 2013 forecast was a big improvement over the 2012 one.

In case you think I am picking on Zillow, I am not. Their forecast was actually better than many. We quote Jed Kelko, Chief Economist at Trulia: “Arizona’s home prices are going to fall by 7.2% between Q3 2011 and Q3 2012″. That was possibly the worst forecast in recent history, as average $/SF rose by 26.5% instead. Trulia’s error was 33.7 percentage points. Even this was not quite as bad as several forecasts produced between 2006 and 2012 by S&P / Case-Shiller / Moody’s Analytics many of which have been proven dramatically wrong during that 7 year period…”

If you really want to know what your home is worth, just ask.  I’m not bragging, I’m applying for a job …

From the Cromford Report’s Michael Orr

May 16, 2014 by · Leave a Comment 

Unfortunately Zillow® has decided to provide 12-month forecasts for home values. Since the figure given is a forecast for the Zestimate® value, it does not necessarily have any relationship to real market value. On the other hand, this means it can never really be challenged because the Zestimate is created by Zillow in the first place. In the past Zillow Zestimate’s have often been greatly divergent from real market values. In the cases I have watched they have often been extremely volatile for no apparent reason, sometimes rising or falling by 10% or more in just a few weeks. I have also seen Zestimates that were 80% below or 200% above true market value, though this sort of aberration seems to be getting rarer.

In the past Zillow forecasts for the wider market have not proven to be at all accurate, so I despair at the thought that ordinary members of the public will take them seriously for individual homes. Giving a percentage change to one decimal place gives a false impression of precision for a number that is more likely to be wildly wrong than close to accurate.

In the case of my own home, Zillow is forecasting a loss in Zestimate of 1.3% over the next 12 months. That doesn’t seem too unlikely, quite frankly, but their Zestimate for my home has dropped 2.9% in just the last month and 8.2% in the last 6 months. In fact 6 months ago their Zestimate for my home was ludicrously high – some 20% higher than any other automated valuation I could find. Meanwhile Trulia’s estimated value for the same home has rocketed upward in the opposite direction during the same 6 months and they are now higher than Zillow. Home owners tend to believe the highest number they can find. The variation between these automated valuation tools is enormous and there is no evidence that Zillow’s is better (or indeed any worse) than the 25 or so other tools I have seen.

The fact is that a real appraisal or professional CMA are the only sensible ways to estimate a home value. Even these can vary a lot depending on who conducted them, and Zillow’s Zestimate numbers really should be used for entertainment purposes only. As long as they are used purely for entertainment value they not a problem. Unfortunately ordinary members of the public tend to think there is some real world basis for them, which provides nothing but problems for real estate professions who actually know what they are talking about.

For those interested in how accurate Zillow’s forecasts have been in the past, take a look here:

http://www.zillow.com/research/home-value-declines-pick-up-in-fourth-quarter-but-zillow-forecasts-smaller-declines-in-2012-2282/

In February 2012 Zillow predicted that Phoenix metro home values would increase by 0.6% between December 31, 2011 and December 31, 2012.

The actual change in average $/SF was 29.5%, so Zillow was only wrong by 28.9 percentage points.

For the country as a whole, Stan predicted a 3.7% decline in values during 2012 and no housing bottom before 2013. Funny how they never mention that any more.

The Zillow prediction for 2013 was for national home values to rise by 3.3%. Phoenix area values were predicted to rise by 8.5%. Phoenix actually rose by 16.7% in 2013 and the national increase was about 13%. Again there is almost no correlation between Zillow’s forecast and what actually happens. However I must admit that the 2013 forecast was a big improvement over the 2012 one.

In case you think I am picking on Zillow, I am not. Their forecast was actually better than many. We quote Jed Kelko, Chief Economist at Trulia: “Arizona’s home prices are going to fall by 7.2% between Q3 2011 and Q3 2012″. That was possibly the worst forecast in recent history, as average $/SF rose by 26.5% instead. Trulia’s error was 33.7 percentage points. Even this was not quite as bad as several forecasts produced between 2006 and 2012 by S&P / Case-Shiller / Moody’s Analytics many of which have been proven dramatically wrong during that 7 year period.

