Wonderful home, Superior Location, AND Friendly Community? You'll find it all here! This spacious 3/2 includes an extra space for an office, TV room, arts & crafts area, or even an unexpected guest! The kitchen includes granite counters and SS appliances. Slate tile, wood flooring, and new carpet in the great room. New interior and exterior paint. When you step outside, a beautifully lush, tropical oasis awaits. Take advantage of Arizona's awesome fall, winter, and spring weather by taking a relaxing dip in the pool. This is why we live in AZ! And let's not forget about the convenience factor! You're just a hop, skip, or short drive to some of the nearby hotspots that make this popular community the place to live: Scottsdale Sports Complex TPC Scottsdale (Home of the WM Phoenix Open) Fairmont Princess Luxury Hotel Whole Foods Market The Mayo Clinic (World Renowned Health Care) Westworld of Scottsdale (Famous Barrett Jackson Car Show, among others) Scottsdale Quarter, Kierland Commons, Market Street (Premier Luxury Shopping and Dining) Desert Ridge Marketplace (Shopping, Entertainment, and Dining Venue). Surround yourself with the creature comforts you've been looking for. You'll find them here at 8131 E Michelle Dr!
Back to the 80’s? Loan Assumptions, Rate Buy Downs, and Incentives More Choice for Buyers: Supply Up 22% in 10 Weeks
For Buyers: The 4th quarter is here, and this is the best time of year to be a buyer in Greater Phoenix!Inventory continues to rise, up 22% in 10 weeks to be exact, and price reductions typically peak in October and November. Most sellers listing in October are motivated to close on their homes before the end of the year, but few are more motivated than builders. New homes make up 22% of active MLS listings and 29% of Maricopa and Pinal County August sales. Builder incentives include not only closing cost assistance but select upgrades and significant permanent and temporary rate buy downs. For perspective, let’s use a $350,000 loan. If a buyer uses the seller’s or builder’s closing cost assistance to buy down the mortgage rate by 3% it would save more than $650/month on their payment. Buying the rate down by 2% saves $450/month.
Builders are not the only ones with incentives, however. Last month, 45% of all closings through the Arizona Regional MLS involved sellers paying buyers’ closing costs with a median of $8,500, about the cost of a 2/1 temporary buy down on a $365,000 loan. Buyers would be smart to consider areas with heavy competition between builders. The cities of Coolidge, Maricopa, Tolleson, and Laveen collectively saw 70% of sellers agree to closing cost assistance with 50% of them paying out $10,000 or more.
First-time home buyers may feel like the difficulties they’re facing in today’s housing market are unique and unprecedented. However, high rates like today bring out tools and opportunities for buyers that only emerge when the market is stressed, and they disappear when the market recovers. Baby Boomers, considered to be the wealthiest generation today, didn’t have it so great when they were in their 20’s and 30’s. In the midst of building their careers, growing their families, and purchasing homes, the economy experienced 4 recessions, 4 rounds of high unemployment, and mortgage rates that soared over 10 years from a low of 7% to 18%; it took another 10 years to get back down to 7%. During that time, home sales were low but home values did not decline, similar to today. Here are some stories about how a few of our Baby Boomers and Gen-Xers purchased their first home:
· Mike, 72yo - first home in 1976 for £9,600 at 8.25%, gifted down payment from family and rent-to-own appliances. Sold it 3 years later for £19,000. · Tom, 68yo - bought his first home in the 70’s together with 3 friends at 9% as tenants in common. · Chris, 58yo - first home 1989, paid a distressed seller $4,000 and took over their FHA mortgage payment · Thomas, over 59yo - first home was a distressed HUD foreclosure he bought for $55K and fixed it up himself · Michael, 66yo - sold his boat and car to purchase his first home at 8.5% · Raejean, 57yo - purchased her first home in 1985 at 16.5% · Kathleen - purchased in 1979 with gifted down payment and 3-2-1 rate buy down · Kathryn - first home in 1981, interest rates were 18%, but she assumed the seller’s VA loan at 6% · Nick - bought first home in 1988 with his brother, assumed the seller’s VA loan with $4,500 down and got a roommate to help make the payment, didn’t care about the rate · Jon - first home in 1981, assumed a VA loan at 10%, seller financed the rest at 10%. Existing rates were 18%
Each one said their decision to buy their first home was a good one in hindsight, even though money was tight and rates were high. Especially today, it’s highly recommended to consult with a Realtor® and a lender who is fully aware of available loan programs, FHA and VA loan assumptions, seller incentives, down payment assistance, and other tools designed to help you on your way to home ownership and building wealth.
