The housing market is uncertain Phoenix Real Estate Market Update

All right, so the housing market is being described as fragile. How fragile is it? We know things may be uncertain, but let's talk about why this article is saying that it is fragile. We're also going to talk about, of course, what's going on here locally in Phoenix. I have a few data points that we haven't looked at in a while, so we're going to take a look at those and what agent predictions are for 2026 based on what they're feeling, what they're seeing out there. So welcome back. Let's get into it. This article from Real Estate News is saying housing market conditions are fragile as pending sales lag. If home purchase contracts are a gauge for future sales, the real estate market may continue to be subdued in March and April. Now, this is a national article, so it's not looking specifically at Phoenix, but in many places the spring market is the busiest season, just as it is here. They're saying pending home sales in February were down 0.8% compared to a year ago. That's according to the National Association of Realtors, although they inched up 1.8% from January, consistent with seasonal trends. The year-over-year decline is concerning, however, since 30-year mortgage rates were in the low 6% range throughout most of February, even briefly dipping below 6%, which is significantly below the averages seen a year ago when rates were around 6.85%. More on rates shortly because we will talk about what's going on there. But they're saying that the home buying season is off to a delayed start somewhat. They're also referencing global events and mortgage rates, of course. There's a lot going on there. And then they say limited inventory. With the official start of spring just days away, available listings could be an issue. For sale, inventory has been shrinking in recent months and is only up 5.7% compared to a year ago. We're going to look at I think it's important that we're tracking that. As compared to demand I mentioned last week, we're seeing inventory leveling off. So is that continuing or not? And then, of course, regional differences. I don't know that I would describe the housing market as fragile, maybe a bit uncertain when you look at the whole economic picture. There is a lot going on right now that could affect the economy, which could then affect, of course, housing. But I don't know that I would say fragile, be that as it may. I wanted to share this article with all of you. So let's kind of drill down to what's going on in Phoenix. We're going to jump right into that. The Cromford Market Index, thank you to the Cromford Report for all of their great information. I know I hear from you guys a lot of how much you love this stuff, and I'm so glad I'm not the only one. The market index, 82.8%. So they say anything under 90% is considered buyer's market. Demand is 86.6%, and supply is 104.5%. That has gone up. If you recall, last week, the week before, we were a little bit closer to 100%. And so we are increasing on the side. And the Cromford Report even calls out that we are seeing this supply increase and the demand is not keeping up with it as of right now. If that changes, then things may go in a different direction. But for right now, we are still seeing supply outpacing demand, and we're going to look at what the active listing inventory looks like. Now, specifically, when we look at all the 17 largest cities or 18 largest cities in the Phoenix metro area, here is their CMI in relation. We've got quite a few in this seller's market, everything from Cave Creek on up to Chandler. So a good number there. And then in the buyer's market, anything under 90. So we've got Goodyear all the way down to Buckeye, and then a few balanced markets in the middle there. Kind of a combination of red and green arrows. We are making some moves, of course, trending a little bit more towards a buyer's market overall because of that supply. But gosh, ever so minimal, like just not something that you're really going to notice day to day at this point. But that's where we stand with the CMI across the valley. The overall change week to week, the average CMI is down 1.4%, which is less than the 3.5% movement that we saw last week. So it was down 3.5% last week. So it's kind of inching back towards the middle, essentially inching back towards balance when it's, I wouldn't say that we're headed towards a seller's market in particular right now. But who knows? Who knows? Spring is always a stronger time for sellers. And if we could get that buyer demand out there, it could eat up some of those listings. But there are a number of factors that are keeping buyers on the sidelines, or at least having them think a little bit more about jumping in. One of those is mortgage rates. So I'll chat with you about rates here shortly. But let's look at these active listings right now because we've been tracking active listings. I've said this for the last few weeks. We usually do kind of the same pattern every year. We increase active listings. They're higher during our spring season, and then they taper off as we get into the summer. And we saw maybe a little bit of an early taper, right? But then this week we went up just ever so slightly, 25,573 active listings compared to 25,433 active listings. Not a huge difference, but you can see we're not doing this upward trend like we did last year, where this was just gaining and gaining and gaining. Now our demand, when we look at our listings under contract, this line has definitely broken away from what we've seen the last two years. So we are seeing