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tl;dr
Demand in Phoenix finally increased for the first time in months. Showing some resiliency during a high interest rate environment.
The average mortgage rate is 7.44%
Seller are not being realistic with their expections when it comes to selling.
Phoenix
Well Zillow has (as an iBuyer), but that is old news and they were only around for a very brief time.
Opendoor has been selling about 40 homes a month in Greater Phoenix. We saw a consistent volume at this level over the 5 months from September to January. But in February that popped up to 63. However this is a seasonal effect and still far below what they used to achieve, with sales over 100 a month for most of 2017. Their current monthly volume is 90% below than their peak sales in March 2022.
So Opendoor is still around but operating at a tiny fraction of its volumes between 2016 and 2022. With a 0.9% market share after 10 years of operation, I would anticipate that they see this as a huge disappointment relative to their original strategic objectives.
What of OfferPad?
Their monthly sales volume is hovering around 15 sales per month. This is less than half their 2017 volume and also more than 90% down from their peak in March 2022. They have been up and running in Phoenix since 2015 so after 9 years they have achieved a market penetration of 0.2%.
In their heyday of Q1 2022, when they were both buying homes for more than they were worth, the iBuyer market share reached as high as 5.7%. So their present 1.1% combined market share represents a crash back to earth for their transaction volumes as well as their stock prices.
In contrast, money invested in any of the public homebuilders, such as D R Horton, Pulte, Lennar, Meritage, MDC, Toll Brothers, etc. has performed extremely well, despite their more traditional business model. The model might be old, but it has the great but unfashionable feature of generating healthy profits, even after interest, tax, depreciation and amortization. You may call me old fashioned, but I still like that feature.
The Cromford Market Index is a gauge of Phoenix’s Supply and demand metrics. 100 is considered a balanced market. Anything higher than the 100-point benchmark is considered a seller’s market. Anything below 100 is considered a buyer’s market.
As of April 19th, 2024, the CMI has decreased to 111.4. Down 2.1 basis points from 2 weeks ago
Supply has increased by 4 basis points and demand has increased by 2 basis points.
Rates
7-Day rate change: +14 basis points
YoY change: +69 basis points
Average interest rate: 7.44%
Back to reality
After years of fierce buyer competition and homes selling for six figures over the asking price, homeowners looking to sell this spring are entering the fray with “more realistic” expectations.
We have officially entered the “best week to sell a home” in 2024 (April 14-20), according to an earlier report by Realtor.com. But this time around, home sellers are not anticipating as much of a seller’s market compared to years past.
Home seller behavior in the spring market of 2024. And judging by the survey responses, sellers are approaching the sale of their home with tempered expectations.
Today’s sellers expect fewer bidding wars and fewer offers over asking—as well as fewer buyers willing to waive contingencies like home inspections and appraisals. They’re also more likely to expect their homes to spend a longer stint on the market.
Buyers are still out there, but as mortgage rates climb back up to 7.44% the number of buyers who can qualify for a mortgage is likely to tick down
Seller expectations in Spring 2024:
Sellers expecting multiple offers on their home: 12% — down from 27% in 2023
Sellers expecting to sell for more than the asking price: 15% — down from 31%
Sellers expecting to receive an offer within one week of listing: 15% — down from 37%
Sellers expecting buyers to waive contingencies (like home inspections and appraisals): 15% — down from 35%.
S&p500 vibe check
US stocks continued to fall yesterday on bearish sentiment driven by rate policy concerns and Middle East tensions
The S&P fell for a fifth-straight day for its longest losing streak since October
This Nasdaq fell for a fifth-straight day for its longest losing streak since January
Meme, tweet, & fact of the week
Bob Marley was buried with his bible, his guitar, and bud of marijuana.