For Sellers: The seller market is weakening in the wake of rising mortgage rates as we head into the 4th quarter.Greater Phoenix is still in a seller’s market, but at the current rate of decline, it could see a balanced market by year-end.This means that sellers should allow for longer marketing times, improve the condition of their homes prior to listing if necessary, and stay open to funding rate buy-downs.Prices are holding tight and are not expected to decline significantly for now.
The table below provides a concise statistical summary of today's residential resale market in the Phoenix metropolitan area.
The figures shown are for the entire Arizona Regional area as defined by ARMLS. All residential resale transactions recorded by ARMLS are included. Geographically, this includes Maricopa County, the majority of Pinal county, and a small part of Yavapai County. In addition, "out of area" listings recorded in ARMLS are included, although these constitute a very small percentage (typically less than 1%) of total sales and have very little effect on the statistics.
All dwelling types are included. For-sale-by-owner, auctions, and other non-MLS transactions are not included. Land, commercial units, and multiple dwelling units are also excluded.
Key Skills You Need Your Listing Agent To Have
Selling your house is a big decision. And that can make it feel both exciting and a little bit nerve-wracking. However, the key to a successful sale is finding the perfect listing agent to work with you throughout the process. A listing agent, also known as a seller’s agent, helps market and sell your house while advocating for you every step of the way.
But, how do you know you’ve found the perfect match in an agent? Here are three key skills you’ll want your listing agent to have.
They Price Your House Based on the Latest Data
While it may be tempting to pick the agent who suggests the highest asking price for your house, that strategy may cost you. It’s easy to get caught up in the excitement when you see a bigger number, but overpricing your house can have consequences. It could mean it’ll sit on the market longer because the higher price is actually deterring buyers.
Instead, you want to pick an agent who’s going to have an open conversation about how they think you should price your house and why. A great agent will base their pricing strategy on solid data. They won’t throw out a number just to win your listing. Instead, they’ll show you the facts, explain their pricing strategy, and make sure you’re on the same page. As NerdWalletexplains:
“An agent who recommends the highest price isn’t always the best choice. Choose an agent who backs up the recommendation with market knowledge.”
They’re a Great Negotiator
The home-selling process can be emotional, especially if you’ve been in your house for a long time. You’re connected to it and have a lot of memories there. This can make the negotiation process harder. That’s where a trusted professional comes in.
A skilled listing agent will be calm under pressure and will be your point person in all of those conversations. Their experience in handling the back-and-forth gives you the peace of mind that you’ve got someone on your side who’s got your best interests in mind throughout this journey.
They’re a Skilled Problem Solver
At the heart of it all, a listing agent’s main priority is to get your house sold. A great agent never loses sight of that goal and will help you prioritize your needs above all else. If they identify any necessary steps you need to take, they’ll be open with you about it. Their commitment to your success means they’ll work with you to address any potential roadblocks and find creative solutions to anything that pops up along the way.
“Just as important as the knowledge and experience agents bring is their ability to guide you smoothly through the process. Above all, go with an agent you trust and will feel comfortable with. . .”
Bottom Line
Whether you're a first-time seller or you’ve been through selling a house before, a great listing agent is the key to success. Connect with a real estate professional so you have a skilled local expert by your side to guide you through every step of the process.
As of 10/12/2023 30-year fixed: 7.69% 15-year fixed: 7.02% Mortgage rates have decreased slightly since this time last week.
