BREAKING NEWS...Federal Reserve Raised Interest Rates 0.75%!
The Federal Reserve just raised interest rates by the most since 1994, pushing its benchmark rate higher by 0.75% in a bid to slow inflation.
This increase in interest rates will most likely slow demand even more than we have seen the past couple months. With slowing demand and growing supply, upward pressure on pricing is dissipating very quickly. This is best measured
by the average price per sq. ft. The readings move at different points in the cycle.
First to change are list prices for active listings, as sellers start to compete with each other by lowering their asking prices.
Second to change are list prices for listings under contract, as the better deals go under contract sooner than over-priced homes.
Last to change are prices for closed listings, since their contract prices were determined a month or two prior to close of escrow.
At the Cromford® Report, they like to measure these things on a daily basis. Hence the chart below, which covers six months. The figures for closed listings use the average for listing that closed in the immediately preceding monthly period. On June 13 this means listings that closed between May 13 and June 12.
This chart has many very clear messages:
Asking prices are coming down. They peaked on April 27 at $364.81, then gradually started to ease. They are drifting downward and are currently hovering around $353.
Under contract prices are also coming down. They peaked on May 14 at $314.06 and have now settled back to $311 with a gentle downtrend established.
Closed pricing has moved mostly sideways since the beginning of May, but the high point reached so far was $305.97 on June 10. There is little sign of them going over $306 and as the under-contract prices decline, this will severely limit any upside to closed prices. The red line will always tend to stay below the green line.
The list price for closed listings is still rising a little, because the achieved percentage of list is falling.
In a normal market, the red line is always below the brown line (that is, most buyers pay less than list price), but right now the average closed sale went for about 1% more than the asking price. This situation probably will not last much longer.
If current trends continue, we may very well see the average price of closed listings start to fall, while still staying slightly higher than the average list price of those closed homes. This is something we would have previously believed as rare as a unicorn. It can only happen when the change from hot to cold is as fast and violent as we have seen between mid-April and June 2022. This has not been observed since we started measurements in 2000.
Anyone who is planning to sell their home today needs to understand that their property is no longer likely to appreciate in the months ahead. Be grateful for the incredible surge in its value over the past several years, but all good things come to an end.
Anyone looking to buy a home...it is a good time to buy... you have more homes to choose from and fewer buyers to compete against. In addition, despite the increasing interest rates, our lenders have strategies to help make mortgage payments affordable.
Contact our team to...we would love to assist you with buying or selling in Greater Phoenix Market!