A Normalizing Market
As we previously forecasted, the blazing hot housing market we have experienced over the last two years is now adjusting to more normal market conditions. Record high inflation spurred the Federal Reserve to raise interest rates, which led mortgage rates to increase. Though mortgage rates have recently trended down somewhatthe combination of fast home price appreciation and rising rates have slowed buyer demand and helped create affordability challenges. Alternatively, rental rates continued to rise with a 23.3% annual increase in Phoenix and 21.9% annual increase in Tucson. We expect housing affordability issues will continue to drive rental demand and future rental rate hikes.
The recent fast-paced, strong seller’s market was not what we would consider a normal market. Now, our local housing market is returning to a more historically normal activity. With this shift, it is imperative to work with a professional and up to date agent as your advisor.
- Rising active listing inventory. However, we are still only 50% of the inventory levels, which is historically seen in a more balanced market.
- Softening of buyer demand. We see this especially at lower price points, though high-end demand is still strong.
- Deceleration of pricing growth. We expect softening buyer demand and rising inventory will translate to less competition on listings and less upward pressure to bid up home sale pricing.
Buyer Demand Moderates
When an offer is accepted on a listing, the property goes “under contract.” Under contract is a leading indicator to closed sales. We saw a softening of buyer demand in Q2 2022 with declines in listings going under contract.
In June 2022, the number of new under contract properties was down 18.6% from the previous month and down 27.2% from June 2021.
Listing Inventory Growing But Still Scarce
The number of active listings grew to 12,842 in June 2022 up from a historic low. While the increase in inventory is helpful to buyers, it is still 50% below normal levels. Supply chain issues in new construction and the fact that some homeowners have either bought or refinanced at mortgage interest rates well below today’s rates, may throttle future inventory growth.
Median Sales Price on the Rise
Median home sales price increased to $476,000 in June 2022, up 18.4% from June 2021. Higher home values have helped grow equity and household wealth.
Homeowners See Big Equity Gains
The accelerated growth in home prices has created a benefit to most homeowners. Nationally, and on average in the last year, homeowners have gained $64,000 in home equity, while in Arizona that gain was $96,000. Though home price growth should decelerate, we expect the gains realized so far to remain intact which should keep the risk of new foreclosure activity low.
Given that the market is normalizing vs crashing, and that supply and demand are moving to a more normal and balanced position, economists forecast that home sale prices will appreciate on average 8.5% in 2022, not the 20%+ rate experienced in the last two years. Of course, the value
of your home depends on market conditions in your neighborhood and area. None of the economists are forecasting a decline in home prices.
Real Estate Trends Are Local
The market conditions happening in your neighborhood may be different than others and what you may see from city, state or national numbers. Request a neighborhood market trend report from me, Becky Bell. Reach out today BeckyRealtorBell@gmail.com or 480.390.3678
*** Note- Statistics based on information obtained from MLSSAZ and ARMLS on 07/13/2022 using TrendGraphix software. Information is believed to be reliable, but not guaranteed.
Closed sales started the year off strong, matching Q1 2021 pace through March. As interest rates starting rising in Q2, we saw closed sales drop slightly through May. In June residential Phoenix metro home sales were down 7.7% from the prior month and down 21% from one year ago. YTD closed home sales are down 6%.
Real Estate Trends Are Local
The market conditions happening in your neighborhood may be different than others and what you may see from city, state or national numbers. Request a neighborhood market trend report from me, Becky Bell.