The start of a new year brings the promise of a fresh start, new beginnings, and sometimes a new job or home. Word on the street is that jobs are many and wages are rising but what’s up with real estate?
Home Prices Drop in Late 2022, but Affordability Still a Challenge Due to Higher Interest Rates
As the final quarter of 2022 rolled around, the housing market looked quite different from the hot days of pandemic fever – properties consumed by iBuyers and people fleeing big cities for larger lots living and remote working. Purchase offers 20% over ask, and properties going under contract within days of listing, with all manner of shortcomings being ignored by frenzied buyers, had happy homeowners staking a for sale sign in their yards.
Rising interest rates and an unstable economy reversed our course, with sellers pulling up stakes to hold onto historically low-interest rates. At the same time, buyers waited for the tables to turn and prices to plummet. Sellers fortunate to receive offers were again willing to make concessions and do repairs. Sadly, efforts proved insufficient to give us anything comparable to the boon of 2021.
As you might expect, the year-over-year change in Phoenix declined across almost all spectrums of price points. The most significant impact is shouldered by homes priced from $100,000 to $500,000, thus supporting the headlines. This range accounts for nearly 70% of all sales in Maricopa county. The least affected was from $750,000 to $2,000,000, with an approximate 14% drop in sales, which is not bad considering it was a much calmer year than last. Most interesting is that Phoenix has grown in the $7,000,000+ range, with 61 sales in 2022, whereas 2021 and 2019 saw 17 and 5, respectively, and in 2018, none.
Phoenix Real Estate Market Sees Increased Stability Amid a Shaky Economy
Phoenix’s real estate market has changed significantly over the past year. More substantial overall lending restrictions, rising interest rates, and a shaky economy have led to more stability in sales-to-inventory ratios. As a result, buyers can finally breathe with home prices flattening or dropping since May.
The desired outcome is to make the most significant profit possible when selling. However, if you have been a homeowner within the past two years, chances are your asset has appreciated substantially (congratulations) on paper. To ultimately see the cash, sellers need to remain ready to lower list prices and offer compromises such as reductions in closing fees, subsidized buy downs, or any needed repairs. In this way, everybody stands to gain something to get the deal closed.
With the advent of ways to make homes more accessible, appraisals and existing home conditions have returned to being critical considerations for buyers. Sellers must prepare their dwellings meticulously to get a quick offer, and ‘bad flips’ have been delegated to the past.
Housing Market Crash is Unlikely
No need to panic — current indicators do not suggest a housing market crash is likely. Generally, such a situation will be preceded by drops in home prices of 20-30%, decreases in sales caused by other factors besides limited stock, and an increase in foreclosure activity. In contrast, homeowners have considerable equity right now, lenders are stringent, and there is a shortage of housing options available. Today’s homeowners are well-situated with ample home equity – far better than in 2008. The signs firmly point toward a cooling off rather than a dramatic collapse. Phew.
For homebuyers facing high prices and climbing mortgage rates, waiting for the perfect moment to enter the market is impractical. Even if you opt not to buy now, there are no signals indicating significant price decreases or a decrease in interest rates anytime soon. Knowing precisely when to purchase a house at the lowest possible cost isn’t something we can strategize – it will just take place, and we won’t even be aware that it was the absolute lowest until 3-4 months have passed and the data rolls in.
Don’t Miss Out on Your Dream Home
If you discover a residence that suits your requirements, falls within your financial plan, and is located in an area that makes your heart skip a beat, why not go for it? Though there has been some space in the market lately due to decreased competition among buyers, don’t submit an offer too far below the asking price if you’re genuinely interested in the house. The supply of properties is drastically lower than the demand, meaning any stingy attempts might cost you that dream home.
During the holidays, people usually aren’t paying attention to real estate. But as soon as decorations are put away, this usually leads to a boost in listings from homeowners wanting to cash in on the surge of visiting buyers. Around the second or third week in January, we get a sneak peek into what the rest of 2023 will look like.
As per trends, spring is poised to hold the most successful months out of the year; however, views diverge on when we will reach our yearly peak. Experts estimate that our listing numbers should recover to pre-pandemic levels by January’s end; however, much speculation exists that historically low-interest rates will continue with a wait-and-see approach by sellers.
Phoenix Market Brimming with Opportunities for Buyers and Sellers Ahead of 2023 Superbowl and Other Events
As 2022 has shown, the real estate market can change dramatically in a year. With abundant equity, sellers can approach the market with a solid stance and get the most out of their property. Buyers can expect selling homeowners to be far more amicable when reaching the finish line and mortgage rates are beginning to ease. Nevertheless, while we are generally in a more balanced market, an overall inventory shortage gives sellers the edge.
Our state can look forward to a swell of activity from possible first- and second-home buyers in 2023 due to the presence of the Superbowl, baseball training sessions, golf tournaments, car shows, and the flourishing business climate. Homeowners willing to list will experience strong interest in their properties; however, they must work harder than merely posting For Sale signs to see multiple offers.
With successful negotiations, sellers may achieve a comparable rate on their new home to the one they currently enjoy on the home they sell. Moreover, some lenders are offering no-cost refinancing packages for future interest rates.
If you’re in search of a great deal, now is a good time to take advantage of any post-holiday rush of property listings and score deep discounts on homes that have been lingering on the market for a while. Additionally, the competition from real estate investors is expected to decrease, as the once-lucrative practice of flipping homes has become less profitable. You may just get lucky and find the perfect place to purchase and make your own!
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- Forbes.com
- Fox Business News
- Marketwatch.com
- Tina Tamboer – Senior Housing Analyst – The Cromford Report
- Weekly Real Estate News
- Redfin Real Estate News
