There's some craziness going on in the market and I just want to try and make sense of that.

The "sellers strike", as it's being called, is still kind of continuing on a local and national level. This is where a large percentage of home owners have an interest rate lower on their current home than the current rates.

As you will know, interest rates have continued to creep up over the last few months. In March this year they were about 6.5% and stayed there until about May and they have been evolving since then to a 23 year high of over 7% here in August.

Inventory locally has continued to go up and we've had a 50% increase from March 1st to August 1st of site built single family homes available in the Prescott MLS (Multiple Listing Service).

Conversely, values actually showed a little bit of an uptick in many areas of our MLS. We'll talk about why, because that is a little bit counterintuitive.

In Prescott last month we saw a 9% increase in overall values. So I dug into the numbers a little bit more.

Of the 226 properties that closed last month, about 100 were in Prescott itself. When I looked closer at those 100, 17% closed at or above the million dollar mark. So the luxury properties that were sold did have an impact in pulling those values up. They include a lot of new construction in places like Prescott Lakes and Talking Rock.

If you take out the million dollar plus market and look at the balance of the homes sold last month, there was still about a 5% increase in overall value. So I started to scratch my head and asked:"Why is that?".

I believe the answer is twofold. Interest rates were going up and the Federal Reserve had indicated that they were going to raise rates.

If you look at homes that closed in July that means they went under contract in May and June when interest rates were a full half a percent lower, if not more, than they are now.

Simultaneously, the Fed came out and said they were going to raise interest rates. So I think the number of closings in July show that there was a little bit of pent up demand at about 6.5% and buyers made offers before the interest rates continued to climb.

Conversely right now, the active inventory in Prescott has been on the market now for 109 days. That's a little bit different from the number of days on market that homes are selling in.

There's lots of factors that go into selling a home. Your price, your condition, your location, your marketing. If those are right then homes are taking about 40 days to sell, MLS-wide. Usually you can look at one of those four factors for the answer if your home isn't selling in that timeframe.

Looking at other values, Prescott Valley actually went down a little less than 1%. Chino Valley had an uptick with some higher-priced properites on large acreages that sold out there. MLS-wide, values went up by 4%.

So what do I think is going to happen?

In the new interest rate environment we are seeing today, I do think we are going to see a little bit of a correction once those settle in, because we are seeing the active inventory on the market for a much longer period of time.

To give us some perspective on the "sellers strike", locally we have about a 3.5 month supply of homes. As I've said before, a normal market is usually anywhere between five to seven months.

On a national level, when you look at the number of homes for sale today, July 2023 was about 48% down, compared with the pre-pandemic level of July 2019.

So there's still very limited inventory, relatively speaking, and I think the market is recognizing that some sellers out there are being realistic and some are just pushing the envelope and hoping that there's still added value that's probably no longer there, based on the new rates.

In terms of demand, comparing last month with July 2022, about 93% of the overall buying activity is still in the market. So, despite what you read, there are still plenty of buyers out there.

If you're a buyer, you might be asking yourself: "What am I supposed to do?"

A couple of things to look at are not to underestimate the tax credits if you're not a home owner right now and a lot of experts are predicting that interest rates are going to come down.

A lot of sellers who've been on the market a long time want to sell. Consider locking in the price now, before the interest rates go down, which typically raises prices back up, then refinance your home as soon as the rates do come down.

If you have any other questions please don't hesitate to contact us at 928-237-4425.

Have a great day,

Geoff

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