more buyer demand essentially in the market this year than as compared to the last two years. The difference is we are still seeing active listings outpace what we've seen in the last couple of years as well. So it's all relative, right? So that's why we're not seeing a whole lot of movement one way or the other. We're not really seeing a crazy spring market yet. Although, I will say from my anecdotal experience, there is a lot going on out there. One of our listings got multiple offers under contract in a couple days. We have had some other clients looking at a property that was getting multiple offers. I've shared the same type of story a few times now. We keep seeing in pockets in different areas, multiple offers, and then some areas where it's a little bit of like a cricket situation. Just not a whole lot going on. So depending on where you're at, you may experience something different. Now with that said, I also wanted to take a look at seller paid closing costs or seller paid concessions that we haven't looked at in a while because I got this question recently and someone was asking, you know, should we be anticipating the buyer asking for concessions if they write an offer? And the answer is yes. And it does depend on your price point, but it is very likely that a buyer will write concessions into their offer in this market because they are trying to buy down their rate. And in fact, you can see 51% of sales recently in, this is for March so far, have closed with seller concessions. And the median amount is $10,000. So that's something to think about if you're listed on the market and you get an offer and the buyer is asking for concessions, don't get all mad about it. It's totally normal. We're seeing it 50% of the time and they may be doing it to buy down their rate or to help with closing costs. It's a negotiation tool, right? That's what they're doing. Very common to see right now. There was a time when it was not common to see. Obviously, you can see this back in 2022. No one was asking for concessions because no one was going to pay concessions. But it is something we're seeing now in this market. So keep that in mind if you are listing your home on the market, that you may see some concessions and it is very common. As a buyer, know that it is common. So if it makes sense with your offer to put that in, then you are part of the 50% that is asking for that. So I always think that's a good stat to visit because it's not always about price. It's about all of the other terms that are being negotiated behind the scenes that play a role in what is happening in the market. Because price is typically one of the last things that we see to come down when we're moving into a buyer's market. So you'll typically see the days on market increase. We'll see more sales with seller concessions. And then eventually you start to see prices come down. So speaking of prices, I did want to talk a little bit about appreciation because I've had a few conversations lately with people who have bought a home in the last couple years and are interested in selling it but disappointed in what they would be able to get for it. And either barely breaking even or potentially taking a loss when you incorporate all of the closing costs and whatnot into the sale. And the thing is, I think we all have to readjust our expectations to remember that appreciation rates are normally like 1% to 3%. They follow the rate of inflation. So depending on what that looks like, but it is not double digit appreciation on an annual basis. It's just not normal. Although we experienced that during the COVID years, that is not a normal thing to see. So you really have to keep that in mind when you're purchasing a home is how long am I going to be in this home? Because there is really no guarantee that you can turn around and sell it in a year or three years and think that it has appreciated. And so I just wanted to show how the annual appreciation looks because this dark blue line, this was 2021. You guys, this was what was happening. 37.9% appreciation is insane. And that was in June of 2021. This is based on monthly price per square foot. So you can look at this a few different ways and the appreciation rates will look a bit differently, especially if you're looking at annual appreciation. However, just to give you an idea, 2022 also way higher than what we've been seeing and where we're at today, 0.5%. 0.5% and it was 0.2% in January when we're looking on this monthly basis, which is better than we were at in 2023. But all of this to say, annual appreciation is not normal when it's up here. That's not what typically happens. So when you're thinking about buying a home, really think about how long you plan to be in the home. And it's not going to be easy to sell for a profit in a short period of time, more than likely, because that was outlier years for a while. Now, if you want to know what the annual appreciation rate is in your city, I can pull that information for you. Just check the description below to request that. So I've been sharing the contract ratio every single week. Let's take a look at where we're at today. We are at 39.2, which is just above 37.5 from last week, very slowly creeping up. Now the difference between the contract ratio and the Cromford Market Index is contract ratio is kind of reacting a little bit quicker because it's really just measuring the number of listings that are on the market and how many of those are actually under contract. So what kind of options a buyer really has out there? The CMI is a little bit more of a involved algorithm. I don't