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Arizona November Real Estate Market Update

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Thank you for following me and supporting me!  I’m trying to give you direct stats from the Cromford Market report and other sources.  There are so many discrepancies when watching YouTube videos and browsing websites but this is the actual data in the Arizona market.  Most of the information is data from the past and it’s hard to predict the future, especially in this critical time. Here are some key points and my 2 Cents, Please follow the charts and read the direct info from the Cromford report in the links.

  • The market is boring going into Christmas and seasonally a slow time with not many transactions and Prices flattening.
  • If prices grew while we had increasing interest rates rising to 8%, what do you think would happen if they were to drop today?  
  • Supply and Demand still predict the market.  While Supply is increasing at the moment and demand is weakening, we are headed towards a buyer’s market in most cities but will that end when the new year starts, that’s the question
  • Interest rates have played a massive role in buyer hesitancy and sellers not wanting to trade in their homes. 
  • With people still moving to Arizona, the pent-up demand is building.
  •  Interest rates come down during recessions, but nobody wants to call a recession so I guess somebody will have to declare one.
  • Job Growth in Arizona has been robust, this will help with Demand.
  • The Cromford market index, the crystal ball of price appreciation is dropping with some cities in buyers markets.  The outskirts of town where many new builds are, is where supply increases past demand making them “Buyers Markets”.
  • Supply is now growing very strongly, but still low in relative terms.
  • Rental prices are still high but dropping as supply grows.
 
Buyers:
It feels hopeless I know, there are so many things to decide. As you figure out monthly payments it’s heartbreaking to choose a high mortgage or high rent.  If you wait, what then?  For every 3 people that move here only 1 exits the state, so the pent-up demand is real, I see it in every day.  Builders cannot keep up with supply, so you have a tough choice as there’s not much of a chance that you’ll get that $500k house for $300k or even $450k.  You may disagree but the fall is the best time to buy seasonally and at least you can negotiate a bit.  If you’re waiting for rates to drop what do you think others are doing, it may be tough to find a home, and bidding wars may come back.  I can help you make that decision but start saving now.   
 
Sellers
Most of the sales happening right now are sellers who have to sell or new builds.  Of course, if you’re having a divorce, moving out of state, or if you want to sell and rent, you sell.  Trading in a 3% mortgage for a 7.5% is not attractive to anyone.  Get the numbers from a bank or a lender to see what you’re dealing with.  I can help as well.  Homes are still selling if the price is right, and the average days on the market is only 55 days which is going down.  Do not panic, even though the market is slow, it will pick up, depending on interest rates and when buyers decide to make the plunge.  Possibly wait until January to list your property, the fall isn’t the best time to list. As of November 9th, the following cities are in buyer’s markets: Surprise, Litchfield Park, Goodyear, Buckeye, Maricopa, Casa Grande, Gold Canyon, and Queen Creek. Balanced markets are Cave Creek, Peoria, and Sun City. All others are still seller’s markets, but weakening.
Market Summary for the Beginning of November From the Cromford Report

Here are the basics – the ARMLS numbers for October 1, 2023, compared with October 1, 2022, for all areas & types:

  • Active Listings (excluding UCB & CCBS): 15,247 versus 20,582 last year – down 26% – but up 14% from 13,404 last month
  • Pending Listings: 3,911 versus 4,411 last year – down 11% – and down 8.3% from 4,264 last month
  • Monthly Sales: 5,177 versus 5,420 last year – down 4.5% – and down 5.4% from 5,472 last month
  • Monthly Average Sales Price per Sq. Ft.: $295.19 versus $276.73 last year – up 6.7% – and up 3.4% from $285.40 last month

Mortgage rates rose yet further during October, peaking at an average of 8.03% on October 19 and remaining around 7.9% until the end of the month. This had a chilling effect on demand and the pending listing count dropped below 4,000, an unusually low level for the time of year. Monthly sales were also weak at 5,177, even lower than the poor level of a year ago.

New listings have been arriving at more normal levels over the past 3 months, leading to a rise in active listings, though we are still well below the levels we experienced 12 months ago. Rising supply and falling demand have led to a significant change in the state of the market and the seller’s market is quickly becoming more balanced, with a few areas becoming favorable to buyers instead. This has not been reflected in the average closed price per sq. ft. which shot up by 3.4% over the last month and is now 6.7% higher than a year ago. However, the median sales price is much less impressive, still slightly below last year’s level and up only 0.7% for the month.

