A Real Estate Market Report
It’s been over 18 months since the start of that first “quarantine” back in March 2020, when markets all around the world started to crash and economies came to a halt, leaving world governments scrambling over how to respond to such an unexpected crisis in our developed, thoroughly connected societies. Real estate agents in our country, or at least the prepared ones, were bracing for a shift in the real estate market as we had expected since analyzing historic data pointing into a 10-12 year cycle that was due to end between 2020 and 2022. While real estate transactions came to halt right at the beginning of the pandemic, they rapidly started increasing after a decline in interest rates and an emotional response triggered by average people spending way more time in their homes than normal.
Fast forward to Summer 2020 and you start seeing homes selling much faster than usual, making new sellers meet a huge spur of homebuyers ready to offer more money in order to get the opportunity to buy their homes. It has been an up-climb ever since.
Is the real estate market changing? Overall, it hasn’t changed much. It’s still pretty crazy considering all the factors, like median sales price, and months of inventory. However, there are signs the market might be starting to shift. The Tucson Real Estate Market has seen increasingly new listings hitting the market with closed sales declining. There was an 11% decrease in closed sales, year-over-year, and months of inventory have changed to 1.1, an increase from 0.9 in June.
Still In A Deep Sellers’ Market
Did you know the standard of practice for determining whether it is a buyers’ market, a sellers’ market, or a balanced market is the statistic called “months of inventory“? Technically, it means the number of months it would take for all the current homes in the market to sell if no new listings were to be added.
Buyers have opted out of the market thanks to bidding wars and increasing prices, and are now reportedly waiting on prices to come down.
A buyers’ market is when months of inventory is at 7 months or more; a balanced market is when months of inventory is around 6 months; and a sellers’ market, which is the one we are currently in, is when months of inventory is at 5 months or less. Tucson is currently at 1.1, which makes it a hell of a DEEP sellers’ market.
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Okay, So What Are The Numbers?
There are other important statistics we Real Estate agents take a look at when checking out the market besides the ones I have mentioned. Days on Market (DOM) is very important, as well as Percent of List Price Received, which taking them into consideration along with the others can tell us how the market is and how fast it is changing.
Below you can take a look at some of them, relative to the same month last year.
|Key Metric||Sep 2020||Sep 2021||% Change|
|Days on Market||24||14||-41.7%|
|Median Sales Price||$266,000||$327,960||+23.3%|
|Percent of List Price Received||99.6%||100.6%||+1.0%|
|Months of Inventory||1.3||1.1||-15.4%|
|Inventory of Homes for Sale||1,731||1,609||-7.0%|
Another key metric to consider is the fact that the median household income had decreased from 2019 to 2020 according to Statista, while the median sales price has soared in the last year and a half, making housing affordability a problem. Buyers have opted out of the market thanks to bidding wars and increasing prices, and are now reportedly waiting on prices to come down.
The question is… when will they start coming down?
What Will Happen In The Near Future?
It all is still uncertain. The Fed had previously said they would revisit their interest rates this fall to consider all economic factors and the pandemic and make changes accordingly, but they are showing signs that they will most likely keep them the same until next year. That translates into mortgage interest rates staying about where they are today, which is a little over 3% for a 30-year fixed-rate, according to Bankrate.
In the long term, historically there has always been a 10-12-year cycle of ups and downs in the housing market and its activity. It’s been about 13 years since the financial crisis in 2007-2008. Honestly, I thought the pandemic would be a trigger for the housing market to shift, and it did for a few months, though nobody expected it to come back stronger than ever before. Home prices have soared for a long time and the average household income has still to catch up, so either the economy will keep booming to make incomes grow faster, or home prices will have to start to come down and balance up with the current situation, or both.
For now, expect the housing market to remain raging on into next year.