know how they put it all together, but it's not as much of a real-time feedback. Now you will notice we are seeing a lot more red and yellow on this map than we did even a week ago. This was two weeks ago, three weeks ago. Interesting. I'm just going to play this so you can see it kind of fill up. See, start to see some darker colors, more yellow, less blue. So blue is the cold markets, yellow is more of this hot and green is balanced and warm. Then obviously we've got a little bit of red in Chandler, which is hotter. Only 49 active listings in this zip code in Chandler and 42 of them are under contract. That is pretty competitive because if a buyer is looking in that market in that zip code, they don't have very many choices at all. So this is always really helpful if you've been considering selling your home or if you were thinking about buying, both of these can give you a little bit more of a pulse on what's going on in those particular areas. So if you want the contract ratio in a particular zip code, please check the description below and request that information. We can get that for you. Now mortgage rates, a whole nother thing. Let's take a look at where we're at. We're at 6.36, which is better than the beginning of the week when we were at 6.41. Actually, I think that was the 13th, so last Friday. But what is going on? Well, there's a lot going on, right? Oil prices are increasing, which creates inflation concerns and inflation concerns affects mortgage rates. The Fed met, they are not changing the federal funds rate, although that is separate from the mortgage interest rate, but it is something that we want to keep our eye on. Mortgage News Daily is saying that rates got hit three times on Wednesday with the net effect being a move back up to the highest levels in several months. Do you guys remember when we were at 5.99 and everyone was like, oh my God, we're under six? It was very short-lived. The average lender isn't quite as high as they were last Friday, but late day reprices, many are fairly close. So basically, inflation figured into this morning's developments. This was on Wednesday, a renewed surge in oil prices. It's not as big as some of the recent spikes, but bond yields followed with a strong correlation. So that's what is then affecting the mortgage interest rate. The third market mover was also inflation-related. Fed Chair Powell's characterization of inflation progress left the market feeling hopeless regarding potential rate cuts anytime soon. And so it's that rate cut expectation that ends up actually affecting the market and interest rates. The post-Fed press conference resulted in financial markets moving expectations for the next rate cut out to April of 2027. A day ago, the markets saw no chance of a rate hike. At the next Fed meeting today, it's nearly 5%. Not high, but notable shift nonetheless. So when I mentioned there was uncertainty, this is all the things that are going on. And as rates get affected, whether you think it is something that's important to watch or not, there are a lot of buyers who really are dependent on a mortgage rate for affordability, and that is how they choose to purchase homes, whether you agree with it or not. So it is affecting buyer demand. Yes, there are plenty of people who are using cash or may not be as affected by rates, but there are some who kind of hinge back and forth really based on the rate. So essentially it will affect demand. Now I said I would address some agent predictions for the housing market, and this is from Zillow, and it's kind of the agent sentiment survey, which I think is interesting because agents reporting in what they're seeing on the ground is helpful to know what they're hearing feedback from buyers and sellers and their plans and kind of the pace of how many buyers and sellers they may be speaking with. They're saying buyers are gaining ground. By the fourth quarter, 51% of agents said market conditions were favoring buyers. We all know that with uncertainty and rates of market in general, it's made buyers much more hesitant to buy. One agent noted the shift matches what Zillow sees in the data on the heels of a year of small wins for buyers, such as a slight affordability gains and buyer-friendly conditions in 19 major metro areas. The forecast expects buyers to gain a bit more breathing room. They also say agents are betting on a stronger year ahead. They were cautiously optimistic about where the market was going. 61% expect transaction volume to increase over the next 12 months. So far, they're saying shifting towards a buyer's market but seeing more transaction volume. Prices are holding. Spring could see them rise. With what we're seeing here in Phoenix, I don't know if we're in Phoenix, but things could change. I just don't see the demand recovery to really start pushing everything and pushing prices. Although in some of those very specific areas that I've mentioned where we're seeing multiple offers, maybe there would be some more appreciation specifically in those areas because there is higher demand. So I'd love to see what's going on nationally, but just remember, real estate is so hyperlocal. So what they're reporting in all different areas of the country could be experienced differently here in Phoenix. Over the last week, I've spoken with a few of you about buying in the Phoenix area and selling. And our team is always happy to chat with you guys on a discovery call if you're considering buying or selling. So check the description below for a link to set something like that up. I will be back next week with another market update.