What is Happening in the Real Estate Market in Phoenix?
One of the more important shifts happening in the Phoenix real estate market right now is that sellers are starting to realize they cannot price as casually as they did when buyers had fewer options and cheaper money. No, the real estate market is not going to crash, but sellers in today’s market must be disciplined and realistic in pricing their home.
According to recent Realtor.com data, 16.7% of active listings nationally had a price reduction in April. That is elevated compared with historical norms, even though it is lower than a year ago. Phoenix was one of the most active price-cutting markets in the nation. That does not mean every listing in those markets is in trouble. But it does show that sellers are running into a much more selective buyer pool.
Price cuts are not always a bad sign
A price reduction can mean a seller missed the market. It can also mean the seller finally accepted the market. There is a difference. In a more normal environment, sellers test a price, buyers respond, and the listing adjusts if needed. The problem is that many sellers are still emotionally anchored to a market that no longer exists: fewer listings, lower rates, faster offers, and less buyer patience. We’re not in that world right now.
Today’s buyers are doing more math. They are comparing more options. They are watching rates. They are considering value. They are asking for concessions. They are refusing to reward a listing that feels even slightly overpriced. And the even slightly overpriced home sits on the market while other homes, which have probably been on the market for a longer period of time and the seller has already learned the lessons of pricing, get snatched up.
The most important decision a seller will make is the initial pricing decision. In this market, you must resist the urge to push the list price to the “high end” of the market. It won’t sell at that price, so why price it there? Pricing the home aggressively at the outset can save sellers a lot of pain. It’s important for sellers to understand what buyers are comparing them against today, not what they wish buyers were comparing them against.
A seller may say, “The house down the street sold for this last year.” That may be true. But the better question is: What would that same buyer do today with today’s interest rate, today’s inventory, and today’s alternatives? Those are the critical questions.
Every market metric in the Phoenix area is currently stalled. Supply is high, existing homes sales are flat, prices are soft, and homes are taking longer to sell. Buyers have more to consider than they did during the tight inventory periods. That combination puts more pressure on a seller’s pricing strategy.
Most sellers look at the recently sold comps in their neighborhood and determine list price accordingly. But a better strategy is to look at the current competition in your neighborhood. What else is active right now in the same price range? What does a buyer’s monthly cost look like at today’s rates? Are similar homes cutting price after a couple weeks on the market?
These three questions will tell you more about where to list your house than the comps. Comps tell you where the market has been; active competition tells you what the seller is up against right now. Payment tells you what buyers are actually feeling. Price reductions tell you where sellers may have already overshot. That is the more complete picture. The goal is to make a smarter decision at initial list price before the market gives you feedback the hard way.
The bottom line
Sellers are not powerless in today’s market and buyers are not suddenly in control everywhere. But the market is clearly more selective than it was when low inventory could hide weak pricing.
Home prices are still holding up nationally and in the Phoenix area. But that does not mean every seller can push. Price growth is slower, mortgage rates are still pressuring affordability, and buyers are less willing to stretch without a clear reason.
Thinking about selling your home? Curious about its value in today’s market? Wondering if right now is the best time to sell, or if it would be better to wait? Let’s talk! We would love to discuss these questions with you and walk with you through the listing and sale process to maximize your proceeds from the sale and sell your home fast.