Metro Realty Real Estate Market Report (June 2023)
Follow us for current Arizona Real Estate Market information
Facebook @MetroRealtyAZ Instagram @MetroRealtyAZ
Arizona Real Estate Market Report June 2023
Arizona Real Estate Market – June 2023 Stats
Market Summary for the Beginning of 2023
Here are the basics – the ARMLS numbers for January 1, 2023 compared with January 1, 2022 for all areas & types:
-
-
- Active Listings (excluding UCB & CCBS): 11,730 versus 9,439 last year – up 24% – but down 6.2% from 12,503 last month
- Active Listings (including UCB & CCBS): 15,062 versus 12,801 last year – up 18% – but down 7.3% compared with 16,248 last month
- Pending Listings: 5,696 versus 6,887 last year – down 17% – and down 8.5% from 6,224 last month
- Under Contract Listings (including Pending, CCBS & UCB): 9,028 versus 10,249 last year – down 12% – and down 9.4% from 9,969 last month
- Monthly Sales: 8,082 versus 8,728 last year – down 7.4% – but up 21% from 6,687 last month
- Monthly Average Sales Price per Sq. Ft.: $283.47 versus $303.39 last year – down 6.6% – but up 1.3% from $279.76 last month
- Monthly Median Sales Price: $434,000 versus $475,000 last year – down 8.6% – but up 2.1% from $425,000 last month
-
This time last year, the market was in full retreat, but pricing was just a few days away from its peak of $306.46 per sq. ft., reached on June 10. Closings were still plentiful, driven by the demand from institutional investors and buyers who were just about to curtail their buying spree.
It is common knowledge that demand is sensitive to interest rates, but thinking that higher interest rates lead to lower prices is simplistic and wrong. In the current environment, higher interest rates dramatically reduce the desire to pay off low-interest loans and so dispose of property.
Those who bought at the peak during the first half of 2022 may be underwater, but unless a dramatic change in their circumstances makes their financial situation desperate, they are unlikely to be motivated to sell and convert that loss on paper to a hard loss of real money.
The weakness of supply is the main factor to consider when studying the current housing market. Despite the low number of homes going under contract, the number of homes for sale (without a contract) dropped another 6% and is now below 12,000. This is an unhealthy supply, and it is well-nigh impossible for prices to decline when supply is so weak and trending lower.
Supply and Demand:
Unless we get a significant reduction in mortgage rates, the affordability of homes will remain a major problem. This will constrain sales volumes, but it is very unlikely to put downward pressure on pricing. Instead we are much more likely to see a long-term price appreciation trend setting in once more, with the chronic shortage of supply the over-arching unsolved issue.
Below the surface, it gets more interesting. Maricopa and Chandler are progressing well for sellers with their CMIs up 15% and 13% respectively. However, we have 6 cities that have moved downwards in the last month, with one (Cave Creek) down by 26%.
These 6 cities are becoming more favorable for buyers. For 3 of them (Phoenix, Goodyear and Surprise) the change is small, 3% or less.
But for Glendale, Tempe and Cave Creek, buyers have seen their situation improve, primarily because demand has reduced sharply. This means they have less competition from other buyers and a little more chance to impose their will on negotiations.
New supply is still very low, but we will be watching closely for any change in this trend. Catherine Kolodin, Designated Broker
Mid-Month Pricing Update and Forecast
The average 30-year fixed mortgage interest rate remains close to 7%, which is not popular with buyers. Several of the large-scale home builders are incenting their buyers by paying down the rate to the mid-5 area.
This working well for them as the rising prices leave them plenty of room to do this. However only about 10% of new homes get listed by ARMLS. This means the relatively robust sales of new homes is not fully reflected in the CMI, which is primarily focused on the re-sale market.
The long term normal supply is around 3 to 5 months for a ZIP code like 85142. As we dip below 3 months, things usually get tough for buyers and as we rise above 5 months things get difficult for sellers. We almost hit 6 months at the start of December and have lost nearly two thirds of that supply over the past 6 months. That is a big change folks!
“Asking prices are now on the rise and it does not take a big leap of imagination to see closed prices following suit during the second quarter.”
Catherine Kolodin, Designated Broker
Arizona Real Estate Market – Buyers/Sellers
For Buyers:
Last month we reported that the year-over-year supply change will be negative within 6 weeks, and at that time supply was 80% higher than the previous year.
Now 5 weeks later, supply is only 3.7% higher than last year’s count and is expected to be below 2022 in another week. New listings continue to be insufficient in replacing properties that have gone under contract, resulting in overall supply dropping an average of 151 listings per week within the last month.
Once again, just when housing economists got optimistic in April about mortgage rates stabilizing or declining, less than favorable inflation reports caused them to spike once again. It’s tough to do mortgage rate predictions these days.
Since then, conventional mortgage rates have dropped only slightly, hovering around 6.9%. The downturn in demand has created a noticeable advantage for FHA buyers, who had been mostly rejected by sellers over the past 2 years in favor of cash investors.
As investors have retreated back to normal levels this year, putting traditional buyers back in the driver’s seat, FHA increased the amount of money they’re willing to loan to $530K. They also lowered their Mortgage insurance premiums by $100s on monthly payments annually.
For Sellers:
Despite the increase in mortgage rates and subsequent drop in demand, prices continue to rise in Greater Phoenix and are expected to continue doing so for the next 3-5 months. While still down year-over-year, the median sales price has recovered 5% since our December newsletter, up $22K.
Before the end of the 3rd quarter this year, it’s very likely annual appreciation rates will turn positive once again.
Nearly every city is officially a seller’s market this month. Maricopa and Buckeye are no longer buyer’s markets. They are now in balance and moving towards seller’s markets once again.
When markets soften like they did last year, the cities on the outskirts fall into buyer’s markets first and are the last to come out. Cities on the interior are the last to go into buyer’s markets, and the first to come out.
As the interior cities such as Phoenix, Glendale, and Chandler first moved into a seller’s markets in January, the shift of these outlying areas is the final step to coming full circle in the market correction.
Improving market conditions for sellers only slightly relieves the need to contribute to closing costs and rate buydown for buyers. Over 50% of sales between $200K-$500K involved sellers contributing to buyers’ costs with the median contribution at $7,500 so far this month.
To stay informed of the ever-changing real estate market, Follow us on Instagram and Facebook. Facebook @MetroRealtyAZ Instagram @MetroRealtyAZ