“Some lenders advertise much lower rates than others. Other lenders can be "out of the market" at times. Our index attempts to capture the most prevalently quoted conventional conforming 30-year fixed rate for a loan scenario with at least 20% down and no major loan level price adjustments.”
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.
Sep 17 - Active listing counts have started to rise significantly over the past 2 weeks, with the counts excluding UCB and CCBS listings moving up 6.1% from September 2 to September 16.
New listings are still scarce, but they are less scarce than a month ago. We have seen the 28-day count rise from the low of 6,486 on July 31 to around 7,100 this week. This is still well below normal (9,500 to 10,500) but demand is so weak that an extra 150 listings per week cannot be absorbed.
The increase in supply is causing the Cromford® Market Index to fall, signaling a weakening market balance for sellers.
This trend is looking like it will probably continue until mid-November when the usual seasonal decline in active listings is likely to kick in. This is good for buyers since they will have more choices and a little extra negotiation power.
The employment outlook in the Phoenix Metro is looking strong, with a plethora of tech companies expanding operations and starting new projects. This activity further strengthens and diversifies the local economy, bringing talented employees who demand a high standard of quality living spaces and amenities. One of the reasons our local economy suffered so greatly during the 07-08 great financial crisis was due to the concentration of housing construction related employment. While we are now more diversified, we are not fully protected from a recession. However, it provides a stronger, more resilient economic base in a better position to endure economic hardship.
Expansion and attraction projects in FY 2023 include:
•TSMC announced a total $40 billion investment and plans to build a second state-of-the-art semiconductor fab in Phoenix, creating4,500 total jobs. •LG Energy Solution announced a $5.5 billion investment to build a battery manufacturing complex in Queen Creek, creatingthousands of jobs. •American Battery Factory announced plans to build a $1.2 billion lithium iron phosphate battery cell manufacturing facility in Tucson, creating1,000 jobs. •Republic Services announced it will relocate its corporate headquarters to a newly- built facility in Phoenix, which will house 1,000 employees. •Discount Tire announced plans to develop a new corporate headquarters in Phoenix, including a 300,000+ square-foot office building that will house 1,100 employees. •Virgin Galactic announced a new Delta class spaceship manufacturing facility in Mesa, creating hundreds of aerospace engineering and manufacturing jobs. •Moov, a marketplace for used semiconductor equipment, celebrated the grand opening of its new U.S. headquarters and office in Tempe, supporting hundreds of jobs. •Benchmark Electronics celebrated the grand opening of its $20 million Precision Technologies facility in Mesa, supporting up to 100 new jobs. •Procter & Gamble (P&G), a global consumer goods leader, announced plans to invest $500 million to build a new fabric care product manufacturing facility in Coolidge, creating 500 new jobs. •EVelution Energy, an electric vehicle battery materials processing company, announced plans to build a $200 million cobalt sulfate production facility in Yuma County, creating 60 new jobs. •Blue Origin celebrated the grand opening of its new avionics and systems engineering office in Phoenix, creating hundreds of new jobs. •Corning, one of the world's leading innovators in materials science, announced plans to build a new optical cable manufacturing facility in Gilbert, creating 250 jobs. •FrameTec, announced the commencement of construction on its new $40 million framing truss manufacturing facility in Camp Verde, creating over 180 new jobs. •JA Solar will invest $60 million to establish its first solar module manufacturing facility in the U.S. in Phoenix, creating over 600 jobs. •Rehrig Pacific, a manufacturer for the supply chain and environmental waste industries, broke ground on a new manufacturing facility in Buckeye, creating over 100 jobs. •Sion Power, a leading technology developer of batteries for electric vehicles, announced an expansion of its battery manufacturing operations in Tucson, creating over 150 jobs. •Nucor, the largest steel and steel products producer in the U.S., will invest $100 million to expand its existing bar mill in Kingman, creating 140 new jobs. •JX Nippon Mining & Metals USA broke ground on its new electronic materials manufacturing facility in Mesa, creating over 100 jobs once operational in 2024. •Chang Chun Arizona, a leading petrochemical supplier based in Taiwan, broke ground on its $300 million semiconductor chemical manufacturing facility in Casa Grande, creating over 200 new jobs. •Ecobat, the global leader in battery recycling, announced plans to build a lithium-ion battery recycling facility in Casa Grande, creating over 60 new jobs. •Cirba Solutions, a leading battery management and materials processor, announced plans to construct a lithium-ion battery recycling facility in Eloy, creating over 100 jobs. •HyRel Technologies, a global provider of quick-turn semiconductor modification solutions, commenced operations at its $15 million manufacturing facility in Peoria, creating 50 new jobs.
