The Greater Phoenix housing market continues to face challenges with weak demand and low sales volumes, leaving little room for optimism. However, there are a few reasons for cautious hope. Supply has decreased over the past month, and although it remains considerably higher than last year, it is now on a short-term downward trend. Additionally, there has been a slight increase in pending listings compared to last month, though this positive sign is tempered by a drop in listings under contract.
The monthly sales count initially appears encouraging, showing a 4.8% increase from July 2023. However, this gain is mostly illusory due to an extra working day in July 2024. Closings remain far below normal levels, impacting professionals who rely on commission-based income.
While other credit sectors, such as auto loans and credit cards, face significant challenges, home loans remain stable with delinquency rates at low levels. This stability means foreclosure volumes remain small, and there is little indication of a change in the near future. Despite repeated predictions of a foreclosure wave, those hoping for more bank-owned homes entering the market are likely to be disappointed.
Most pricing measures have seen significant drops since May, largely due to seasonal factors. This is particularly true for average active listing prices, as luxury home listings have rapidly declined. Many of these homes were not sold but rather canceled or expired. For instance, the number of active listings over $2 million has decreased by 22% in the past two months, while those over $7.5 million have fallen by 42%.
Current pricing is only slightly higher than last year, with the median sales price up just 1.2%. Given that most costs have increased more than 1.2% over the past year, homes are effectively cheaper in real terms than they were a year ago.
Mortgage rates have dropped significantly over the last three days, with the average 30-year fixed rate falling from 6.80% to 6.40%. Rates could decline further if the Federal Reserve lowers the base rate as expected at their September meeting. While nothing is certain, it’s reasonable to anticipate a notable increase in demand if rates return to around 6%.
Overall, the market remains balanced, with a slow trend toward greater bargaining power for buyers. However, with supply now decreasing, even a slight uptick in demand could reverse this trend.
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