Greater Phoenix Balanced Market May Not Last Long
These Two Factors Could Further Drop Mortgage Rates in 2024
For Buyers:
Greater Phoenix has moved out of a seller’s market and into a balanced market, but it’s unclear how long this opportunity will last for buyers. December is typically the calm before the storm each year for the housing market, and this year is no different. New listings are at their lowest this month as many sellers opt to wait until January to list their home. As a result, supply can become stale and picked over. However, the lull is a window of opportunity for negotiations as the remaining sellers want to be under contract before the wave of new listings come in the new year. There is uncertainty mixed with hope in the market today as mortgage rates have declined from 8.0% to 7.0% since October. Every day the mortgage rate declines, more buyers are able to purchase. Last year, also from October to December, rates dropped from 7.4% to 6.1%. This was enough to pull the housing market out of a buyer’s market, into balance, and eventually a seller’s market once again by January. This put upward pressure on price until May, when rates rose once again to 7%. If rates continue their decline and drop below 6.5%, we expect to see noticeable improvements in buyer demand as we enter 2024.
This November, the Consumer Price Index inflation rate took a positive turn down and the Federal Reserve did not raise the federal funds rate, both measures were key factors in the current mortgage rate decline. This month, the inflation rate once again declined and the market expects the federal funds rate to remain unchanged, stirring emotions of hope and anticipation that rates will continue declining as mortgage applications rise. The rapid decline of rates is preventing Greater Phoenix from dropping entirely into a buyer’s market at this stage, which is causing analysts to question how long the opportunity will last. The combination of a sustained balanced market and the weakest month of the year seasonally means that the best thing buyers can do is stay vigilant in their search for a home and take advantage of this quiet time. Once the new year begins, the market could heat up quickly.
For Sellers:
While Greater Phoenix is in a balanced market overall, it’s not evenly distributed. As of December 7th, most of the cities in Pinal County and the edges of the valley are in buyer’s markets. They include Cave Creek, Sun City, Surprise, Buckeye, Maricopa, Casa Grande, Queen Creek, and Gold Canyon. Balanced markets are Paradise Valley, Goodyear, Peoria, Sun City West, Litchfield Park, and Arizona City. All other cities are in seller’s markets, but much weaker than they were a month ago.
The top 5 seller’s markets, in order, are Tolleson, Anthem, Apache Junction, El Mirage, and Sun Lakes. Close behind are Chandler, Laveen, and Fountain Hills. While these cities lean the most towards sellers, the only cities showing significant price increases since June are Anthem, Sun Lakes, and Fountain Hills. Despite being strong seller’s markets, Laveen and Tolleson have 76% and 71% of their sales closing with significant buyer incentives at median costs of $13,500 and $10,000; much higher than the valleywide measures of 44% and $9,626 for December.
Leading supply and demand measures indicate sales price measures should go flat over the next 3-6 months. Demand is expected to increase once the new year begins, but competing supply may offset it. Pushing the market too far on what price it’s willing to bear will most likely result in more days on market. Focusing on getting your home in the best possible condition, budgeting appropriately for buyer incentives, and managing expectations for price will get your home sold faster in this environment. These are the markets where quality marketing, exposure, and agent representation truly make a difference.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2023 Cromford Associates LLC and Tamboer Consulting LLC
Misha’s Commentary:
I was speaking with a first time buyer at an open house a few weeks back- he was very concerned about rates (rightfully so), pricing holding stable in the face of rates, and wanting to get it right when it was time to buy. While all of his explanations were perfectly rational and well thought out- I did had one bit of advice that hopefully stuck with him and will help him in his search. You cannot time everything, and in every market there is an opportunity, the best thing you can do is figure out where the opportunity is and how it can benefit you. 
There is opportunity in this market for buyers and sellers- this is how I would take advantage of the current market for both:
For buyers:
The end of the year is typically quiet in Real Estate- people want to enjoy the holidays with their families, traveling, etc. Often sellers pull their listings off market for the holiday- and will re-list 45 days later to appear “new” to the market. Even with the holidays, family visits, and being “off-market,” seller’s want to sell. Have your agents pull the recently cancelled listings to see if there is anything off market that fits your search. If a seller has 2 months of mortgage to pay before getting back on market, maybe this can be contributed towards your closing costs/rate buyer down, etc? Also, as stated above sellers are motivated to get their properties under contract before the new listings hit the market in Spring. Along with off market, look at homes that have been on for over 30 days. This is your opportunity, sellers want to sell now and are more willing to give concessions and negotiate price/reparis- and it may just be short lived before demand increases in Spring, rates lower, and we might start seeing multiple offer scenarios again.
For sellers:
With inventory down, you may get more eyes on your listing and more showings, this is your opportunity- make adjustments now before the end of the year. If you have been on the market over 90 days- it’s time for a new strategy. Consider you have a few adjustable pieces to your listing: price, condition/quality, marketing efforts, and timing. Price is the most powerful, but if you feel that your price is exactly right, you may consider improving the condition or quality of your home- paint, landscape, staging, etc. Consider changing your marketing strategy- this may mean a list of things, new photos, video, paid advertising, broker opens, showings, etc.- this is where your agents experience and expertise should come in. The last piece is timing- if you opt to remove your listing to reset the days and appear new in Spring, you will have more competition, but you may also have more demand from buyer’s, so it could be a winning combination. 
I think it’s wise to take a look at the cost of waiting for both buyer’s and seller’s and make a decision based on your own needs, timing, and finances.