Here we are in March 2023, with the Spring Market almost in the rearview mirror. While real estate has taken a bit of a thumping in the Phoenix area over the last few quarters, there are some promising numbers starting show up in the stats. Let's look at a few of the comparisons between March 2022 and March 1, 2023 (from ARMLS, all areas):
- Active Listings (excluding UCB & CCBS):
14,739 versus 4,588 last year. This is up 221% year over year, but down 5.5% from 15,598 last month
- Pending Listings:
5,911 versus 8,333 last year. While down 29% year over year, pending listings are up 15.7% from 5,109 in February 2023.
- Under Contract/Pending Listings:
9,109 versus 12,050 last year. Pendings are down 24% from last year; however, they are up 16.6% from 7,810 last month
- Monthly Sales:
5,693 versus 7,993 last year, which is down 29%. Sales are up 31% from 4,357 February
- Monthly Median Sales Price:
$413,000 versus $445,000 last year. This is a decrease of 7.2% year over year, but up 0.7% from $410,000 in February 2023.
Here is a look at how various communities are faring this month.
Volumes remain much lower than a year ago, but they have recovered some ground. Monthly sales were down 29% compared with 2022, which is a major improvement from the 39% deficit last month.
The volume of sales is still down significantly over last year, but the losses are easing up a bit. For instance, last month (February 2023) volumes were down over 39% year over year. This month, they are only down 29% versus March of 2022. We'll take that double-digit improvement!
While volumes are still looking a little hungover after the huge run-up of recent years, we are seeing more improvement in supply and demand. For instance, the supply of active listings has trended lower for a couple of quarters, but supply in the luxury sector has actually been increasing. With interest rates topping 7%, you'd expect that demand would be trending lower as well. However, defying the expected logic, many buyers are not giving in to the higher interest rates, which is reflected in an explosion of listings under contract, which is up a whopping 16.6%, despite short supply. Further bolstering the unexpected growth is a 31% increase in the monthly sales rate. Of course, this does not mean that mortgage rates have not impacted buyers. Some have retreated to the sidelines, as have some sellers (hence the low supply), as they don't want to give up the lower rates on their current mortgage to risk higher rates on a new home.
With fewer sellers willing to list due to interest rate risk, there is still upward pressure on prices from buyer demand for moderate priced homes. This is a reversal of the previous trend, which could be exacerbated by a combination of cash buyers and renters trying to escape ever-increasing rents. We certainly aren't seeing the demand we saw a year ago, but there are intrepid buyers out there - enough to balance the limited supply and maintain a modest seller's market. Patient sellers with well-prepared and well-priced homes are finding buyers without the need for huge price cuts. The rate of price increase has considerably slowed from the height of the housing surge, with median sales up marginally at 0.7% over the last month, and price per square foot rising 1.2%. However, this is still a reversal of where the trends were headed just a few short months ago. The wild card is what the Federal Reserve will do with interest rates in the future and how the mortgage market will react. There is a risk premium built into current mortgage rates that is far above normal, which provides some wiggle room for mortgage rates to hold steady or even decrease, even if the Federal Reserve continues its tightening. We'll have to see how the mortgage industry reacts to recent events in the banking industry and other risk factors, as well.
Despite the doom and gloom of YouTube pundits, the data is telling a vastly different story about the health of the housing market in Phoenix. There are virtually no indicators pointing to any kind of collapse. With prices on the rise again, at a much more sustainable clip, there is little indication of a coming wave of supply that would up-end the balance. Foreclosures are still low, as well as mortgage delinquency. Builders have pulled back on new construction, so there will be no excess supply from that quarter. We are unlikely at this point to see a glut of homes hitting the market and putting downward pressure on pricing at this point unless there are drastic changes in other areas of the economy. Current homeowners are sitting tight with their cheaper mortgages and a ton of equity, which is a good place to be right now.
We are here to help! If you want to find out how much your home is worth in this strong market, email me at [email protected]. We would be happy to help you determine if the time is right for you to sell your home or buy a new home.
Data and analysis derived from ARMLS and Cromford Reports.