R.O.I. Real State – Residential Newsletter- October 2021

Predictions for 2022 couldn’t be more diverse across national analysts. Some are forecasting another year of mild appreciation, some double-digit appreciation, and others see a decline. The most accurate indicator for price movement in Greater Phoenix is the supply-demand index. When it’s over 110, prices typically rise. The farther over 110 the indicator is, the more prices appreciate above the rate of inflation. The current overall index of 354.9 tells us that prices should continue to rise for at least 3 to 6 more months, but keep a close eye on inventory. Any moderate increase in inventory will impact pricing, and hence negotiability (we are starting to see an increase in inventory for homes over 420K). Over the past 5 months, market-wide appreciation (based on average sale price per square foot) averaged 1.1% per month. That is slower than the previous 6-month average of 3.3% per month, but significantly higher than October’s inflation rate of 6% (0.5% per month). 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:  Supply appears to have started its seasonal decline, which is normal as fewer sellers wish to list during the holiday season. While the median sale price has been hovering around $420K for the past 6 weeks, listings below are quickly diminishing while more expensive listings ($420K-1M) have risen over 60% in supply. It’s not getting any easier for first-time homebuyers. The average list price per square foot has been gradually rising over the past 4 weeks. This is attributable to Greater Phoenix’ strong luxury market that is pushing up the average per square foot listing price. Because lower-priced homes don’t tend to stay on the market for long, active listing datasets tend to be luxury-heavy. This is reflected in the average list price at $337/SF, but the average under contract is significantly less at $274/SF. 

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.