The Many Non-Financial Benefits of Home Ownership
Buying and owning your own home can have a big impact on your life. While there are financial reasons to become a homeowner, it’s essential to think about the non-financial benefits that make a home more than just a place to live.
Here are some of the top non-financial reasons to buy a home.
According to Fannie Mae, 94% of survey respondents say “Having Control Over What You Do with Your Living Space” is a top reason to own.
Your home is truly your own space. If you own a home, unless there are specific homeowner association requirements, you can decorate and change it the way you like. That means you can make small changes or even do big renovations to make your home perfect for you. Your home is uniquely yours and by buying, you give yourself the freedom to tailor it to your individual style. Investopediaexplains:
“One often-cited benefit of homeownership is the knowledge that you own your little corner of the world. You can customize your house, remodel, paint, and decorate without the need to get permission from a landlord.”
When you rent, you might not be able to make your place really feel like it’s yours. And if you do make any modifications, you might have to change them back before you leave. But if you own your home, you can make it just the way you want it. That level of customization can give you a sense of pride in where you live and make you feel more connected to it.
Fannie Mae also finds 90% say “Having a Good Place for Your Family To Raise Your Children” tops their list of why it’s better to buy a home.
Another important factor to think about is what stage of life you’re in. U.S. Newsbreaks it down:
“For those with young children, buying a home and putting down roots is a major driver. . . . You don’t want the upheaval of a massive rent increase or a non-renewed lease to impact your sense of stability.”
No matter which of life’s milestones you’re in, stability and predictability are important. That’s because the one constant in life is that things will change. And, as life changes around you, having a familiar home and not worrying about moving regularly helps you and those who matter most feel more secure and more comfortable.
Lastly, Fannie Mae says 82% list “Feeling Engaged in Your Community” as another key motivator to own.
Owning your home also helps you feel even more connected to your neighborhood. People who own homes usually live in them for an average of nine years, according to the National Association of Realtors (NAR). As that time passes, it’s natural to make friends and build strong ties in the community. As Gary Acosta, CEO and Co-Founder at the National Association of Hispanic Real Estate Professionals (NAHREP), points out:
“Homeowners also tend to be more active in their local communities . . .”
When you care deeply about the people you live near, you’ll do what you can to contribute to your local area.
Bottom Line
Owning your home can make your life better by giving you a sense of accomplishment, pride, stability, and connectedness. If you're thinking about becoming a homeowner and want to learn more, reach out to a local real estate agent today.
As of 9/21/2023 30-year fixed: 7.47% 15-year fixed: 6.75% Mortgage rates have increasedsignificantly since this time last week.
“Some lenders advertise much lower rates than others. Other lenders can be "out of the market" at times. Our index attempts to capture the most prevalently quoted conventional conforming 30-year fixed rate for a loan scenario with at least 20% down and no major loan level price adjustments.”
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.
Why Buyers Should Stay in the Game in 2023 Sellers: Prepare for Longer Days on Market in Q4
For Buyers:
When first-time home buyers talk to their parents or grandparents about today’s mortgage rates, they may get a response similar to, “I purchased my first home in the 80’s at [insert range of 10%-18% interest here].” In fact, some carry their high mortgage rate like a badge of honor because it turned out to be a great decision, despite the uncertainties of their time. In their 20s and early 30s, Baby Boomers endured 4 recessions, 4 rounds of high unemployment, and erratic mortgage rates that started from a low of 7% and rose to a peak of 18%.However, those who got in the game where they could, with a long-term mindset, were rewarded and are looked upon as “lucky” to have gotten in when they did.