Remember the wise words: Prediction Is Very Difficult, Especially About the Future – Niels Bohr (1885-1962)

 

Better Late than Never

May 2, 2014 by · Leave a Comment 

2014 began with a whimper as demand from Buyers waned to historically low levels.  Sellers, who seemed to be missing in 2013, showed up but buyers seemed to be unaffected by the increased selection of homes.  Market watchers kept looking for signs of the buyer drought ending to no avail – until now.  Finally buyers have begun buying again.  Whew, let’s all take a breath.

“Buyers” as a category form two sub-categories – investors and owner occupants.  In previous articles we mentioned that the Hedge firms who had been buying for a few years here have largely ended their buying.  But investors also include the “fix and flip” groups as well as individuals buying a home or two for their personal investments.  We see that investors are buying at the lowest levels in years – a good sign in our opinion.  To quote the one and only Michael Orr of the Cromford Report:

“Except for those unusual periods, which were dramatically affected by government intervention, the last time we saw investor buying activity lower than 16.2% (the current level) was December 2008.”

This tells us that the category of buyers currently in recovery is the owner occupant buyer.  This is a positive sign.  Although the change is only newly in place, if it continues for the next few months it likely will keep our market from swinging to a strong buyer market and prevent pricing erosion.

Interestingly, buyer demand has varied dramatically according to price range.  Predictably, in the 200K and under price range both supply and demand are down.  Supply is down due to the distress product evaporating and the resulting price rises that accompany diminished distressed sales.  The dropped demand at that price come from investors leaving (as this was their preferred price point) as well as first-time buyers opting to rent rather than purchase (either by choice or necessity).

Comparing the low end housing to the high-end and you find a dramatically different story.  As Michael Orr comments:

“For Greater Phoenix in March we had 109 sales of homes priced over $1,000,000. This is the highest March number for million dollar homes since 2008. For homes priced at or below $1,000,000 we had 6,503 sales which is the lowest March number since 2008. This divergence between luxury home sales and the rest of the market is quite striking. However there are still plenty of homes over $1,000,000 for sale so supply is not an issue. It must also be remembered that a home priced at $1,025,000 this year may have been $975,000 last year.”

Needless to say, demand will be the most critical area to watch this year.  Demand will determine which direction our currently flat pricing will take.  A word of caution, don’t be mislead by potential news reports that state our “median” price is rising.  Due to the increase in high end sales and the sharp decrease in low end sales – rising median pricing could be falsely interpreted as “the market price” is rising.  At this time, pricing is flat.

When demand is weak in housing for an extended period, the population must go somewhere – and in this case it means rentals.  Demand for single family rental housing has seen a sharp increase.  Eventually this will be good news for the housing market as first time home buyers leave rentals when owning is cheaper than renting.  We are not there yet, but the signs are pointing to that as a future possibility.  Here is what the Cromford Report says:

The scarcity of single family homes available to rent is getting extreme. Other types of rentals are not so hard to find for rent, but single family homes have dried up, probably because so few new rentals are being created compared with 2010 through 2013.

On January 1 we had 4,377 active single family rental listings. Today we have 2,391. That is a 45% drop in less than 3 months. On March 1 we had 2,806 so they have dropped 15% just in the last 30 days…. if inventory remains as tight as this it is likely that landlords will take the opportunity to push single family rental rates upwards.

So the watchword for now is “demand”.  It is a situation we will continue to closely monitor and so keep our wonderful past, present and future clients fully informed.

