An Overall & Local Look

The real estate market has been full of uncertainty. With talks of a housing disaster, high mortgage rates, and sinking sales, it’s hard to make sense of it all. But don’t worry, in this LUXE BLOG post, we’re going to discuss the key points. Additionally, we’ll apply these insights to the Greater Phoenix area.

State Of Affordability

Affordability is the buzzword of the moment in real estate.

• High mortgage rates are wreaking havoc
• Median sales prices are near all-time highs
• Goldman Sachs’ Home Affordability Index shows a four-decade low

Affordability seems to be the Achilles’ heel of the housing market right now. Not just in Phoenix, but nationally. The challenge is real, and according to experts, it’s here to stay for a while.

Is The Sales Volume Plunge Something To Worry About?

Sales volumes have been the talk of the town. Especially with the significant drop we’ve seen recently.

• Sales rates are down to 4 million per year
• This is a sharp decline from 6.6 million in 2020
• Phoenix’s sales rates mirror this national trend

The drop in sales volume is alarming, and it’s not just a Greater Phoenix issue; it’s happening across the board. The market has cooled off considerably, a trend experts expect to continue.

Also Read: United States’ Housing Market: Insights From Altos Research

From Low Inventory To High Rates, The US Housing Market Is Not Very Active

Why So Many Seller’s Aren’t Selling

One notable trend is the lack of willingness to sell unless absolutely necessary.

• Sellers are hesitant unless forced by life changes
• Divorce, job transfers, and deaths are primary reasons
• Voluntary selling and trading have dropped

The stagnant market isn’t just about buyers being unable to afford homes. Sellers, too, are sitting tight. Only those compelled by unavoidable life circumstances are entering the market.

Future Outlook On interest Rates

Interest rates have a significant impact on the real estate market, and they’re not looking to ease up anytime soon.

• 44% chance of rates staying above 5% by end of 2024
• Expected to ease to around 6% by end of 2023

With the mortgage rates staying high, affordability is unlikely to improve in the near future. This could mean a prolonged period of subdued activity in the housing market.

A Look At The Greater Phoenix Market

The Phoenix market offers a unique lens to view these trends.

• Contract Ratio indicates market heat
• Currently at 56, leaning towards a warm market
• Some ZIP codes showing ‘hotter’ activity

Even though the broader market conditions are not ideal, Greater Phoenix still has some good action. The Contract Ratio gives us a glimpse into the local market conditions, and it seems to be slightly more encouraging than the national trends.

Also Read: Real Estate Trends For Greater Phoenix As Of Early October

Greater Phoenix’s Real Estate Market Continues To Soften

Local Softening Market

The Greater Phoenix market is showing signs of softening. This is taking away power from sellers.

• More supply coming into the market
• Demand not keeping pace
• Current Cromford Market Index at 138.3 as of October, 8th, 2023

While the supply-demand dynamics haven’t flipped, they’re coming closer to a balanced state. This could be the light at the end of the tunnel for both buyers and sellers.

In The End

The current state of the real estate market may seem daunting, with affordability at an all-time low and sales plunging. However, understanding these trends can equip you to make better decisions, whether you’re a buyer, seller, or an investor. In Phoenix, there are still opportunities to be found, but the key is to navigate the market wisely. Stay tuned to LUXE BLOG for future updates.