How Presidential Elections Affect Housing
Starter Homes are a Hot Market in Greater Phoenix
For Buyers:
With many existing home owners comfortably staying put these days, more attention is placed on first-time home buyers, affordability, and supply of homes. The first thing that comes to mind is the choice between renting and buying. According to RealData the median cost of a 3 bedroom apartment at a 50+ unit complex in Q2 2023 was $2,100 per month in Maricopa County. The median size is roughly 1,250 square feet. The past 30 days of sales show the median sale price of a 1,200-1,500 square foot, 3+ bedroom single family starter home to be $370,000 in Greater Phoenix.
Many first time home buyers put down 3.5% on a FHA loan ($13,000 on $370K), and last month nearly 70% in this price range had a seller or builder agree to contribute to closing costs with a rate buydown. That’s a median contribution of $10,000 from the sellers. On February 1st, the average FHA rate was 6.0% according to Mortgage News Daily. With a 2/1 buydown from the seller, the first year estimated payment would be $2,159 per month, including taxes, insurance, and PMI. A permanent 1% buydown would equate to $2,375 per month. This puts the monthly cost to buy a small starter home within a few hundred dollars of the median rental rate.
In Pinal County, the median cost drops to $310,000 and over half of the properties sold in the past 30 days are newly built within the past 5 years or under contract for 2024. On a 2/1 FHA buydown, the estimated PITI payment is $1,825 per month and a permanent 1% buydown would be $2,006.
Currently there are 366 active single family listings between 1,200-1,500 square feet, with 3+ bedrooms, under $370,000 in the Arizona Regional MLS (Pinal County has 53% of them). There are 312 listings under contract and 191 closed in the last 31 days. This is a hot market segment.
2024 is expected to be another year of change for the Greater Phoenix housing industry, but this time the shift is expected to be towards stability in home appreciation and improved affordability measures as incomes catch up. After hitting rock bottom for demand in 2023, things are looking up.
For Sellers:
It’s an election year! Every four years there is an expectation that the drama, uncertainty, and manipulation that comes with presidential campaigns will dramatically affect the housing market, specifically prices or mortgage rates. Spoiler Alert: It doesn’t. The main influence on the housing market comes from policies, not the elections themselves. For instance, the stimulus packages and policies that were passed during the 2020 COVID-19 election year and continued into the next administration were the first stones to cause a ripple effect of fortunate and unfortunate events in the housing market over the past 4 years. So what’s to be expected this year? There is one market that can be affected by an election, and that’s the stock market. After the last 4 elections, the stock market has responded positively afterwards, which affects both luxury buyers and retirees with a high percentage of cash purchases. If a cash buyer expects their investment portfolio to be worth more after an election, they may simply put off their home purchase until the Spring. This can cause contract activity to stagnate for a couple months, but not enough to affect prices, and this mild affect can be offset by other mitigating
factors, like seasonality, that would make the impact unnoticeable.
So far in 2024, listings under contract over $1M are higher than 2022, which is the #1 record year for this price range. Active listings over $1M are also at record highs, which is offsetting the increased demand and keeping price appreciation stable. Retirement communities are not experiencing the same however, as this segment is highly sensitive to inflation. When prices for necessities are high and uncertain, many buyers in this segment will choose to keep their cash for safekeeping. Perhaps they’ll feel better after the election.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2024 Cromford Associates LLC and Tamboer Consulting LLC
Misha’s Commentary:
Buyers: I love this time of year! Not just for the weather, but for the flood of new listings that comes with our Spring market. It’s so fun to hunt for the best homes, have more choices for buyers, and it’s always the busiest time of year. Although the market is showing more inventory as the big highlight, with the pent up demand from buyers waiting on the sidelines for much of last year, as well as interest rates holding pretty steady in the mid 6% range- I believe the good inventory will be gobbled up in no time.
Everyone seems to be hanging on for when rates dip again, but if we see the housing market continue to improve on monthly median pricing, contract rate, and sales overall- you may not get the rate decrease you are waiting for. Along with that, if suddenly rates do dip- more buyers means more competition and often paying more. If you feel ready to buy, speak to your trusted agent soon and get out there while the inventory looks great.
Sellers: I do find it interesting that consumer attitudes impact our personal financial outlook more so than actual data and policy. It’s confusing and overwhelming for most people to analyze the markets, fiscal policy, the federal reserve meetings, etc. Plus the news is full of flashy headlines every few months were the real estate market is concerned.
What you need to know is that our market is pretty stable because we have a normal amount of demand, a constant influx of new residents, and relatively low pricing. It’s a great time to sell even with more inventory because of the pent up demand for great homes. As I have been writing for the past year- before going to market make sure you’re picture perfect, ready to go! With more inventory comes more competition naturally, and you want to be the stand out amongst the other 10 properties. Take a look at your curb appeal, deferred maintenance items, interior refreshing needed, etc. Work with your trusted agent to make a list of needed items before you list.