Do you think the market is slowing down?? - Merrill's Market Madness #72

Do you think the market is slowing down?? - Merrill's Market Madness #72

Hello, and welcome to a new episode of Merrill’s Monday morning market madness coming at you today with some updates regarding the Phoenix-area housing market. And in today's episode, we're going to be specifically discussing the November numbers as, you know, just a couple of days into December. So I wanted to kind of talk to you about what the market did in November and how it has compared to previous November's to give you an idea of kind of where our supply and demand levels are at. 

So as always, I'd like to start with our monthly supply of inventory number so active on the market in our MLS right now is 7117 I'm sorry, yeah, 7117 listings, pending 11,499 8212 listings have sold in the past 30 days, giving us a month supply of inventory of 0.87, which is actually a little lower than we have been out on a lot of Monday's recently we were in the low 0.9 is in range 0.9 to 0.9 for inventory has started declining over the past month. So you know, the normal trend of a, you know, normal market, which we really haven't been in a normal market in the Phoenix area for many, many years now. At least, you know, I mean, 2000 is the last normal market that I would consider would be like maybe 2003 to 2000 for a relatively balanced market where home values are not skyrocketing or plummeting. Like we've been in a very strong seller's market pretty much since 2011. 

And then, you know, 2000, obviously, late 2007 to 2010 was, you know, the Great Recession, and that was very much a collapsing market. So we haven't really seen a nice balanced, stable steady market in quite some time. But a balanced market would expect to see a month's supply of inventory of somewhere around four or five. And right now we're at 0.87. So still an extremely, extremely strong seller's market at the moment. And so but anyway, the point I was getting ready to make about the inventory, so I look every single day at how many active listings we have in our MLS and I record it on a little sheet. And basically, spring is always a very, very busy selling season. So you know, March, April, May, June, the markets are usually very crazy. And then by July, it starts to slow down. 

And we have seen that this year, July, August, September, October, those sales months were a little slower than May in June. And inventory has been increasing, you know, sellers who have seen how much equity they have, at our low point, we only had 4002 active listings. And at some point like late October or early November, we actually hit over 8000 active listings. So we doubled the number of homes for sale over a couple of months. And now it has started to decline again. And we're back down to around 7000 active listings. The reason I'm telling you all this, and the reason why it's important is that this time last year, we know average home prices have increased by over 20%. This year. At this time last year, we had 2000 more listings available than we have now. And inventories are already declining in November and December. 

That's kind of news that we're already seeing declining inventory in the slowest months of the year. And we're getting ready to head into the spring with an even more dire inventory situation than we had last year. So don't expect home values to fall anytime soon. We still have extremely high demand and desperately low demand, desperately low supply. And I believe that is going to cause another very, very hot seller's market throughout 2022. rates remain low. That's a hugely important factor. You know, that's the one thing that I think could cause a slowdown in the market. I don't even want to call it a reversal like if rates rose to 5%

Four and a half percent something like that, then the market might really balance out affordability would become an even bigger concern than it is right now. And it would really affect people's buying decisions. But right with rates in the threes. It makes everything really really affordable. 

And that is, you know, causing people to continue to buy and push prices. So in the month of November, we saw 8970 closings, which is a meteoric stat for a November that is just a lot of homes to close in. In November, to give you an idea of October, so the month before, so 1765. So we actually closed more homes in November with the Thanksgiving holiday and everything more homes closed in November than what closed in October, that alone should be assigned to people be like, Oh, the buyer demand is still very, very strong. If we were selling that many homes in November, the total volume, I mean, that's just an interesting fact. The total volume of those almost 9000 homes was 4.6 billion. And the average sales price is just I literally just took every single house that closes. I didn't need to narrow it down by area or by type of residence or anything. These is manufactured homes on leased land and mansions, just the average price of everything was $512,600 with average days on the market of 32 days in November of 2020. So you know, in November a year ago, an average of 9176 homes closed. 

So, November 2021 200, fewer home sales than November of 2020. But what you have to know about November 2020 is well, homes were $100,000 Less, I'm gonna go over that number in a second. So affordability was better because the sales cycle of 2020 got really, really messed up, you know, May and April and May were actually very slow months because COVID had just come out and people weren't sure whether they could leave their houses and so everything got moved back. So instead of you know, May and June being our busiest months, we did see a historically insane fall. 

But listen to the previous November's November of 2019 only 7100 closings 2018 6600 2017 7200. The year before that was 6800. Year more that was 5350. a year before that 4985 These are all hot seller markets. By the way, this is not like this was a slow market in 2014. Home prices were rising in 2014. November only saw 4985 closings. 2013 was 50 102,012 was 6808. So if you just take the average of the past 10 years, including this year, and last year, which were insanely high, the average November is only 6831. So we exceeded the average November by more than 2000 homes in November of 2021. With declining inventory with low prices. You know, the biggest objection that I hear about whether it feels like the market is topping out is that you know this affordability. Well, 9000 People still bought properties in November alone of 2021. And that's 2000 More than just a normal November. 

So you know, the affordability doesn't seem to be having a dramatic slowdown on the demand so far. In fact, if anything, demand is higher, significantly higher than normal.

And, and so anyway, got to get going back to November 2020. As I mentioned, 9176 homes closed in November of 2020. And the average sales price of those homes in November of 2020 was 419,000. So again, November 2021 was 512,000. So we saw an increase in the average sales price from November to November of 22.2%. So you know, just kind of average it out. Typically homes are gaining, on average 2% a month in equity. So if you own an average $500,000 house, the value of your home is going up on average $10,000 a month. Of course, it's not a straight line, right? Home values tend to go up a lot more in the spring and tend to remain a little more stable in the fall and in the winter. But that's the other thing that's kind of interesting is that we're still seeing home values average sales prices increasing in the month of October, November and projected for December, another increase in average sales prices, which are you know, in during our slowest months of the year, prices are still rising and demand is still extremely high. So I have in the past been saying you know, over the past 12 months, we've seen average sales prices increase by 22%. I have been saying for several months now that I think 2022 is not going to see that dramatic, we're probably not going to go up 22%. Because of the fact that home prices are much higher, we've got a higher average to start from in the first place. And you know, affordability will continue to become a bigger and bigger factor. But not enough to where the seller's market is suddenly going to reverse and home values are going to plummet. I have been predicting for several months that prices will increase in 2022 by 10 to 15% on average. I'm now learning every day. I'm leaning more heavily towards the 15% number.

You know we'll see what happens of course no one has a crystal ball. That supply is more desperate now than it was a year ago. And demand is pretty much exactly where it was a year ago, demand has not slowed down despite the increase in sales prices by almost $100,000. So anyway, I hope you found this information helpful. If you have any questions about the market or you want to know more specifically what the average prices are doing in your neighborhood, or you want to know what the value of your home is, I'd be more than happy to run those numbers for you. And as always, thank you so much for watching. Hope you all have a great holiday season and Happy New Year.

What does this mean to you? If you're even a little bit interested in learning more about participating in the Phoenix housing market as a seller, buyer, or investor... you NEED to know this stuff! Or at least work with someone who is obsessed with the market stats. Reach out to me today so we can start working on making your real estate dreams a reality!

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