How Bad Is The Housing Market? | Phoenix Real Estate Market Update

So how bad is it really? Well, the affidavits of value for the Phoenix area just came out for September and it's not looking good. However, we just got some news from Redfin that is showing some positive signs for the real estate market as a whole. So we're gonna look at that as well. So let's get into it. What happened in September? So these affidavits of value just came out from Maricopa County. And they're saying that there was 5,584 closed transactions, which is down 5.3% from 5,896 last September and down 6.4% from August. So what you're gonna hear in all of this is a lot of down, a lot of numbers that are less than the previous month and the previous year. There were 1,441 closed new homes, which is down 11.3% from last September and down 0.8% from August. They also break it up to the resale transactions. There was 4,143 closed resale transactions, which is down 3% from last September and down 8.2% from August. The overall median sales price, however, this is where we are not going down. It was 471,995, which is up 4.9% from last September. So almost 5% higher than last year and up 0.4% from August, so from month to month. The resale, however, the resale median sales price was 450,000, up 2.3% from September and unchanged from August. And the new home median sales price was 518,792, which is up 8.3% from last September and up 1% from August. So new homes are certainly doing a little bit better than resale homes. New homes have 8.3% higher price this year compared to last year, while our resale median sales price is only up 2.3%. So new homes are a little bit more expensive. They've also seen more increase in their price year over year. Now, the Cromford Report says that there were 21 working days in September of 2024 and only 20 working days in September of 2023. So this 5.3% change in number of closed transactions is actually worse than it looks. They say that you would expect a 5% increase if the same closing rate per day were applied this September to last September. So number of sales every month is looking really rough. Our number of closed transactions on an annual basis as well is very low. However, Redfin has an article that is showing a sign pointing in a different direction. And of course, this is nationally, not Phoenix, but we are gonna look at those numbers for Phoenix too. So Redfin just came out saying pending home sales post biggest increase since 2021. The pending home sales rose 2% from a year earlier during the four weeks ending October 6th. It's the biggest increase in three years. Demand picked up at earlier stages of the home buying process too. Redfin's home buyer demand index, which is a measure of tours and their feedback from their agents, sat near its highest level since May last week and mortgage purchase applications are up 8% month over month. So Redfin is starting to see some pickup in their index or kind of their pulse on what's going on out there. And they're also seeing that pending sales have been improving, meaning that those pending sales will turn into closings, meaning that the closed transaction number is likely going to go up. They're saying pending home sales improved because buyers came out of the woodwork in late September after the Fed's interest rate cut, even though mortgage rates had already been declining for several weeks, which is a whole nother story because we are not in a great place with mortgage rates anymore. Basically, those two months leading up to the rate cut were when you wanted to be making your move as a buyer. And since the rate cut, rates have really not gone in the direction that you would want them to if you're a buyer. The falling mortgage rates push the typical homebuyer's housing payment down to 2526, according to Redfin, its lowest level since January, down 5.8% year over year. Now, like I said, rates are not really going in the direction that you want them to be going if you're a buyer. You can see this huge jump that we saw here. This was two weeks ago, not last week, but the prior week. And where we ended our week last week with rates was 6.64%. So basically brought us back to, let's see, last time we were around 6.6. Let's see, 6.7, 6.6. Let's just say 6.7, that's July 31st. So maybe in August, we were probably, I think mid-August, 6.62, August 1st. So we're basically back to that point. And you can see how much of change we saw since August 1st and now all the way back to where we're at today. Why did this happen? Well, because the jobs report came out a couple weeks ago and just showed that the labor market was stronger than what was expected. And so that affected the reaction in the markets, which then affected mortgage rates. So here is where we stand today. So this article from HousingWire, mortgage demand drops as interest rates rise, economy remains resilient. This is talking about what I just mentioned. After reaching the highest level since July of 22, mortgage applications have declined for two straight weeks, counteracting some recent positive signs for a still sputtering housing industry. According to the weekly data released by Mortgage Bankers Association, applications shrank 5.1% on a seasonally adjusted basis during the week ending October 4th. This included a 9% weekly decline in refinance applications and 0.1% decline in purchase loan demand. Compared to the same week in 2023, purchase applications were actually up 8% and refi applications were up 159%. So, I mean, if we just take a look at where we were at in 2023 in terms of rates at this time, if we go back to mid-October, we were at 8% mortgage rates and now we're at 6.5%, just coming off of a low of like 6.1%. So, between this year and last year, we got to a point where we were two percentage points below in terms of our mortgage rates than we were last year. So we had an opportunity to gain a lot of buyer demand. I think a lot of buyers sat on the fence because they believed rates were gonna go lower than 6%. They believed that the Fed rate cut was going to help rates continue to go down. And instead, after all of that took place, we've seen rates go back up. Now, are they staying here? No, not likely. They will probably start to fluctuate again, maybe up, maybe down. We'll see what type of news affects this. We have an election coming up next month. We have a lot of people pausing their home search and pausing their listings because of the election. So, we have a few things to shake out, I think, but we'll see what happens with rates and how that will begin to affect buyer demand. So we saw what Redfin is saying about the overall US market, but what is happening in the Phoenix area in terms of listings under contract? If we take a look at this, we are seeing a slight increase in our listings under contract over the last two weeks. I would not say this is a trend yet. We did see a few weeks ago an increase in our listings under contract. This is likely due to those rates declining. And then last, or a couple of weeks ago, it came down, went back up. So we'll see if this continues to increase. Not really seeing any bold movements here, not seeing really any new trends. I don't think this is very