Median Hits $440K, Annual Appreciation Expected to be Positive Again Soon Traditional Buyers Rebound After Investors Retreat
For Buyers:
Last month we reported that the year-over-year supply change will be negative within 6 weeks, and at that time supply was 80% higher than the previous year. Now 5 weeks later, supply is only 3.7% higher than last year’s count and is expected to be below 2022 in another week. New listings continue to be insufficient in replacing properties that have gone under contract, resulting in overall supply dropping an average of 151 listings per week within the last month. That’s a slower rate of decline compared to previous months, but it’s not because more sellers decided to get off the fence and list their homes. The slower decline is in response to demand weakening when mortgage rates increased from 6.5% to 7.1% within 2 weeks last month, the shock causing many buyers to take a breath. Once again, just when housing economists got optimistic in April about mortgage rates stabilizing or declining, less-than-favorable inflation reports caused them to spike once again. It’s tough to do mortgage rate predictions these days. Since then, conventional mortgage rates have dropped only slightly, hovering around 6.9%. The downturn in demand has created a noticeable advantage for FHA buyers, who had been mostly rejected by sellers over the past 2 years in favor of cash investors. As investors have retreated back to normal levels this year, putting traditional buyers back in the driver’s seat, FHA increased the amount of money they’re willing to loan to $530K. They also lowered their Mortgage insurance premiums by $100s on monthly payments annually. These changes have resulted in the market share of closings in Greater Phoenix funded by FHA going from just 9% in April 2022 to 22% in April 2023 on sales under $600K. Sellers are still contributing to closing costs and buying down mortgage rates on behalf of the buyers to make the monthly payments attractive and competitive compared to local rental rates. In May, many lenders upped the game and announced new down payment assistance programs and loans with just 1% down. Each program has separate requirements that need to be explained by a qualified loan officer, but they are often focused on getting first-time home buyers into entry-level homes. You may be surprised when we tell you that does not disqualify many buyers who have previously owned a home. Search the definition of first-time home buyer online and you’ll find that any individual who has not owned their prim yr residence within the last 3 years is re-classified as a first-time home buyer. Couples also qualify as first-time home buyers if one spouse has not owned a home in the last 3 years.
For Sellers: Despite the increase in mortgage rates and subsequent drop in demand, prices continue to rise in Greater Phoenix and are expected to continue doing so for the next 3-5 months. While still down year-over-year, the median sales price has recovered 5% since our December newsletter, up $22K. Before the end of the 3rd quarter this year, it’s very likely annual appreciation rates will turn positive once again. Nearly every city is officially a seller’s market this month. Maricopa and Buckeye are no longer buyer’s markets. They are now in balance and moving towards seller’s markets once again. The only city remaining in a buyer’s market is Casa Grande at this time. When markets soften like they did last year, the cities on the outskirts fall into buyer’s markets first and are the last to come out. Cities on the interior are the last to go into buyer’s markets, and the first to come out. As the interior cities such as Phoenix, Glendale, and Chandler first moved into seller’s markets in January, the shift of these outlying areas is the final step to coming full circle in the market correction. Improving market conditions for sellers only slightly relieves the need to contribute to closing costs and rate buydown for buyers. Over 50% of sales between $200K-$500K involved sellers contributing to buyers’ costs with the median contribution at $7,500 so far this month. That’s down from January’s sales where 62% involved concessions in this price range, at a median cost of $9,300. So while things are improving, make no mistake that Greater Phoenix would not be in an appreciating market if sellers were not willing and able to offset the costs associated with closing on a home.
Why Buying or Selling a Home Helps the Economy and Your Community
If you’re thinking about buying or selling a house, it’s important to know that it doesn’t just affect your life, but also your community.
The National Association of Realtors (NAR) releases a report every year to show how much economic activity is generated by home sales. The chart below illustrates that impact:
As the visual shows, when a house is sold, it can make a big difference in the local economy. The impact comes largely from the workers required to build, update, and buy and sell homes. Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), explains how the housing industry adds jobs to a community:
“The economic impact means housing is a significant job creator. In fact, for every single-family home built, enough economic activity is generated to sustain three full-time jobs for a year, per NAHB research. . . . And one job for every $100,000 in remodeling spending.”
Housing being a major job creator makes sense when you consider there are many different industries involved in the process. A recent article from Fortunenotes housing activity could have a more robust impact than you think due to the many ways it’s tied to the economy:
“Housing has three direct linkages to economic activity (GDP): the construction of new homes, the remodeling of existing homes, and that of housing transactions. . . . consider the activity associated with home sales – think broker fees, lawyers, etc. – which are a sizable contributor to housing’s GDP footprint.”
When you buy or sell a home, you work with a team of professionals, including contractors, specialists, lawyers, and city officials. Each person plays a role in making the transaction happen.
So, when you make a move in the housing market, you’re not just meeting your own needs, you’re also making a positive impact on the community. Knowing this can give you a sense of empowerment as you make your decision this year.
Bottom Line
Each and every home sale is important for the local economy. If you’re ready to move, reach out to a trusted real estate agent. It won’t just change your life – it’ll also have a strong positive effect on the whole community.
