The 4th Buyer’s Market in 25 Years Arrives in Time for the Holidays
Most consumers are unaware that the greater Phoenix real estate market spends far more time as a seller’s market than as a buyer’s market. Point in fact, in the last 5 weeks we have entered a buyer’s market for only the 4th time in the last 25 years. But as usual, God is in the details.
The luxury market and the mainstream market are fueled by different economic engines and therefore do not always act in unison. This is the case currently. Luxury is experiencing rising pricing and activity courtesy of the robust stock and crypto markets. Contrast that to the mid- market, and you see demand and pricing struggling due to mortgage rates in the high 6%+ range.
When we look at supply and demand, we see the fundamentals behind the buyer’s market. While demand hit a low in September and has improved if only a smidge, supply has risen during that same period. To quote the Cromford Report “…Buyers have benefited from more choice and sellers are suffering increased competition.” Further the report states : “It continues to be a frigid market for most zip codes in Greater Phoenix with the lowest contract ratio* (listings under contract divided by active listings) we’ve seen since January 2015, 10 years ago.”
As to pricing, we are seeing the luxury market increasing while the mainstream market is vulnerable to erosion. Given the low purchase activity – there is little to suggest upward pricing and in the outer fringes of the valley there is unquestionably downward pressure on price. It is important to remember that pricing is a trailing indicator, not a leading one. It can take months for pricing to respond to shifts in the market. So really it is a question of how long this buyer’s market will last? If interest rates decline to the 6% range – we will see demand respond and respond more rapidly than supply can. At which point, buyer advantage will cease. If they remain stubbornly above 6.5% then likely we will see further downward pressure on pricing.
Whatever 2025 brings, when we know – our clients will know. Wishing you a joyous holiday season.
Russell & Wendy Shaw
(Mostly Wendy)