By now most are aware that the greater Phoenix market began the year as a seller’s market, then balanced market, and now has slipped to a buyer’s market. As we often repeat, real estate markets are local (meaning national statistics are not reflective of what is happening locally) and truth be told, real estate markets are actually hyper-local. That means different areas and price points may not act in unison even in the same locality. The Cromford Report shares:
“Buckeye, Maricopa and Queen Creek entered a buyers’ market in July. Surprise, Chandler, Gilbert and Tempe followed in August. Goodyear, Peoria and Avondale joined in September with Mesa and Goodyear falling in line by October. Phoenix is expected to succumb this month within a matter of days. The only holdouts remain in the Northeast Valley cities of Paradise Valley, Fountain Hills, Cave Creek and Scottsdale”. Why is the Northeast holding on at the moment? Because they are the luxury areas of the valley – and luxury is not greatly impacted by rising interest rates.
The Report further explains: “The 2022 peak of price was achieved in May, which was the result of contracts accepted in late March and April. Starting in June, sales prices revealed their decline in response to mortgage rate increases. At the end of October, the decline in average sales price per square foot since May was recorded at -9.1%…The largest declines happened between June and July at -4.5% and between August and September at –3.6%.”
Where does that leave us? We have a shrunken marketplace with less sellers and less buyers choosing to enter the marketplace. Sellers cannot replace the low interest rates on their homes if they change houses, and buyers are sidelined either because they cannot afford the interest rate hikes or hope to buy at bottom of the market. This shrinkage has resulted in a softer landing for the housing market.
Wise words for sellers: if you are selling and you have owned your home for at least 2 years you have made money. Cromford reports “Appreciation rates based on sales price per square foot through the MLS are: 2 years: +33.6%, 3 years: +59.9%, 4 years: +68.1%, 5 years: +84.8%.” Wise words for buyers: timing a market is hard. We typically cannot tell when bottom has been reached until 3- 4 months after the fact. When rates drop, we expect the market to respond quickly. Sidelined markets never remain so forever.
Russell and Wendy Shaw