An absence of pain can sometimes be experienced as pleasure, like when you stop banging your head against a wall. This principle applies to the Federal Reserve who decided NOT to raise the Federal Funds Rate at the start of November. The mortgage market had a huge party in response. The average 30-year fixed rate dropped from 7.88% on October 31 to 7.38% just 3 days later. The lower rates may possibly result in a recovery of demand during November, but the change was too late be reflected in any of the numbers above.

Demand remains surprisingly robust in the new home market, which has benefited from the weak supply in the re-sale market. New home pricing has increased much faster than re-sale pricing as a result. Offering mortgage rate buy-downs has been an important factor is maintaining this demand.

We now have to watch the demand numbers to see if buyers respond to rates under 7.5%.

Here are some important charts from the Cromford Report

The median sales price is based on 50% of the homes sold for below $439,945 and 50% of the homes sold for above.
Analyzing the Average Sales Price per Square Foot trends with a 3-month moving average in Greater Phoenix shows we experienced a dip in the market with -5.1% in July.
In October 2023, the average price per square foot stands at $295.67 with a total of 2,918 sales. This marks a 6.3% increase up to date. Although a -12.3% was experienced during May to December.
It's not clear if the U.S. will have a recession; some people worry about it, while others think the economy will be okay. Mortgage rates drop during recessions.
Up until now, the housing market exhibits consistent growth, surpassing a 5% annual appreciation rate in comparizon with the actual median.
Looking at past mortgage rates for different generations, both Boomer I's and Boomer II's had the highest rate at 18.4% in the 1980s. This shows that rates have changed a lot over time, with today's rates being much lower in comparison.
Between the 1970s and the early 2000s, the unemployment rate constantly changed, experiencing significant fluctuations during recessions. The highest rate, reaching 10.8%, was in the mid-80s, and the next 10% rate occurred during the COVID recession.
Annual price appreciation depreciated back in 2014 and remained at a flat rate until 2018, with a slight bump in 2019, followed by a massive increase in 2020. Although the annual price depreciated in 2023, it is expected to rise again.
The Supply Index Trend gained 5.3 points, while the CMI dropped 19.0 points. On the other hand, the Demand lost 2.9 points.
In 2023, we observed the closest result to a balanced market, with a dip during week 42 as predicted by previous market report.
The number of single-family homes under 2,500 square feet has consistently risen from 2015 to 2019.
Compared to last year, we observed five increases: the average sales price per square foot, sales over the asking price, the seller concessions to buyer, the SP/LP ratio, and days on the market. Meanwhile, two decreases were noted.
The housing market is a bit shaky like it was in the 1980s, but the article says home prices might not crash. They think it's because more young people (millennials) are now buying homes.
The mortgage rate forecast for 2023 shows that the trajectory has failed to unfold as expected, and a reversal is still highly anticipated. Predicting the outcome is quite difficult, although a new supply of long-bond buyers is expected to bring the rates down.
In 2023, the availability of rental properties has reached its highest levels in comparison to historical data.
Looking at homes for rent (not counting vacation places), there was a drop of about 7.77% from March to May 2023.
The need for homes is heavily influenced by mortgage rates. In 2022 and 2023, it has fallen below the usual pattern we saw in the seasons from 2015 to 2018.
Sun City is in the lead with a sales tally of 1,788, while Litchfield is trailing behind with only 2 sales.
October 2023 highlights a thriving Greater Phoenix economy with record-breaking achievements, insights into historical recessions and unemployment for Baby Boomers, and a glimpse into 1980s deal-making strategies.
October 2023 highlights a thriving Greater Phoenix economy with record-breaking achievements, insights into historical recessions and unemployment for Baby Boomers, and a glimpse into 1980s deal-making strategies.

Click the button below to view the full Cromford Market Report Charts

If you would like to know more about what your current home is worth or what it looks like to get into a new home please reach out to me at 480-466-4917 or jay@jaybrugroup.com

Regards,

Jay Bru

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