Greater Phoenix Housing Market Update 2023: Mortgage Rates and Buyer Trends

Happy 2023 everyone!

May this year bring you everything you want it to and more!

2022 was a rollercoaster year. Click here to watch this month's short video.

• We went from a smokin' hot Seller's Market to a baby Buyer's Market all in the same year. Just CRAZY!

• This volatility was mainly caused by an increase in mortgage interest rates, which are tied to the 10-year Bond market and not the Fed rate.(So don't think what you see in the news about interest rates is applicable.)

• (Psst: Look below for an update on the current mortgage interest rates.) You just might be surprised that they have been going down.

• Last year, traditional buyers took a back seat to an influx of cash investors and speculators who outbid them. This was especially prominent in the market under $500K where owner occupant buyers made up just 56.8% of sales in June (normally 70-75%), and investors took 31% (normally 11-17%).As of November, traditional buyers have once again returned to 71% market share under $500K, and investors have retreated under 20%.YYIIPPPYYYY!!!!!

• Investors make up the majority of losses associated with recent price declines. (Snarky comment inserted here if I wasn't such a nice person. LOL)

• This is great news, especially for first-time home buyers, as prices have come down significantly for starter homes. The median sales price for a 1,400-1,600 sq. ft. single family home has declined from $435K in May to $370K so far in January; a decline of $65,000, or 15%. At today’s mortgage rate of 6%,that’s a savings of at least $352 per month in payment.

• To sweeten the pot, both FHA and conventional loan limits increased for 2023. FHA increased from $441,600 to $530,150. As a result, the market share of sales with FHA financing under $500K increased from a low of 11% in March to 20% by November.

• Many first-time home buyers take advantage of FHA financingas they have softer requirements for approval and their rates are typically lower than conventional loans.

• Happening right now is a shift out of the shortest Buyer Market ever recorded by the Cromford Report. The shift is a direct result of the fewest number of listings added to supply in the 4th quarter of the year going back to 2000. (Read that again.)

• Demand is still very low, but when it’s met with low supply there is less downward pressure on price.

• Currently, 51% of all January sales have involved some form of concession from the seller, with a median cost of $9,854; in line with the cost of a temporary rate buy-down.

• The long-term appreciation rates for homes in Greater Phoenix are as follows using January sales to date: 25% for 2yrs., 50% for 3yrs., 63% for 4yrs., 70% for 5yrs., and 86%+ for 6yrs or more.(Owning a home for years can help add to your financial wealth.)

Are you considering buying or selling a home? Reply to this email or text me at 602-730-2143.

Q: What is happening with interest rates?

A: They've been going down since November. Really. See my pretty arrow?

Most folks think that mortgage interest rates are somehow connected to Fed rate. Instead, it is connected with the 10-year bond market. Even though the Fed rate has continued to climb, the positive stats showing inflation is getting under control has led to mortgage rate declines.

Now is a fabulous time to buy a home. Sellers are willing to pay to lower a Buyer's interest rate AND there is still minimal competition. Once the interest rates go down more, and the word gets out, Buyers will come back in droves. If you think I'm wrong, I am willing to make a wager. Just reply to this email and let's chat. I love a little competition!

If you are considering buying or selling a house and would like specific market details for your unique situation, reply to this email.

I'd be happy to provide an insight and answer your questions.

Q: Is the market already taking baby steps into Seller's Market territory?

A: Yeppers. As you read above, and can see in this chart, we are seeing an increase in the Contract Ratios (number of Active listings divided by the number of homes in escrow). What you don't see on this chart is that this is normal for January. Sellers are waking up after their holiday slumber and beginning to put their homes on the market. Buyers, who tend to prefer flip flops to warm boots, will then jump into the fun. (That is unless something crazy intense happens to ruin things, of course.)

Q: How badly did 2022 end for the housing market?

To best articulate a few things, I needed 2 charts. (Aren't you excited?)

Let's chat about supply vs demand. The more supply compared to demand, the more prices go down. The higher the demand over supply, the more prices go up.

Our active listings are on par with mid-2019 and roughly 3 thousand less than the latter part of 2018. (But how did the market respond to that much supply? Great question.)

Now look at this next chart to see how demand (prices) were responding to the level of supply.

As you can see on this chart, houses appreciated beautifully both in 2018 (increase of 8.3% in housing values in Maricopa) and in 2019 (increase of 5%). I will do a happy dance to get back to consistent, smooth appreciation like we had from 2011 through the end of 2019. (Is it me or am I sounding like an older person reminiscing about the good ole days? Well, I am dagnabit!

If you know anyone considering buying or selling a home, please don't keep me a secret! I love working with friends, family, and co-workers.

Simply reply to this email or call/text me at 602-730-2143.

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Nancy Wittenberg