Flash forward to 2023. While admittedly there is a large swath of buyers priced out of purchasing a home due to mortgage rates between 6.8%-7.5%, there are a number of them who have the means to enter the market but are waiting for mortgage rates to decline. Their mindset is not unlike those buyers who waited for prices to come down when rates were below 3% 2 years ago, and now regret it. Waiting for the perfect home, at the perfect time, at the perfect price, and at the perfect mortgage rate is an exhausting and futile endeavor. The reason is that when all the perfect boxes are checked off, there is a line of competing buyers that make the experience… well ...less perfect.
Jump to September. As Greater Phoenix moves into the last few months of 2023, seasonally this is the best time to be a buyer. Active listings are rising as they typically do in the Arizona Regional MLS, providing more selection. The median sales price is $40,000 below the highest peak of June 2022, and prices are stable for now. These months are typically slower than the Spring, but competing demand for homes is further suppressed by mortgage rates. Thus 41% of sales involve seller-paid closing costs that often include a rate buy-down. Closing cost assistance is one of the first things to go when rates decline and/or buyer competition increases in relation to supply. Since January, the percentage of sales with assistance has dropped from 51% to 41% and the median paid by sellers has dropped from $9,700 to $7,500.
Things aren’t perfect, but 3 out of 4 isn’t bad.
For Sellers:
Currently, the median number of days prior to a seller obtaining an accepted offer is 21 days. However, going into the last few months of the year, sellers should allow for an extra week or two as the calendar approaches year-end holidays. Historically, properties that are listed in October are on the market for a median of 2-4 days longer than those listed in September. However, properties listed in late October or early November are typically 10-14 days longer.
Real estate professionals often advise their clients that the first week of active status is the most important in terms of gauging whether a listing is priced appropriately to attract a full-price offer. Analyzing the last 30 days of sales, this advice proves to be true. Properties that accepted contracts within 1 week of list showed 68% of sellers received their original list price or more at closing. At 2 weeks on the market, that measure declines to 53% but is still a majority. By week 3, however, 59% of sellers accepted offers less than their original price, and after 4 weeks on the market, 81% accepted less.
As sellers approach longer marketing times in October, it’s common to see both active listings and price reductions increase. This year is following that expectation and weekly price reductions are on the rise, up 34% since the beginning of July, but still down a whopping 63% from this time last year. Weekly price reductions are expected to continue rising gradually from now until they peak in early November, so sellers planning to list within the next few weeks may want to budget for at least one in their strategy.
Make no mistake though, the market still favors sellers. So far this year, sales prices have appreciated 6-7% over the past 8 months, with 12 fewer days on market compared to last year, and tighter negotiations within just 2% of the last list price on average. Sale prices are expected to continue rising mildly for the next 3 months.
Sep 10 - The current trends in the market are lessening the negotiation advantage for sellers and probably making them just a little nervous.
The above chart shows us that supply is starting to rise again. The increase was very modest for the first 6 weeks, but last week saw active listings rise over 3.2% to 12,476. This is still a small number (last year we has over 19,000 at this time), but the trend is of psychological importance. Buyers can flex their muscles a little, especially in the areas with the lowest CMI, such as Casa Grande and Queen Creek.
Of course, any major change in mortgage interest rates could set a cat among the pigeons. This uncertainty works both ways, but the 7% level seems to have established itself as the borderline between good and bad sentiment. I am tempted to mention that I bought my first home in 1976 with a variable rate mortgage fixed for the first 5 years at 8.25%. Funnily enough, this is actually lower than the 8.75% I am currently paying for all 3 of my residential loans. These examples are in the UK so of limited relevance, but they do remind us that home-buyers in the USA are very lucky to have 30-year and 15-year fixed rate mortgage rates available to them. Such things rarely exist abroad. Banks don't usually offer them without a huge amount of government intervention in the real estate lending market. This government intervention is abnormally large in the USA, compared with most foreign countries, and has been so ever since the end of the Second World War.
