How is the Real Estate Market in Metro Phoenix and Scottsdale - February 2014

After working so hard to write my last report on a “Normal” real estate market, Michael Orr shot me down and is reporting we skipped Normal and went right to a “buyer’s” market.

Yesterday, I attended a presentation organized by Jason Servais at OnQFinancial. The speaker was Michael Orr. I interviewed him before the presentation and then recorded his presentation. The videos are below. You may watch them. The quality and sound is poor. So I will outline his presentation for you right here.

Greater Phoenix Housing Market

by Michael Orr

Director

Center for Real Estate Theory and Practice

February 25, 2014

First, how does a market react. This picture demonstrates how markets go up and down and how people react during those times.

You can see that people actually act in the wrong manner as the market goes through its gyrations.

Cromford Repor Index Feb 2014 — Cromford Report Index Feb 2014

Here is the Cromford Report Index. It shows Supply at 91.3, which isn’t bad if Demand was normal. Demand is very low at 78.1. The overall Index is reading 85.6 and remember 100 is normal. This demonstrates a buyer’s market.

Here we have the Index from 6 months ago:

We look at last August and Supply was even lower, creating a Seller’s market. Demand was close to Normal, also helping the Index to have an overall reading of 151.1. That was a total Seller’s market. Prices were rising and homes were selling in a week.

Here is a chart of the Index:

So this chart demonstrates how the Cromford Index moved down from August, just as the market slowed. We boomed through a Balanced Market during the Holidays. Now as the New Year has begun, we have moved to a buyer’s market. I was holding my breath through the holidays, hoping the market would rebound when the season started in February. So far, I am not seeing that and the Cromford Index is mathematically demonstrating it.

So, what happens when Buyer’s have the Advantage?

1. They cherry pick the best listings.

2. They demand incentives.

3. They push prices lower.

4. They punish homes that do not have some or all of the qualities that create value, such as: Location, View, Upgrades, Condition.

And here is how Sellers respond:

Here you have it. A buyer’s market includes an increase in price reduction. Many of these homes were over priced to begin with.
Interview with Jason Servais: