Sales Volume & Price: Zillow announced hundreds of millions of dollars in losses this week stemming from Zillow Offers and their decision to exit the iBuyer market completely. While this was not surprising to most professionals in the industry, it was a surprise to many consumers who valued the Zestimate and saw Zillow as too big to fail. When Zillow Offers did fail, some thought it was just the beginning of the end for the housing market. Some thought there would be a surge of inventory; there was not. Some thought there would be a decrease in demand; there was not. In fact, supply was barely affected, and contracts have continued to rise, defying seasonality. Some thought Zillow controlled the market, but it does not. Zillow’s mistake was made back in February, when they announced the Zestimate would double as an offer under Zillow Offers, thus removing one more human element from the real estate transaction and greatly increasing their risk. Extreme seller markets are considered “dump your junk” markets; meaning, if you don’t want to do repairs or remodel, this is the time to list an outdated, leaky-roofed, pet-stained home and it will sell. Algorithms cannot smell a home, see a busy street in the back, or hear a high school band practice every morning next door. It only took 8 months for Zillow’s experiment to fail after they had been an active iBuyer for 3 years. This is not a reflection of a bad market, only bad decisions.
Originally shared via roiproperties.com newsletter. Click here to read full newsletter.
From November to December 2021, the supply-demand index rose 37.6 points. Although both indicators decreased, supply made the bigger move, which pushed the market higher into a seller’s market. Last month, both indicators increased, but demand made the more significant move, also pushing the market higher into a seller’s market. The result has been a 47-point increase in favor of sellers over the past 2 months. As national housing predictions for 2022 flood the headlines, it’s easy to get caught up in the unknown and unpredictable: the expectation of rising interest rates, for example. While that’s valid, it’s also important to lean into the math and what we know. A flattening in sale prices is inevitable, but current measures show they will continue to rise for at least 3-6 months in Greater Phoenix. You can read all the details in the R.O.I. Properties “Real State – Residential” newsletter (just click on the image), with additional statistics, market trends and information, but here’s a quick peek at the highlights:
Active Listings: Listings in escrow started 2021 at 9,508, rose 27% to 12,068 by February, and bounced between 11,500–12,000 until May, before dropping 15% to 10,216 at the end of July. Then contract activity took a turn and rose 17% to 11,946 in October before dropping seasonally to 9,876 as of December 26, up 3.9% from the beginning of 2021. Despite the decline since October, contract activity is still very high for this time of year. From 2015–2019, Greater Phoenix typically measured between 7,500–9,000 properties in escrow waiting to close at the end of December. The worst year ever was 2007, with only 3,750 in escrow and 58,000 active in the MLS. As of December 22, there have been 102,795 sales closed through the Arizona Regional MLS, up 4.7% from 2020 and 1.2% higher than the peak year of 2005 to date. This puts 2021 on track to be the #1 year for MLS sales. With another week to go, annual appreciation is running at 26.2%. Looking forward to 2022, it’s reasonable to expect the market to eventually cool down with added inventory from new home development. However, the large gap between supply and demand tells us that the market hasn’t begun to cool at this stage and prices will continue to rise in the immediate future. When the market does flatten out, the first indicators to show it will be list price reductions, seller concessions, and sales over asking price—not sales price.