What Experts Project for the Housing Market Over the Next 5 Years
If you’re planning to buy a home, one thing to consider is what experts project home prices will do in the future and how that might affect your investment. While you may have seen negative news over the past year about home prices, they’re doing far better than expected and are rising across the country. And data shows, experts forecast home prices will keep appreciating.
Experts Project Ongoing Appreciation
Pulsenomics polled over 100 economists, investment strategists, and housing market analysts in the latest quarterly Home Price Expectation Survey (HPES). The results show what the panelists project will happen with home prices over the next five years. Here are those expert forecasts saying home prices will go up every year through 2027 (see graph below):
If you’re someone who was worried home prices would fall because of stories you’ve read online, here’s the big takeaway. Even though home prices vary by local market, experts project prices will continue to rise across the country for years to come. And these numbers indicate the return to more normal home price appreciation.
And while the projected increase in 2024 isn’t as large as 2023, it’s important to recognize home price appreciation is cumulative. In other words, if these experts are correct after your home’s value rises by 3.32% this year, it’ll appreciate by another 2.17% next year. This is a good example of why owning a home is a choice that wins big over time.
What Does This Mean for You?
Once you buy a home, price appreciation raises your home’s value, and that grows your household wealth. To see how a typical home’s value could change in the next few years using the expert projections from the HPES, check out the graph below:
In this example, let’s say you bought a $400,000 home at the beginning of this year. If you factor in the forecast from the HPES, you could potentially accumulate more than $71,000 in household wealth over the next five years.
So, if you’re thinking about whether buying a home is a good choice, remember how it can be a powerful way to grow your wealth in the long run.
Bottom Line
According to the experts, home prices are expected to grow over the next five years at a more normal pace. If you’re ready to become a homeowner, know that buying today can set you up for long-term success as home values (and your own net worth) grow. Connect with a local real estate agent to start the homebuying process today.
As of 9/14/2023 30-year fixed: 7.24% 15-year fixed: 6.59% Mortgage rates have decreased very slightly since this time last week.
“Some lenders advertise much lower rates than others. Other lenders can be "out of the market" at times. Our index attempts to capture the most prevalently quoted conventional conforming 30-year fixed rate for a loan scenario with at least 20% down and no major loan level price adjustments.”
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.
Aug 26 - When buyers are actively looking for homes their main source of information about home prices are the list prices for homes they see listed for sale. All the other data is historic, based on what someone agreed to pay weeks or even months ago. Here is what they see when they look at the ARMLS active listings:
First of all, they notice that the average price per square foot is higher in week 34 of 2023 than in week 34 of all the years back to 2015. They can also see that every year has been higher than the one before for week 34. The weak pricing triggered in 2Q 2022 by a sudden jump in mortgage rates has had only a temporary effect and now looks to be of only minor lasting significance.
The current average $/SF for all active listings is $350.27. This is an average across all areas within the ARMLS database and all dwelling types. Because this is a very large sample, the chart is very well-behaved and shows us that:
The long-term trend has been higher for the last 8 years, with 2023 some 91% higher than 2015.
The summer is a seasonally weak period, each year showing a decline from May to August, except for 2020 which was bouncing back from the severe COVID scare that occurred in March and April that year. The weakness in 3Q 2023 is similar to 3Q 2015 through 2018, relatively normal and uneventful years.
Today we see active list pricing of 8.7% higher than we did this time last year. This is a larger increase than the 6.0% we measured at the same time last year.
There was an unusually large and rapid fall between May and August last year on top of the seasonal weakness. This was heavily influenced by the pricing actions of the iBuyers who realized too late that they had continued buying even while the market was cooling, resulting in them having far too much inventory by June 2022. They had a fire-sale of this inventory in the second half of 2022 in order to rid themselves of that exposure.
