How To Stay Warm In This Cooling Real Estate Market
I think we can all agree that winter is the best time of year in Phoenix. Sure, we pretend we like Fall but nobody really thinks sweating through a wool batman costume on a 90 degree Oct night is a great time. The real good stuff is sweating your way through a t-shirt while you put up your Christmas lights on a 78 degree Nov day. The mild cool down we experience each winter in Phoenix is actually a fantastic metaphor for the real estate market shift we are finally experiencing after an eight-year housing rally. But have no fear! We’ve got some scary looking charts for you and some less scary advice on how to survive this market shift. Alright so now that we’ve established that I know stuff about numbers and how to find charts online let’s talk about what these mean. First, it’s important to note that you will not hear much on the news about the market slowing down. The media focuses mostly on housing prices and those are still moving up nicely. Prices are a lagging indicator, meaning they tell us what has already happened in the market, not what is going to happen. I picked out two leading indicators to discuss so that we can see what is going to happen and make you smarter than your friends. The first chart represents The Cromford Market Index (CMI) which is a measure created by statistician Mike Orr formerly of ASU. This index combines thousands of data points to create a single number that shows us how hot or cold a market is. A CMI of 100 is a perfectly balanced market and anything over 100 represents a hot seller’s market. The CMI has been above 100 with a few short exceptions since June of 2009 and as a result, we have seen unprecedented growth in housing prices. As you can see the CMI is falling steadily now moving ever closer to a balanced (cooler) market. The second chart is the Listing Success Rate (LSR) which shows the percentage of homes listed for sale that actually sell (as opposed to being canceled and taken off the market). A falling LSR means that sellers are having a harder time getting their homes to sell which shows a clear cooling off in the marketplace. The charts above represent just two metrics but I could post a half dozen more that prove my point and I give a more detailed video explanation of these charts on the blog so be sure to check that out at www.gluchgroup.com/blog Why Has Winter Come? As always we will keep you in the loop on all future developments. Stay tuned and subscribe to the blog. Now sit back and enjoy these brisk low 60 degree nights!
Bring Out The Scary Charts!
Just to get your blood pumping and prove I’m not making this stuff up let’s kick things off with the charts!
Our best guess is that the market is cooling for three reasons:
What Do I Do Now?!