Buyers Play Hide and Seek

April 3, 2014 by · Leave a Comment 

The shift from the strong seller market we saw in the first half of 2013 to a buyer’s market in 2014, has created a certain level of disbelief.  Local markets shift fairly rapidly – and changes in supply and demand are generally the cause.  Although we have commented on this shift in past articles, it is worth looking at again because shifts don’t always become trends.  In this case, it is looking like a trend.  Although supply is building, that is not the driving force behind the shift.  The puzzle in today’s market seems to be “where did the buyers go?” 

To quote our favorite real estate guru Michael Orr of the Cromford Report “…the number of active listings continues to grow. Although the total number…is quite normal at 30,314, we would usually be seeing declining numbers by now because March through May is the peak season for active listings going under contract. If the number of active listings manages to grow even slightly during March then it is likely to soar during the second half of the year, unless there is a major change in market direction. … the total today…is the highest we have seen since April 2011 and 60% higher than March 15, 2013.

New listings continue to arrive much faster than last year, but not in excessive numbers. We have seen 26,353 year to date, 11% more than the 23,813 we counted last year. This would normally not be considered excessive, but the shortage of buyers means there are more new listings than the market needs.”

So again, the real problem is the drop in buyers.  Sadly, we haven’t heard much “expert explanation” for this but we have a few theories:

  1.  The major investors that have been heavily buying (because they are well funded hedge funds – such as Blackstone Group and Colony) have largely ceased purchasing in the valley.  We believe this composes the largest percentage of the “missing buyers”.  While this drop does impact our market, we do not consider this purely a bad thing.  Hedge funds purchased to hold and rent for 3-7 years and are not end users.  While this helped push up values in the valley, it did take away properties to end user buyers who could not compete with these cash offers.
  2. The basic economic picture has still not fully recovered.  To obtain loans to purchase properties (as the average buyer must) one must have employment.  Although the employment rate is better than it was at the depth of the Great Recession, it is far from “normal” or “optimum”.  No housing market fully escapes the basic economics forever.  So although we consider the housing market “recovered”, we do not consider the job market recovered.
  3. The Millennials who largely compose the pool of first time homebuyers are not buying in normal volumes.  Some of this is being subscribed to changes in their belief systems as to the value of home ownership – having seen housing equate foreclosure in the distress market.  Personally we believe it has less to do with psychology and more to do with mounds of student loan debt and the lack of financial ability to purchase.
  4. Lending practices have not returned to the standards of previous years.  Locally, FHA loan limits have been lowered down to 271K from the previous 350K range.  Additionally, self employed borrowers even with perfect credit and sizable down payments are struggling to obtain loans. Too many viable buyers are being denied loans.
  5. Prices have risen over the last two years.  Just as rapidly falling prices cause sellers to withdraw from the housing market, rising prices can cause buyers to withdraw as they find renting more attractive.  This seems to be proven by the rental rates in the valley which have been in an upswing since January of this year.  As rents continue to rise due to increased demand (after all if you are not buying, you are renting) purchasing will again become more attractive.  When you can purchase and have a payment equal to or below what you can rent a comparable property for – most renters become buyers.  If rental rates continue their rise – look for the pendulum to swing again to purchasing.
  6. We suspect net migration in to Arizona has faltered recently (see point 2 – jobs and weather seem to drive migration) although the census numbers seem a bit unreliable.

Does the drop in buyers mean that homesellers should despair?  Absolutely not!  But it does mean that the dynamics that drive a home sale are more important than ever – marketing, pricing, condition, location, accessibility  and of course your choice of agent.  You knew we were going to say that, didn’t you? 

As always, we will continue to monitor our market as it shifts.  If you are curious as to your home’s shifting value, feel free to contact us.

The Sub-markets

April 3, 2014 by · Leave a Comment 

Despite a number of naysayers, the market has in fact shifted from a balanced market (which only lasted a few months) to a gentle buyer’s market.  This has been caused more by a decrease in demand, than a huge increase in supply. Supply is still growing in most areas, but only slowly.

But viewing the real estate market as a whole is a mistake made by novices.  The market can be broken down (and should be) in to sub-categories based on price or area.  These microcosms are a better guide to “the market” both for buyers and sellers.  Let’s focus for the moment on a few key areas of change.