One key problem is that the reality represented above is completely unlike the false narratives peddled by several sensationalist and misguided pundits on YouTube and other social networks and even those more sober and serious analysts who were working for Goldman Sachs in January. If buyers have been reading or watching this stuff, they may enter the market with preconceived notions that are very wide of the mark.
Buyers expecting lower prices are going to be sorely disappointed, especially when the real prices are coupled with the latest 30-year mortgage rates around 7.4%. This is another reason why demand is so persistently weak this year. Simplistic observers believe weak demand translates to weaker prices. Nope. It translates to weak sales. But for prices, supply is just as important and remains drastically below normal, even though it has risen slightly over the past few weeks. Rising slightly will make little difference. We would need supply to almost double for the market to achieve balance.
Have you ever wondered how inflation impacts the housing market? Believe it or not, they’re connected. Whenever there are changes to one, both are affected. Here’s a high-level overview of the connection between the two.
The Relationship Between Housing Inflation and Overall Inflation
Shelter inflation is the measure of price growth specific to housing. It comes from a survey of renters and homeowners that’s done by the Bureau of Labor Statistics (BLS). The survey asks renters how much they’re paying in rent, and homeowners how much they’d rent their homes for, if they weren’t living in them.
Much like overall inflation measures the cost of everyday items, shelter inflation measures the cost of housing. And for four consecutive months, based on that survey, shelter inflation has been coming down (see graph below):
Why does this matter? Well, shelter inflation makes up about one-third of overall inflation, as measured by the Consumer Price Index (CPI). So, when shelter inflation moves, it leads to noticeable moves in overall inflation. That means the recent dip in shelter inflation might be a sign that overall inflation could fall in the months ahead.
That moderation would be a welcome sight for the Federal Reserve (the Fed). They’ve been working to get inflation under control since early 2022. While they’ve made some headway (it peaked at 8.9% in the middle of last year), they’re still trying to get to their 2% goal (the latest report is 3.3%).
Inflation and the Federal Funds Rate
What’s the Fed been doing to lower inflation? They’ve been increasing the Federal Funds Rate. That interest rate influences how much it costs banks to borrow money from each other. When inflation climbed, the Fed responded by raising the Federal Funds Rate to keep the economy from overheating.
The graph below shows the relationship between the two. Each time inflation (shown in the blue line) starts to climb, the Fed raises the Federal Funds Rate (shown in the orange line) to try to get it back to their target of 2% (see below):
The circled portion of the graph shows the most recent spike in inflation, the Fed’s actions to raise the Federal Funds Rate to fight that, and the moderation of inflation that happened in response to that hike. As inflation gets closer to the Fed’s current 2% goal, they may not need to raise the Federal Funds Rate much further.
A Brighter Future for Mortgage Rates?
So, what does all of this mean for you? While the actions coming out of the Fed don’t determine mortgage rates, they do have an impact. As Mortgage Professional America (MPA) explains:
“. . . mortgage rates and inflation are connected, however indirectly. When inflation rises, mortgage rates rise to keep up with the value of the US dollar. When inflation drops, mortgage rates follow suit.”
While no one can predict the future for mortgage rates, it’s encouraging to see the signs of moderating inflation in the economy.
Bottom Line
Whether you’re looking to buy, sell, or just stay informed about the housing market, connect with a local real estate expert who can help.
Don't worry, your grandma's florals aren't coming back! The freshest floral prints add instant vibrancy to your home! Which of these trends do you plan on trying in your home?
As of 8/31/2023 30-year fixed: 7.07% 15-year fixed: 6.45% Mortgage rates have decreased noticeably since this time last week.
“Some lenders advertise much lower rates than others. Other lenders can be "out of the market" at times. Our index attempts to capture the most prevalently quoted conventional conforming 30-year fixed rate for a loan scenario with at least 20% down and no major loan level price adjustments.”
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.
