Tucson Real Estate Market Projection - August 2022
I want to start by saying, this is 100% an opinion piece. Yes, I have knowledge of the housing market, but none of what I am about to say is backed by anyone except me (I mean, there may be people who agree, perhaps a lot of people, but I don’t know that).
The housing market is going to crash.
I’ve been saying that isn’t the case. I agree the market isn’t crashing as we thought it would. But, again, it’s not 2008. It’s not the same circumstances. Everyone isn’t getting foreclosed on, but these prices are officially ridiculous.
Every morning, I hop on the MLS, browse the new listings, and scan the price reductions. There have been almost as many reductions as new listings. Because interest rates are up and demand has slowed, people aren’t willing to pay what they were a few months ago. No one is trying to pay these inflated prices when their interest rates are double.
The thing is these houses are comping at these prices. Because we’ve spent the last year partaking in bidding wars over every home on the market, values have increased at unrealistic numbers, and housing prices are now delusional. Since people were paying ten, twenty, or fifty thousand dollars over asking, many homes sold for more than they were worth; now, everything is valued higher than its value, if that makes sense.
However, since these numbers appear legit on paper, it is difficult to advise your client to sell for ten, twenty, or fifty thousand under what it’s comping.
Since the beginning of the summer, house sales have slowed, and they’re sitting longer and longer at these higher prices. So now you’ve got to come in two weeks later and drop the price, and quite frankly, it still feels too high a lot of the time.
We’re in an area where a 1500 square foot, three bed, two bath home sold for $180K just three years ago, to selling for over $300k, and they just aren’t worth the dollar amount.
These past few years have been the perfect example of supply and demand. The only reason these homes became so valuable was that the demand was so high, but they simply could not hold that value without that demand.
So how is it going to crash? I don’t think it will implode, but the transition will be rocky, and the prices will drop, maybe not as low as they once were, but they need to come down. Because again, these homes are priced 20, 30 percent over their values, and that’s not going to fly much longer even if you painted them grey and put in a new floor. People don’t want to buy a home at these rates. So it doesn’t matter how high rates were in the ’80s, last year, they were at a once-in-a-lifetime low, and people are going to take a minute to recover from that expectation. People will be a little shell-shocked when that happens, and it will feel like a crash. The other thing is a lot of people aren’t going to qualify for as much with an increased interest rate, and if the people who want to buy aren’t qualifying for a $300k home, then no one is going to buy houses listed at those prices.
As a real estate agent, I probably shouldn’t be so blunt, but as a human who lives in the real world, I’d like to invite you all back into it.
If you didn’t take advantage of the market over the last two years, whether that means getting that low-interest rate or selling your home at an increased value, it will not happen now. So if you’re trying to cash in on the tail end and then be able to purchase a new home at a lower price, well, you can’t have your cake and eat it too.
Real estate doesn’t stop. People are going to buy and sell homes. The market fluctuates, and right now, it’s fluctuating downward, but it’s not crashing, it’s just coming back to reality, and it’s time we all start too.
