Is the Scottsdale Real Estate Market Shifting?
If you've been reading local Scottsdale real estate articles in the news, you might notice that there are more price reductions right now and longer days on market. There are fewer Scottsdale homes for sale that go under contract in 24 hours.
What other agents are saying
I belong to several real estate groups on Facebook. Some people think the market is simply evening out and heading towards a more normal cycle.
Others feel it's just a summer lull, especially as more people are getting vaccinated and traveling for the first time in a year or more. People feel safer getting out and are enjoying doing more things in their own towns besides grocery shopping. They want to get out and do things after being stuck at home for so long.
Another reason cited is that many frustrated Scottsdale home buyers just gave up or at the least are taking a break from house hunting. Some signed another year's lease. They're hoping the market will be better next year with less buyer competition and lower, or stabilizing, prices.
There are still many buyers that simply can't afford the ever-increasing prices in the Scottsdale real estate market - including the entire Phoenix market, with price increases of 20%+ over the past year. First-time home buyers are still facing difficulty finding a place.
Here are some of my favorite agent posts in a few of my Facebook real estate groups about the current slight shift:
"Where the market is selling at, if they price it at or under that then the probability of a quick sale increases, go higher and it drastically decreases. You can't underprice a home in this market but you can still overprice one and have it sit and expire."
"I'm already feeling a shift.....But a great home in a great location AT THE RIGHT PRICE, will still fly."
"It appears the “feeding frenzy” is pretty much over for the moment. I have 2 listings going live later this month and we’re gonna have a serious convo about it soon. There are often still multiple offers at their price points but properties are taking days, not hours, to sell. And instead of 30 multiple offers, it is 3 or 4."
"It’s slowed. I put a listing on Thursday and I’ve had 5 showings including the one this afternoon, none scheduled for tomorrow. It’s a beautiful home so I already have one offer and am expecting another this morning. But still much much slower than it was."
If you wait for prices to decrease, you might never have a chance to buy
Many Scottsdale home buyers are feeling the reality of these high prices and realizing that they're not going to get near everything that they want or need. But do they wait, especially if they are currently renting, for prices to even out or drop?
No one sees prices declining any time soon. Even though we are seeing record sales in Scottsdale real estate, there is still a lack of inventory. High lumber costs seem to be curtailing new builds even more.
So why are prices being reduced on some Scottsdale homes for sale? Many Scottsdale real estate agents allow sellers to set their list prices as long as they are within reason. And some sellers are choosing starting prices that are simply too high, especially in a somewhat slowing market.
We're also seeing something similar to more even markets. The homes that are decluttered, clean, and updated are the ones getting multiple offers, forcing the list price higher.
During the highest selling point this year, almost any house would get multiple offers, no matter the condition. That is changing, and it might be those homes that are having to take price reductions.
I still shake my head at some of the old-fashioned-looking homes and some of the high prices the sellers are asking for them. They look like they haven't been updated since they were built. Those are the homes that will need to start reducing in a slower market.
What is a slower market?
We are talking a slight slow down from one of the most frenzied markets we've ever seen. I've been selling real estate since 1983, and I've never seen such a crazy market. I've been through many ups and downs, including several recessions. I've been involved in Buyer's Markets and Seller's Markets, and this current Seller's Market is mind-blowing.
This is all about supply and demand, with low inventory and high buyer demand because of low-interest rates. The first Seller's Market I was ever in was when interest rates dropped to 8.5%! That was a crazy market, but nothing like it is today.
Some reasons we can tell the market is cooling off ever so slightly are:
- Open houses are happening - most Scottsdale homes weren't listed long enough to even have an open house unless it was held the first day the house hit the MLS (Multiple Listing Service).
- Office caravans are not being canceled. I can't remember how many caravans my brokerage advertised to agents that got canceled because every house sold.
- Price reductions - we're not seeing a lot, but we're seeing them. That wasn't happening at one point.
- Longer days on market - unfortunately, newly listed sellers are expecting their homes to sell within a day. They're blaming their agents when they're still on the market for a week or longer. Sellers need to understand that the current market dictates sales prices and time on market. Selling in a day is not normal.
Does this mean prices will go down?
I've sold in other Seller's Markets, and even then I'd have buyers giving up and remaining renters, or homeowners keeping their current places. There were multiple offers on Scottsdale homes for sale, but that meant maybe 2-4 offers total - not 18+ like today. And then the real estate bubble burst, and those high prices plummeted.
That is not expected to happen this time. When we faced the Great Recession that started at the end of 2007, it wasn't an inventory problem that caused Scottsdale real estate prices to drop. If you haven't seen it yet, I recommend watching the film The Big Short. It helped me understand how and why the real estate bubble burst. I knew it was going to happen, but I couldn't explain why.
One of our prior neighbors purchased a Scottsdale townhouse for $270,000 back in 2007 during the Seller's Market before the crash. Only now, in 2021, could she list her place for that price, probably even higher. She's been renting it out for many years since she got married and moved to a single-family home in Scottsdale with her husband and she refused to take such a huge loss.
The Phoenix area is one of the fastest-growing cities in the nation. Scottsdale is a very popular city that continues to attract buyers. With ever-growing areas like this, prices are not expected to go down.
If it's slowing down, will I have trouble buying a place if I don't sell my home first?
That's one thing that will probably still be an issue even with our current slowdown. If you are part of a multiple-offer situation and you are contingent on the sale or even close of your home, your offer will probably be put at the bottom of the pile.
But I have a way to prevent that from happening. Visit my prior post about using Knock so you can purchase your next place without having to sell your home first. Then your offer will be considered along with all others since you will only be contingent on financing. Of course, if there is a strong cash buyer, you might not be able to compete with that, but not all Scottsdale homes sell to cash buyers.
Give me a call at 480-877-1549 if you have questions about our current market in Scottsdale, Cave Creek, Carefree, North Phoenix or Paradise Valley.