The housing market is a lot less frenzied than it was three months ago, and experts see the slowing continuing.
Since mortgage rates started climbing and inflation began hitting record highs, the number of properties for sale in metro Phoenix has shot up and sales have fallen.
For only the second time in more than a year, the area’s median price is expected not to climb in June. That projection is based on pending sales.
“You can’t compare the current housing market to any other market we have been through,” said Tina Tamboer, senior housing analyst with Cromford, at a recent HomeSmart Elite meeting with hundreds of agents in Phoenix.
She said now is not the time for sellers to overprice their houses, and buyers have a better chance of getting repairs done or a home warranty.
The median home price in the Phoenix area is expected to stay flat at $475,000 in June, according to the Arizona Regional Multiple Listing Service.
“With the rapid rise in mortgage rates over the last two weeks, it is reasonable to expect less housing demand in the coming months,” said housing analyst Tom Ruff with ARMLS’ Information Market. “Also, record home prices, gas prices and rising inflation have significantly altered the average homebuyer’s budget.”
Ruff believes the median home price likely peaked in mid-May, after jumping more than 60% in two years.
Home sales in May were down 5% from April and are down 9% for the past year.
The number of Valley homes for sale jumped by 40% in May from April and continues to climb.
The average 30-year mortgage rate hit 5.78% last loan week, up from 3.2% in January, according to Freddie Mac. The current rate translates to a monthly payment of $2,635 a month on a $450,000 mortgage. That’s a $700 increase from when rates were hovering around 3%.
“We admit to being surprised at how quickly the market is cooling,” said housing analyst Michael Orr of Cromford. “We expected a downward trend but did not anticipate it would be so dramatic.”
He said metro Phoenix homebuyers are now seeing 800 to 900 more listings a week to choose from, and if that continues, the market could be balanced between sellers and buyers my mid-August.
Tamboer said one of the first indicators of the housing market slowing is that it takes longer for properties to sell.
It now takes five to six days longer to sell a Valley home than it did six weeks ago.
If the market continues to cool, then list prices will come down, she said.
The median list price climbed from $495,000 in April to $500,000 in May, according to ARMLS. But housing experts say list prices started dipping in June.
The third indicator is for sellers to begin offering more concessions, such as paying closing costs for buyers.
Tamboer believes concessions are coming but aren't standard in the market now.
“Prices won’t drop until we see more concessions,” she said.
If supply and demand return to normal for home sales in metro Phoenix, that doesn’t mean prices will automatically drop.
It does mean prices will moderate and not jump $5,000 a month as they have been for almost the past year.