The Spring Housing Season is Upon Us
What’s Hot and What’s Not in Greater Phoenix
For Buyers:
“That is one good thing about this world… there are always sure to be more Springs.†~Lucy Maude Montgomery. Spring is peak home buying season in Greater Phoenix. March is the 2nd most popular month for new listings historically (the most popular is January), and the beginning of a 4-month long closing season that lasts until June. Supply is up 14% over last year, still 31% below normal, but 16,886 active listings feels like an avalanche compared to 2 years ago when there were only 4,400 to choose from. Higher mortgage rates continue to keep buyer competition lower than normal, but even mild declines in the rate have resulted in a boost in weekly accepted contracts. Closings over asking price have edged up seasonally to 17% of March sales so far, but the majority of sales are negotiated down by an average of 2.1% below list.
Builders have been ramping up new single family home permits over the past 7 months, up 32% since June 2023. Over the last 3 months, 73% of new home sales closed have involved builder incentives paid to the buyer, with at least 50% paying $11,500 or more. These incentives typically go towards buying down the mortgage rate and saving the buyer $100’s on their monthly payments.
Those who have been keeping these updates over the past year have probably noticed that the median sales price has barely moved for 10 months. Starting at $440,000 from June-July 2023, stagnating at $435,000 from September-December, dropping to $430,000 from January-February 2024, and now back up to $441,000 in March. While the current appreciation rate from last March measures +5.8%, over the next 2 months this will start to move closer to 3%, which is in line with the rate of inflation.
This 10-month stagnation in price, which has endured erratic mortgage rates ranging from 7-8%, has allowed some breathing room for annual incomes to catch up to prices. While low affordability rates are leading negative headlines this month, they are largely based on 2021 median family income from the U.S. Census, which doesn’t reflect the influx of higher paying jobs, inbound migration fueled by the “work from home movementâ€, and private sector income growth experienced in Greater Phoenix in 2022 and 2023. Updated income reports combined with an expected mild decline in rates this year provide a reasonable expectation that affordability is set to improve. In short, don’t listen to affordability reports that say the majority of homes are not affordable to the masses. You only need to find the one
home that’s affordable to you. Don’t give up.
For Sellers:
Spring is statistically the best time to be a seller in Greater Phoenix as buyer activity closes in on its seasonal peak from April through May before slowing down from June through December. This season some areas and price points have been heating up more than others compared to last year, but heat is not all about demand because it’s difficult to increase sales without supply for sale. For example, areas with the highest percentage increase in contracts over the past 2 months happen to be on the edges of the Valley, such as Black Canyon City, Carefree/Cave Creek, Rio Verde, Sun Lakes, Wittmann, El Mirage, and Avondale. However, with the exception of Avondale, none of these areas feel particularly hot to active sellers because there’s more competing inventory to accommodate the increase in demand.
When supply is taken into account, the hottest areas of Greater Phoenix where supply isn’t quite sufficient for Spring demand gravitate to the south. Namely Avondale, Tolleson, South Phoenix, Ahwatukee, Chandler, Gilbert, and San Tan Valley. While median prices in these areas are still flat, reasonably-priced sellers are selling 1- 2 weeks faster than the current 4-week median time frame.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2024 Cromford Associates LLC and Tamboer Consulting LLC
Misha’s Commentary:
For buyers- The last sentence of the report above for buyer’s, “Don’t give up,” while a bit dramatic, is exactly correct. The sentiment that the right home at the price you can afford is out there- is true. This is mostly geared to first time buyers as affordability feels like a thing of the past and rates seem to be stuck where it doesn’t make sense to buy vs rent. First time buyers may need to look toward nearby cities, smaller homes/townhomes/condos to make homeownership work. Your budget, wishlist, and long term finances should all come into play here- not the latest flashy housing market data/news. With so much inventory out there, there are some deals to make, as long as you are shopping realistically.
For sellers- Patience has been a general theme with my sellers lately. No need to panic when you hit the dreaded 14 days on market! It’s all good- buyers are taking their time right now. Saving homes, making plans, researching schools, possibly prepping their homes for sale. It takes longer because we don’t have this immediate frenzy for every single decent looking home. Now, the special homes still have a little line up of buyers- prequalified, ready to go when the right home hits- but even with the most special, it’s not frenzy level activity. Take your time preparing your home to hit the market- don’t rush if you can help it. Make the right changes, updates, upgrades- work with your experienced agent to make your home the most appealing and well priced.