You may have heard that real estate markets in Arizona are changing. You may actually be experiencing it. While this is true, there are many news and media sources that exaggerate the true market conditions. They write headlines or bullet points painting a picture that is not entirely accurate. Hard to believe, isn’t it?
Since the beginning of the year, we have seen a shift in both home buyer and home seller activity. Many people welcome this and believe that these changes needed to happen. Many were under the impression that the 2020 and 2021 real estate markets nationally, statewide and locally were artificially inflated and were going to adjust. Some even predicted a bubble bursting and market crash. That has not happened.
Let’s take a look at what the data is actually showing us. The December 2021 data shows the median sales price of a home in Arizona was $323,221. Homes sales were at 9,204 units with 1.92 months’ supply. A four- to six-month supply is considered a “balanced” market. It is therefore evident that we had been experiencing what some refer to as a “seller’s market,” with demand exceeding supply.
By February, the median sales price in Arizona had risen to $344,036 with 9,415 homes sold in January with a 1.98-month supply.
The peak of home sales seems to have been in March with 11,602 sales, a median of $353,033 and a two-month supply.
By June 1, there were 10,284 home sales, a $351,964 median sales price and the supply had risen to 2.57 months. So, a declining number of sales, a lower median price and more home inventory on the market.
Our most recent data shows that in July, we had 8,021 home sales in Arizona, with a median sales price of $343,209 and the home supply has risen to 2.93 months. This reflects an increase of 22.2% in housing inventory versus this time last year and a decrease in sales of 34.1% year over year. Many Realtors report a significant drop in home showings as well.
The source of the above information is the “Arizona Housing Report” generated monthly by the Arizona REALTORS® using the REALTORS® Property Resource and is a compilation of data from all 10 of Arizona’s Multiple Listing Services.
What the above indicates is that our real estate markets are shifting and slowing somewhat. This also shows that we are not experiencing a market crash. One of the biggest reasons for this shift is the rise of interest rates from just above 3% at the beginning of the year to just below 6% in July. The “buying power” of a typical home buyer has been reduced substantially as a result.
Real estate economists did predict a rise in interest rates in 2022, but not to the extent that we have seen. If the price of homes these past few years rose artificially, which many believe is true, then the interest rates we are experiencing now are equally artificially high. Lenders are hedging their bets and adding their own built-in security in the rates they are offering consumers. As of this writing, interest rates were nearing 6% in July, but have stabilized near 5.5% for a 30-year fixed conventional home loan. Some lenders are predicting that interest rates will drop steadily this year, and we shall see.
You will notice that throughout this article I have said “real estate markets” in the plural sense. Even though the data that I have referenced is for the entire State of Arizona, “all real estate is local,” as they say. Speak with your REALTOR® to discuss the trends in your area.
A local expert can give you an idea of what you can expect both buying and selling a home in the great state of Arizona! If you are that REALTOR® who is a local expert, but your clients are interested in homes in other parts of the state, consider referring your customers and clients to an expert in other areas that you are not familiar with. Don’t forget that Arizona law and the REALTOR® code of ethics require REALTORS® to practice within their areas of expertise, including geographic areas of expertise. All real estate is local.
Gary Nelson is the 2022 president of the Arizona Association of REALTORS® and the Delegated Associate Broker at Realty Executives of Flagstaff.