Market Update January 2025

2025 Begins Quietly

Trying to read market signals with only two weeks under our belt is difficult at best.  It is simply too short a time to detect meaningful trends.  With that said, it is never a bad idea to look at where supply and demand stand currently and get a sense of where we begin this year.

When looking at demand, two very different markets are at play at the same time.  The luxury market, which is not interest rate sensitive but responsive to gains in the stock market and crypto market, has performed well.  Not so for the average buyer. Rising mortgage rates hitting the 7.25% range (this time last year they were in the 6.69% range), are limiting the pool of buyers.  As the Cromford Report shares:

“Where is demand? Closed listings stand around 5,000 per month and year to date closings are down 12% from this time last year. We have 5,750 listings under contract. We started the year with 5,496 under contract, so the rise since the beginning of the year is pretty feeble at only 4.6%. On Jan 13 last year we had seen a growth of 13.2% in listings under contract by now. You would be right to conclude that 2025 is starting distinctly slower than 2024 did.”

As far as supply goes, we ended the year with a 12% drop in listings through the holidays (Thanksgiving thru New Year’s) which is the expected seasonal pattern.  However, according to the Cromford Report, supply is now climbing by about 4% per week.  In fact new listings for January are the strongest Greater Phoenix has seen since 2020. That should put us back in the 22,000 range of active listings soon. The Cromford Reports states:

It is not clear where supply will head beyond this, but 22,000 plus listings is going to be more than we need with demand still subdued. New listings are arriving in 2025 at almost the same rate as 2020, which is significantly faster than the intervening 4 years….These conditions suggest home price projections should remain flat, either at or slightly lower than the rate of inflation annually.

At the moment, the market appears to be similar to the last quarter of 2024 – with the overall supply exceeding demand.  But, it is early.  Whatever 2025 brings, we will report it here as it unfolds. 

Russell & Wendy Shaw

(mostly Wendy)

Welcome to 2025

As we begin the year, uncertainty seems to capture the tone of the real estate market.  Uncertainty doesn’t mean bad or good – it just means we simply need data and time to see and understand what trends are emerging.  Another factor is that many listings expire the end of December, thereby beginning January with an “improved market” for sellers.  That is a seasonal effect – and bears little significance as it happens every year.  As the Cromford Report confirms “Let us not get over-excited. With many sellers taking their homes off the market for the holidays, it would be unusual if the market had not improved for the remaining sellers during the 50th week of the year. Something around 5% improvement between November and December is just par for the course”.  Add to that a very long and heated election period– and despite our statement that elections themselves have little effect on the real estate market –psychologically people believe that post-election 2025 is bound for a shift.  And they are right in that mortgage rates react to the effects of inflation, economic growth, and fiscal policy (just not the election itself).  Candidly, our crystal ball is not working as to what will be the effects of this new administration.

Back to our market, the greater Phoenix real estate market spends far more time as a seller’s market than as a buyer’s market (which most consumers are unaware of).  Point in fact, in the last few weeks of November we entered a buyer’s market for only the 4th time in the last 25 years.  However, 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.

There is a final point that we wish to make, while we can and do dissect the market and scan the horizon for trends and shifts, one thing remains unchanged.  Whatever the market – we sell homes.  What changes for us is the marketing strategy.  After over 45 years of selling homes in the valley in every type of market, we know that we can sell YOUR home.  Markets do not scare us.  Therefore, they should not scare you.  You can count on us.  Whatever 2025 brings, when we know – our clients will too. 

Russell & Wendy Shaw

(Mostly Wendy)