Scottsdale Phoenix Paradise Valley Cave Creek Carefree Fountain Hills Mesa Tempe Chandler Gilbert Glendale Peoria
Dennis Carr - Realtor, GRI Licensed in AZ and CA 480.825.2870
Thinking of Selling or Buying?
Thank you for reading the Arizona Metro Market Report. I hope this newsletter helps you stay informed about local real estate trends.
The Phoenix real estate market continues to be one of the most attractive locations within the United States. An exodus from Los Angeles and Seattle has helped fuel the growth. In spite of historically high prices in Arizona, the cost of housing continues to be a bargain for many out-of-state buyers. While overall there are more listings for buyers to choose from vs last year, new listings are scarce. As a result, prices have not crashed due to oversupply. Contact me for a more targeted view of a particular location within the Phoenix Metro you are interested in.
If you are considering purchasing in Arizona and would like to discuss the possibility of buying or selling without being pressured, contact meso I can learn more about your timeline and real estate goals. It is important to plan ahead and develop a strategy for success.
MLS data for New Listings is accessible dating back to 2021. This year (2023) to date has been the lowest number of new listings that have come to the market on record - over 10K lower than this time in June of 2020.Multiple years of low-interest rates have set the real estate market up for the low inventory problem we are now facing. With higher rates, nobody wants to move and give up their low-monthly mortgage payments. We need to keep an eye on unemployment. A rise in unemployment will force many homeowners with low equity positions to sell or face foreclosure. This is a horrible way to create more housing inventory, yet part of the cycle that we have experienced in the past.
Jun 7 - Last week was very quiet for new contracts, with only 1,589 being accepted across Greater Phoenix. This followed another quiet week at 1,737. Both these numbers are lower than every week in 2023 except for the first 2 weeks of January, which are always low.
This leads us to conclude that buyer demand is going down and the culprit is obvious. Buyers much prefer interest rates around 6.5% to those around 7%.
Both demand and supply are low, so we can expect unimpressive volumes during June and probably July too. On the other hand, if rates were to drop back to 6.5% or below then activity would probably pick up again.
Jun 6 - Below is the newly published months of supply chart for the single-family detached market in ZIP code 85142.
I like this chart because it shows clearly the scale of the deterioration of the market during the second half of 2022 and also the large improvement we have seen in 2023. This is from the perspective of sellers since they would benefit from low supply relative to the monthly sales rate. Buyers see things from the opposite perspective.
The long-term normal supply is around 3 to 5 months for a ZIP code like 85142. As we dip below 3 months, things usually get tough for buyers and as we rise above 5 months things get difficult for sellers. We almost hit 6 months at the start of December and have lost nearly two-thirds of that supply over the past 6 months. That is a big change folks!
This chart works particularly well for 85142, and it is one of my favorite ZIP codes. This is because it is a BIG one, containing a much larger number of homes than average. This means we get a lovely big sample size every time we measure it. To a statistician, the sample size is of the utmost importance. Small samples lead to ugly charts and poor-quality information. Large samples lead to beautiful charts and a clear picture of what is going on.
Not all ZIP codes are as rewarding to measure as 85142. Some are extremely small and the sample size sizes are so tiny, they are exasperating. I am looking at you, 85003, 85004, and 85034, to name but a few.
I sometimes get requests to measure subdivisions. I have to politely decline. Attempting to do this is certainly possible but it is usually completely pointless. The sample size for a subdivision is so small that any statistics derived from it look like random data. A good rule of thumb is that you want around 100 sales per month before you can get reliable statistics for a sub-market. Very few ZIP codes are big enough to achieve that. Some that do include 85132, 85138, 85142, 85143, 85212, 85249, 85326, 85338, 85374, 85383, 85387 and 85396.
If a ZIP code generates fewer than 50 sales per month, I advise you to treat all its statistics with due caution. Below 20 sales per month, then it is frustratingly poor at giving us reliable information.
ZIP codes are defined by the US Postal Service to assist in the delivery of mail, They do not give any consideration to statisticians when they define them, and we should not expect their sympathy or cooperation. But we thank them for big beautiful ZIP codes, especially 85142 and 85383, and we hope they don't decide to split them up in the future.
Knowing what needs to get done before a closing can be a lot, and you will probably have many questions, but ya know what? I have a lot of answers, and I'm here to help.
Scottsdale Phoenix Paradise Valley Cave Creek Carefree Fountain Hills Mesa Tempe Chandler Gilbert Glendale Peoria
Dennis Carr - Realtor, GRI Licensed in AZ and CA 480.825.2870
Thinking of Selling or Buying?
Thank you for reading the Arizona Metro Market Report. I hope this newsletter helps you stay informed about local real estate trends.
The Phoenix real estate market continues to be one of the most attractive locations within the United States. An exodus from Los Angeles and Seattle has helped fuel the growth. In spite of historically high prices in Arizona, the cost of housing continues to be a bargain for many out-of-state buyers. While overall there are more listings for buyers to choose from vs last year, new listings are scarce. As a result, prices have not crashed due to oversupply. Contact me for a more targeted view of a particular location within the Phoenix Metro you are interested in.