telling at this point, but it is good to look at this in comparison to what we're hearing from Redfin on a broader scale. So we've talked a lot about buyer demand and what's going on with that, but what is happening with supply? So let's take a look at what's going on with that here in the Phoenix area. Before I get there, if any of this is helpful for you, consider subscribing and share this video with someone who would find it helpful. So here we are with our active listings. This trend has continued. We are still seeing an increase in our listings on the market. And so why is this important? Well, more supply and demand that remains unchanged or falling demand means that sellers start to lose an advantage. Buyers who are willing to get out there have more of a negotiation advantage, more of a negotiation power, because they have options to choose from. They have sellers who don't have a lot of people looking at their home and are willing to be a little bit more flexible on their price or concessions. So we're seeing our listings continue to increase. Is this not normal? Is this not seasonal for us? So I wanna show you, and granted, the last few years have not been the most normal of markets. However, you can see last year at this time, we did see a pretty strong increase in our active listings. This time of year, we do see listings continue to come to the market. 2022 was a little bit outside of our normal patterns, but we did see an increase around this time of year as well. Even though 2021, we had some constrained supply, we did see, again, another increase as we got into the fall timeframe. So this isn't really out of the norm. The question is, and what I've said in previous videos, is how long will this last? How high will this go? And is buyer demand going to keep up with it? Those are all the things that'll make a difference. So this increasing supply and this demand that is remaining somewhat unchanged is putting the Crompter Market Index lower and lower each week. So we're at 93.9, almost 94, which means we're in a balanced market, but we're certainly leaning more towards a buyer's market. According to the CMI, if we get under 90, we're considered a buyer's market throughout the entire valley. Now it's important to understand that every city is a little bit different. So some cities may be a buyer's market while others actually could be a seller's market. But if we look across the valley, on average, this is what we're getting. Our demand is at 75.6, so that is about 25% below normal. And our supply is at 80.5, which is about 20% below normal. So you can see our supply is higher than our demand. This supply has been climbing. Demand hasn't changed all that much. I think it's gone up slightly. I wanna say we were closer to 74 a few weeks back, but really not making any huge move. Now, if we look at every city throughout the valley, or at least every major city that the Cromford Report is able to get a CMI for, we're seeing a lot of red arrows. And we have a more negative change month-over-month this week than we did last week. This week, the change month-over-month is sitting at about negative 3.3%, while last week that number was at negative 2.7%. And just wanna read a little bit of commentary from the Cromford Report because I think they explain it really, really well. They're saying buyers are still gaining negotiation power as supply rises faster than demand. There's now only five cities showing an increase in their Cromford Market Index over the last month, and this is down from six a week ago. And you can see on this chart, if we say that anything under 90 is a buyer's market, we have Surprise all the way down to Buckeye, technically in a buyer's market. And then we have Peoria, Tempe, Cave Creek, and Gilbert all in a balanced market. Phoenix and everything up to Fountain Hills is considered a seller's market. Although with that, you're seeing a lot of these red arrows, meaning that these cities are losing their momentum for sellers. The buyers are gaining more ground in that city, and it's essentially getting weaker for sellers. Now, we've also been looking at the contract ratio, which is showing where we're at in various zip codes around the Valley as far as being in a warm market, a cold market, a hot market. And we have a lot of green and a lot of blue, which is showing cool and warm markets. But if you'll notice, over the last few weeks, we're seeing a few more yellow zip codes and red zip codes here, which isn't really consistent with what we're seeing on the CMI. So you have to remember the contract ratio is going to react a little bit faster. It's taking a reading of what is currently happening in that zip code by way of the number of active listings on the market and how many listings are actually under contract. So what is that demand or that absorption rate of those listings on the market? Well, the CMI is seasonally adjusted and that data is slightly lagging for that reason. This is just a day in time, what is happening with those listings on the market. So if we actually look at, I usually show the map because I like to see the zip code breakdown, but we can look at the contract ratio on this little bar chart here. And this is looking at the entire Valley as a whole. You can see where we stand. We're at 35.3, which is technically considered, I think if we go back here, I wanna say that is, yeah, this is a balanced warm market. We're just barely in that, just like on the cusp of a cold market. And they're saying that there are 18,834 active listings, 6,651 of those are actually under contract and that is as of October 12th. So a couple of days ago. So it's interesting to see how the contract ratio reacts, what this is showing us. Again, this is not seasonally adjusted. So you're going to see those ups and downs in this chart, but it's a little bit different than what we're seeing on the CMI. So is this telling us that what's to come is that we're gonna start to see the CMI go up a little bit because we do have a few more warmer zip codes than we did last week. And we do know that we're starting to see more homes going under contract. So those pending home sales are starting to increase, all of that being a reaction to those lower mortgage rates that we saw a month ago. So this is kind of lagging, right? All of that activity happened a while back, but is that going to show some strength in the market going forward? We'll see, we're gonna continue to monitor it because that's what we do on this channel. Now, if you're a buyer out there and you're wondering how you can get a good deal, I have a couple of resources for you. First of all, check the description below. I have a link where you can see homes on the market that have been on longer than the median days on market. You can also take a look at homes with assumable loans, which is an awesome way to get a great interest rate and find a home that makes it more affordable for you. So check that out. And sellers, if you are curious what your home value is throughout all of these changes, click to get an instant home value. Hopefully that'll help you get an understanding of where you're at. I'll see you guys all next week on my next market update.