Arizona Real Estate Market Update May 24th

Thanks for reading my blog on the updated market report for the Phoenix Metro area, a lot has changed in the last few months with higher interest rates, 25% + in inventory, affordability, and more. Prices will continue to rise in this environment but you will see in the coming months that you have more options to choose from and sellers will get fewer multiple bids, appraisal waivers, and homes will have more days on market. The information is from the Cromford Market Report for May 24th, 2022. It’s hard to avoid the “Crash” or “Bubble” headlines, but a lot of people, get that feeling of a crash from news headlines but you always have to stick with the data. Plain and simple there are still not enough homes for the number of people we have here in Arizona. Here is a quick summary but try to go through each chart to get the full picture:

  • The Arizona real estate market is still considered a frenzy.
  • Prices are expected to continue rising, but at a slower rate in the next few months.
  • Demand began dropping 14 weeks ago, Supply started to rise sharply 8 weeks ago
  • Weekly new listings are at the highest count of new listings since 2010, not counting Coming Soon listings.
  • Rental Mls supply still rising, up 28% since Jan 1, 2022
  • Expect in the coming months:
    • More List price reductions
    • More days on market
    • Fewer offers over the asking price and lower dollar amounts over the asking price
    • More listings to view as a buyer and more negotiations will be more relaxed when placing an offer
    • There will be fewer showings, and “As Is” or “Needs Repair” homes will be less desirable for buyers. Well-priced, up-to-date homes will still sell fast.
  • Interest rates can take 1-3 years historically to come back down to the level experienced in the past decade but no one can predict this.
  • Great time to sell for homeowners if you’re trying to time the market.
  • When buying a rental or investment property, make sure you will have positive cash flow. Buying for appreciation will not work out as well in the past.
  • Foreclosures are still minimal and only 21 were recorded in the past year.
  • It’s still a good time to buy if you need a home for your family. Waiting for prices to fall has not been a great option in the past decade and don’t expect anything different in the coming months.

Affordability is 44% in Arizona and below the national average, this should be 60-75% for this to be normal. If Income goes up, affordability goes up, but the pace is not keeping up. In 2006 the affordability of 26.6% was from false demand, we do not have false demand now.

Mortgage rate history- False demand is when someone buys a home not to live in, that is not today. Historically it can take a year or more if you look at the spikes below, but anything is possible. We don’t know how long they ride or stop or drop, but all we can do is go by history and look at the chart, 1-to 3 years, is historical data for rates to come back down.

Fight the headlines, we’ve been dealing with the bubble topic for 9 years now. Check out these hilarious headings over the past decade. Media want clicks and they want to install fear, well everyone knows that by now. Most of them do not even know what we should be at for days on the market, active listings, and don’t even own a house.

And here is from 2015:

If you keep predicting a housing bubble, it will happen eventually. Robert Shiller is supposed to be one of the main economists because he predicted the last bubble, but did he?

Bubble vs correction.

The 2005 -2008 bubble vs 2022 Bubble was dominated by bad financing. Correction happens after manipulation or outside influence like interest rate hikes. We still are not predicting home prices to come down. When will they come down? The cromford market report cannot predict that far into the future and no one can. All we know for now is prices will not come down for the next while and there is still no indication they will, we will tell you. Watch for the Cromford market index to be below 100, and active listings to reach 16,000-18,000.

What is a correction, a hold in prices?

Active Supply: This is a very, very important number! This has risen significantly but we need to be at 16,000-18,000 to be considered normal.

8132 Active listings reported on May 24th, 2022. This is a sharp rise in listings due to interest rate hikes in the past few months.
Listings under contract have been falling as well due to people getting priced out of the market due to interest rates.

Below look at the sharp rise in Active listings per price point, wow, this is definitely a shift, but prices are still not coming down anytime soon.

Demand is still rising in $1.5-2 mill, very high demand for luxury. Perfect homes will still get multiple offers. More listings are still to come.

Days on market have not risen dramatically but expect this to rise in the coming months.

There are basically no homes for sale under $300,000. This has been forcing people to rent which has also gone up, consider renting out a bedroom in your home if possible, this has been a very lucrative idea and has been a great experience for some.
Still not a buyer’s market But price reductions are coming, look at the sharp increase in the $500k – 800k homes. I personally believe this is an end to sellers asking way above what the comps say. This will continue on for months to come.

Cromford market index

This is a forward indicator, prices follow the index. We are currently at 311, which is the lowest I’ve seen for a while. This is still high in general and keep an eye on this number, if it drops below 100, prices then fall. This is the best crystal ball in the Arizona real estate market.
As long as Cromford index is over 100, prices will rise but the lower the number, the slower prices will rise. This is the sharpest drop that I’ve ever seen and an indication that high appreciation is coming to an end.

Keep in mind the drop can stop at any time. If you’re trying to time the market, list now.

Before you see prices fall you will see an increase in seller concessions, fewer appraisal waivers, fewer inspection waivers, and buyers will have more negotiation power.
Flips are still high but companies like offer pad are unloading inventory and lessening their buying.u


Very few out there still, and only 21 are actually fully foreclosed and banks didn’t even take back they were sold at auction.
21 a
Here is a summary of the report:

Hope this helps, if you would like to take advantage of this record seller’s market, please call me at 480-466-4917. You still have time.

Jay Bru

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