The Market is Shifting (again)
The greater Phoenix housing market entered a buyer’s market in November of 2024. As we have mentioned before, buyer markets tend to be infrequent and short lived. This one has proven to be the exception in its longevity. But in mid-July the market started to slowly revert – a trend that has continued for the last few months. At its current pace the market could enter a balanced state as early as November according to the Cromford Report. Asking prices have declined for the last 4 months (notice that price is a lagging indicator – the market shifts before prices shift) but further reductions appear to have now stalled. Why? Demand is up approximately 9% courtesy of lower rates. In January rates were around 7.26% and now they are a full percentage lower. On the average purchase, that equates to a 12% reduction in monthly payment. Smart buyers should act sooner than later – as these numbers point to a shrinking window of opportunity. Buyer’s power is waning.
Another factor at play is the economy. Based on the weak jobs report and rising unemployment, a recession is looking likely (93% probability according to UBS). Oddly, high unemployment and recessions result in lowered mortgage rates which then triggers increased homebuyer demand. History supports this as home sales increased in the 2001, 2008, and 2020 recessions despite high unemployment. When the economy is in turmoil people move their money to safe havens (10 year treasury bills) which in turn brings the 30 year mortgage rates down. Lowered rates increase demand.
There is an exception, while the sub million market benefits from the recession in reduced mortgage rates, the luxury market and 55+communities do not. As the Cromford Report explains: “…while recessions can activate the mainstream housing market, they will stall the luxury and retirement communities. These segments do not rely on mortgage rates (often paying with cash) and are influenced more by the performance of their investment portfolios, which tend to suffer in a recession”.
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Russell & Wendy Shaw
(Mostly Wendy)