The party is over. The terrific escalations we've seen the past couple of years are not happening anymore, it's showing up in statistics across the country. Some markets are decreasing very slightly, many are flat-lining -- a noteworthy summary of the trend is here.

This is wonderful news! For the first time in a decade, we may actually experience a balanced real estate market, where buyers and sellers have to work together and negotiate to get deals done. 

By analogy, on Wall Street they call a market like this "a trader's market" meaning that the macro economy isn't pushing a strong trend in one direction or the other. Hence, it's up to the trader to spot individual opportunities and it's on them to succeed or fail; the trend won't make them successful, nor will it whipsaw them to failure.

Of course no statistics are more important than the local statistics to determine what's happening in Paradise Valley. The macro statistics do impact us in one important manner however: financing. The banks are "reading the tea leaves" to determine the terms of financing. A period of balanced markets would be positive for the banks and allow them to make longer term plans. This would also come at an opportune time since (as discussed here in previous newsletters) capital requirements are increasing, and those costs will undoubtedly be passed to borrowers. In sum, stability in the real estate markets could counterbalance some of the negative impact of increased capital requirements.

At the moment, financing for homes over $1 million is still quite challenging -- those who qualify get great rates. However, many superb buyers still do not qualify. It's astounding how many people with incomes in the high 6 figures cannot get a bank loan. I'm keeping my fingers crossed that by this time next year, the standards will be a bit more reasonable. Until then, sellers ought to seriously contemplate offering seller financing to get top dollar. 

We will look at the Paradise Valley statistics in detail after the end of this month, as we'll be at the half year mark. The one clear trend I've observed this year has been the jump in $3 million+ closings. We've also seen healthy sales per square foot overall, but they're treading water not heading up nor down. Finally, we also see people snapping up older homes, as financing costs have risen (or financing has become harder to obtain) they just can't afford the remodeled or new home of their dreams. 

In sum, it's a great time to be buying or selling a home in Paradise Valley. You just have to do your homework, and work within the realities of the current environment. Greedy sellers will have their homes linger on market and become stale. Unrealistic buyers will be disappointed. Use the facts and lean on your agent to keep emotions in check, and you'll achieve a positive outcome.

 

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