Strong movement in favor of buyers:

Paradise Valley, Tempe, Cave Creek, Tolleson

Strong movement in favor of sellers:

Gold Canyon, El Mirage, Arizona City, Sun City, Sun Lakes, Apache Junction

So  when buying or selling, the lesson is know your sub-markets!

Sign, Sign, Everywhere a Sign….

March 4, 2014 by · Leave a Comment 

At the risk of dating ourselves with that song’s line, today’s market reminds us a bit of those words.  What do we mean by that?  Simply that our gentle balanced market appears to have now tipped to a buyer’s market.  At least for the moment.  A balanced market is where supply and demand are in equal supply.  In fact, a balanced market is a supply of 4-6 months.  If supply begins to exceed demand – the shift is to a buyer’s market.  If demand exceeds supply, you are in a seller’s market.  So what shifted?   Supply or demand?  The real answer is both.  The supply of homes coming to market is certainly up from the drought of listings in 2013 – but the supply is only abundant when compared to last year. However, demand is weak – weaker than any year since 2001.  Gulp.  So the real shift and the real story is in the decreased demand.

To better make these points let’s turn to our real estate guru Michael Orr of the Cromford Report:

“ In true Phoenix tradition, the balanced market did not last very long – from October 27 to February 8 to be precise. We are now in a confirmed buyer’s market … Demand is weak …its lowest level since May 2008. Supply is not high, but it is growing fast … its highest level since July 2011. The deterioration in market conditions for sellers is across the board. No geographic area or price range is improving. However some sectors are much more favorable to sellers than others. In general the luxury market and the active adult areas are more favorable for sellers than the rest of the market. In the majority of sectors, prices are now under downward pressure, although they have not responded much yet due to residual seller optimism. However, if current market conditions prevail we are likely to see lower sales prices in many of these areas before too long.”

Going further he states:

“One easy way to observe how weak demand is at the moment is to compare the count of pending listings on January 15 and February 15. In every year there is normally strong growth in this number between these two dates. We have been measuring these numbers since 2001 and 2014 is the first year the increase has been less than 1,000. Even in 2007, which was a very soft year, pending listings grew by more than 2,000 from 5,201 to 7,255. In fact, the previous worst year was 2008 with a growth of only 1,317 from 3,610 to 4,927. In this context 2014′s growth from 5,420 to 6,396 looks very disappointing for sellers. The best year for this measurement was 2005, when pending listings grew from 7,831 to 11,208.”

So what do all these facts mean to the average home seller?  It means that the approach sellers (and their agents) took in 2012 & 2013 will not work in today’s market.  The approach of throwing the home on the market and allowing the velocity of the market to overcome a lack of marketing, inadequate home condition, and faulty pricing – simply will not work in today’s market.  It is a time to get back to basics .  But as in years past, the basics will work.  A properly marketed home will result in a sale.  Happily, some things never change. 

Is NOW a Good Time To Buy?

March 4, 2014 by · Leave a Comment 

When someone asks me, “How’s the market?” I sometimes want to say, “Please finish the sentence..for WHOM?”

If it is totally great for buyers can it really be totally great for sellers?  I see some so called real estate “experts” saying it is always a good time to buy or a good time to sell.

It is “good” if the balance of inventory and demand favors you.  For two and half years we were in a red-hot seller’s market.  Then six months ago it started shifting to a balanced market.  It is now a “buyer’s market”.  Pretty much everywhere across the valley.  Will that trend continue?  I don’t know, my crystal ball is so cloudy just now.  What I do know is if the question is now a good time to buy – with inventory now high and current demand low – it is an easy question to answer.  And I suspect you have already answered the question too.

