Metro Phoenix home prices continued to cool off in July, dropping about 1 percent from June but remaining almost 31 percent higher than they were a year ago, Arizona State University reported Thursday.
With prices advancing through the spring, the leveling-off was expected, and it should not represent a turnaround in which residents once again will see their property values fall, said Mike Orr, director of the Center for Real Estate Theory and Practice at ASU’s W.P. Carey School of Business.
“It’s a natural reaction to prices going up so fast in the spring,” he said. “The summer is bound to slow down. The market can’t keep going up at 5 percent a month; that’s crazy. We sort of overdid things in the spring.”
Well put, Mike. Unfortunately, it seems once the prices start to rise the natural assumption from sellers is that the race is on once again as it was back in 2005.
What does this mean in practical terms? Not a lot, actually. Though inventory has been on the rise – up to 8,781 detached homes across Maricopa County as of this morning – we’re still a few thousand homes shy of having anything resembling a balanced market. Below the $125k mark, maybe to $150k, it remains a bit of a free for all as far as the bidding goes. FHA buyers still don’t stand much of a chance at those price points.
No, where the change is most noticeable is for the sellers … the folks who have been waiting for further price increases, who now are looking at a market that has leveled off after a few-month run. (If you haven’t been here for the car stuck in the mud analogy, here it is again – when a car stuck in the mud finally moves, it tends to jump forward before getting back to its normal pace. Thus the state of the Phoenix market after several years in the, er, mud.)
The opportunity to push the envelope on list prices is fading quickly and market value will be the goal, not slightly above as was possible the past few months.
It’s easy to say sellers need to watch for changes in the weather on a day it’s 74 degrees with scattered showers – a rarity in early September. But it doesn’t make the statement any less true or relevant.
For the first time in a couple of years, this just might be a normal fall with lower activity. Prepare now.