Arizona’s Softening Real Estate Market
Several things have occurred during the last 45 – 60 days in the real estate market of Arizona, requiring appraisers’ attention when making adjustments.
During the last several years, the residential real estate market has experienced rapid rising home values driven by high demand, a lack of active listings, and low-interest rates. New home sales have been beyond brisk, and buyers have experienced significant equity increases even before move-in. Many homes have sold within several days and, in some cases, the day of listing.
The market is changing. The Federal Reserve Bank has raised rates several times this year and is forecasted to increase rates several more times before the end of the year. Some forecasters have suggested rates will rise as much as one percent (100 bases points). Rate increases have caused what could be called normalization in the real estate market. Normalization in that prices are starting to decline to a more affordable level, homes are staying on the market longer, and sellers, including new home builders, have restarted offering closing incentives. Some list-to-sell ratios are below 100%.
Is it time to reassess how we treat time adjustments and suggest exposure times? Over the past year, time adjustments could be determined, with some comfort, by measuring prices over the past three or six months. One percent, two and one-half percent per month in some markets could be supported, and days on the market at five to fifteen.
Beware; a chart may show a significant increase in values while, in reality, there might be a dip at the most recent dates showing a decline or flatting in median home values. If adjusting, consider all the comparative data, including data reflective of the most recent period. Also, you might want to add comments reflecting short-term market conditions, further supporting your conclusions. Remember, we are recorders of history, not forecasters of the future.