Elks Vendor Fair Saturday, March 8th from 9am to 2 pm

February 25, 2014 by · Leave a Comment 

The Benevolent and Protective Order of the Elks (BPOE) takes on a very active task in supporting communities locally, throughout Arizona and on a national level.  Elks Lodge #335, located on North 32nd. Street, is a hidden gem right here in our own neighborhood. This Lodge has many members whose mission is to help build a strong community.  These members contribute and support such local programs as Veteran’s Dinners;  The Thanksgiving Basket Program which provides food baskets for Veterans and their families; Dinners for our local Law Enforcement Officers and Fire Fighters; Drug Awareness Programs; Scholarships; Children’s Back to School Program providing new clothing and supplies for children; Young Readers Program; and programs that provide several local schools with dictionaries for their 3rd grade classrooms.

Their newest program, the Single Parent Relief Project, will offer support and assistance to single-parent families in need.  On The First Saturday of each month these families will be welcomed into the Lodge for a hearty breakfast and each will be assisted with food, baby supplies, school supplies and more. The objective will be to assist 20 families in 2014.

Please join us on Saturday, March 8th  from 9am to 2 pm  for our Vendor Fair, featuring food trucks, arts and crafts booth, a DJ and Door Prizes.   Free Admission and Parking at Elks Lodge #335, 14424 N. 32nd. Street. 

Contact Joe Carroccio for further information 480-329-3957

Why Selling in a Balanced Market is actually Good

February 7, 2014 by · Leave a Comment 

One of the most common questions that would-be sellers ask us is when is the best time to sell? The questions vary but generally sound something like this: “Isn’t it best to sell in a seller’s market?” “Now that the market has shifted to a balanced/slight buyer’s market isn’t that a horrible time to sell?” Actually, if you have a choice (and often we have no choice – selling is often driven by circumstances not under our control) selling in a balanced market may be one of the best times to sell. Here are some of the reasons we believe sellers should consider this time to get their homes on the market:

1. Price appreciation flattens in a flat market. We know this sounds counter-intuitive but bear with us as we explain this. Prices are always a trailing indicator in housing. This means that anywhere from 9-18 months after something happens in the market – it is reflected in prices. The market started shifting away from a seller’s market in June 2013 when buyer demand began withering. Pricing runs on fumes for a while before evaporating. That “fume” stage is a sweet spot for sellers because prices are gently floating up, word is not really out on the street that the shift has occurred, and the big future price appreciation that sellers would miss out on if they sell in a seller’ s market – is not being missed. In other words, when prices go flat – sellers are selling at a peak.

2. In a balanced market, builders remain conservative, adding only a trickle of new homes. In a strong seller’s market, builders – just like any other seller – want to cash in on the strong appreciation. This starts adding more and more supply of homes – which as we observed in 2005 – and can create a bubble that “pops” when supply becomes glutted. As we have seen, recovery can be painful and slow after that pop.

3. In a strong sellers market, successful sellers become “homeless” when they are unable to find a home to buy. Sellers who are buying locally, enjoy the power a seller’s market provides them as a seller, but then find themselves stressed and panicked when trying to buy in that same market. This can lead to poor buying decisions and huge concessions to obtain a home.

4. Less problems with low appraisals. An often overlooked problem in a strong seller’s market is the financing piece. Lenders base all their numbers on the appraised value of a home. In a rising market, prices begin escalating over yesterday’s pricing. While sellers often get a higher than expected yield at point of contract, they can find themselves giving that money back to the buyer when the appraisal comes in low or risk the transaction cancelling.

5. In a balanced market there are still enough buyers around to still sell without great difficulty. A balanced market means just that -buyers and sellers are in equal supply. So although the “feeding frenzy” may not be present, the buyers are still viewing and buying properly marketed properties in sufficient quantity to make selling a relatively easy and fast process.

How long will our market stay balanced? That is the million dollar question. At the moment, we see nothing dramatically pulling the market one way or another . But as Sir Isaac Newton so brilliantly said “ I can calculate the motion of heavenly bodies, but not the madness of people.” As always, we will do our best to keep you informed on the Valley’s volatile housing market.

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