The story in the residential market continues to be a slow-moving slog of low inventory and increased interest rates, which recently rose to the highest they’ve been since 2000. Low rates in recent years worked to increase pricing, and those higher interest rates are now backfiring on the ability of owners to sell. A decrease in interest rates does not appear to be likely in the near future, and even then, it’s unknown what it will take for buyers to start jumping back in.
The people most impacted have been the true, year-round owner-occupants, and the sellers of this product may be experiencing more competition as we saw an uptick in inventory for initial and move-up buyers. Entering October, when seasonal buyers traditionally arrive, we are not seeing much of an inventory increase in luxury properties and second homes. The buyers in that market tend be a little more resilient, as most of the time they are cash deals.
Looking at the numbers: From August to September 2023, the supply-demand index declined from 158.5 to 146.0. The supply index rose from 48.6 to 51.5 and the demand index dropped from 77.0 to 75.2. The Greater Phoenix housing market has been in a holding pattern with little change for now. For 4 months, mortgage rates have remained consistent between 6.5-7.5%, 40-43% of sellers continue to incentivize buyers at a median cost of $8,000, median marketing times have been stable at 21 days prior to an accepted contract, and non-luxury sale prices have stagnated. The Federal Reserve has been less aggressive in raising the Federal Funds Rate and employment reports remain positive. Buyers do not like uncertainty, but the stagnation in housing analytics is not bringing certainty in this case. Instead, it feels like a turning point after 20 months of rapid change. Turning points, however, don’t cause buyers to act—they cause them to wait and see.
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