If you are considering purchasing in Arizona and would like to discuss the possibility of buying or selling without being pressured, contact meso I can learn more about your timeline and real estate goals. It is important to plan ahead and develop a strategy for success.
May 30 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today.
The new report covers home sales during the period January to March 2023. This means the typical home sale closed in mid-February. No homes sold during the second quarter are included at all, even though the month of May is just one day from being over.
We should remember that this makes the Case-Shiller Index just over 3 months out-of-date on the day it is published and just over 4 months out of date before the next report is issued.
We are just now seeing firm confirmation of the turn-round in the market reflected in the Case-Shiller Index, with a higher index for Phoenix for the second month in a row. In the Cromford® Report, and in the real world, prices have been rising for 5 months now.
Compared with the previous month's series we see the following changes:
San Francisco +2.98%
San Diego +2.51%
Detroit +2.19%
Minneapolis +1.98%
Denver +1.96%
Seattle +1.96%
Chicago +1.86%
Los Angeles +1.67%
Charlotte +1.65%
Washington +1.46%
Portland +1.42%
Boston +1.34%
New York +1.28%
Atlanta +1.13%
Dallas +1.06%
Tampa +0.99%
Miami +0.68%
Cleveland +0.57%
Las Vegas +0.49%
Phoenix +0.46%
Phoenix has dropped from 8th to last place in this table despite the improvement. The market in the other 19 conurbations has turned around more violently than in Phoenix. It is quite unusual for Phoenix to move slowly, but a refreshing change. The national average increase month to month was 1.26%, far higher than Phoenix.
The change from 2 months ago is dramatic. All 20 of the 20 cities are showing positive price appreciation month to month. There was only 1 two months ago.
Comparing year over year, we see the following changes:
Miami +7.7%
Tampa +4.9%
Charlotte +4.7%
Atlanta +4.5%
Chicago +4.0%
New York +3.3%
Cleveland +2.0%
Detroit +1.1%
Boston +0.8%
Minneapolis +0.5%
Washington -0.2%
Dallas -1.2%
Los Angeles -2.9%
Denver -3.6%
Phoenix -4.5%
Portland -4.6%
Las Vegas -5.1%
San Diego -5.4%
San Francisco -11.2%
Seattle -12.4%
The national average was +0.7%. Phoenix remained in 15th place.
This means the few sellers we have are seeing their listings find buyers quite easily, with less than 17% getting canceled or expiring.
The listing success rate has just moved above 83% for the first time since June 2022. The long-term average success rate is only 67.6% and rates over 83% are relatively uncommon in history. although they have become much more common since 2017. This is largely due to the chronic shortage of supply that still prevails today.
In fact, we see rates over 83% only during the following intervals:
Feb - Jul 2005
Apr - May 2017
Mar - Aug 2018
Mar - Dec 2019
Feb - Apr 2020
May 2020 - Jun 2022
Those predicting home price declines should be reminded that listing success rates over 83% have been found to be incompatible with falling home prices.
Scottsdale Phoenix Paradise Valley Cave Creek Carefree Fountain Hills Mesa Tempe Chandler Gilbert Glendale Peoria
Dennis Carr - Realtor, GRI Licensed in AZ and CA 480.825.2870
Thinking of Selling or Buying?
Thank you for reading the Arizona Metro Market Report. I hope this newsletter helps you stay informed about local real estate trends.
The Phoenix real estate market continues to be one of the most attractive locations within the United States. An exodus from Los Angeles and Seattle has helped fuel the growth. In spite of historically high prices in Arizona, the cost of housing continues to be a bargain for many out-of-state buyers. While overall there are more listings for buyers to choose from vs last year, new listings are scarce. As a result, prices have not crashed due to oversupply. Contact me for a more targeted view of a particular location within the Phoenix Metro you are interested in.
If you are considering purchasing in Arizona and would like to discuss the possibility of buying or selling without being pressured, contact meso I can learn more about your timeline and real estate goals. It is important to plan ahead and develop a strategy for success.
Hillside Home Just Sold in Paradise Valley, AZ - Congratulations Tom and Michelle from Minnesota! Located on North Highlands Drive off of Lincoln, this gem is nestled into a hillside with breathtaking views of Camelback Mountain, Mummy Mountain, and the surrounding valley. Tom and Michelle conducted a thoughtful survey of available homes that offered drama, yet suited their lifestyle needs. After viewing this home, and conducting inspections/investigations, they are delighted with their decision. I feel grateful to have the opportunity to assist home buyers and sellers in Paradise Valley, Phoenix, Scottsdale, and surrounding areas. If there is anything I can do to help your dreams come true, don't hesitate to reach out for a 'no-pressure' discussion about your goals and timelines.
Feeling super excited for Chris and Linda, my clients from Minnesota. They have secured their Arizona Dream Home and will enjoy living here part-time until their permanent transition in about five years. We were able to go under contract on this home during the coming soon period, prior to it being advertised on the open market with Zillow and realtor.com. They have worked hard to make this happen, and I could not be more excited for them - congratulations Chris and Linda!
