After several years of not only continuous but skyrocketing upward growth, 2022 was the year that the Phoenix real estate market finally started leveling out. As the year draws to a close, it’s a time to do a retrospect to look back at the trends that have dominated this year and forecast how they may shape the year ahead.
Assessing 2022
Early 2022 was certainly a seller’s market. Not only were homes selling, but they were selling significantly above market value and at record pace. The median sales price in February was $449,900. Unlike the astronomical month-over-month increases that have been seen in the market, the latest ARMSL data from October reveals average sales prices are holding steady at $450,000, which remains a 5.9% increase since Oct. 2021, and sellers are receiving 97.5% of list price.
Continuing to be a hot market, home prices in Phoenix are expected to hold steady through 2023. Though higher interest rates and inflation threaten to dampen the market’s intensity next year, the Valley remains a hotbed of activity with new employers choosing to open or relocate operations, thereby driving new residents to the state.
Inventory and supply have been chronic problems throughout 2022. In February, buyers were faced with 8,593 homes on the market and only 1.14 months’ supply of inventory. Today, that number has grown to nearly 21,500 and sits at 136.6% more than this time last year.
It’s anticipated that as the market continues to normalize into 2023 and beyond, there will be more realistic housing inventory and supply in the pipeline. This will allow both buyers and sellers to have a little more breathing room when it comes to how much time they have to weigh their options, compare homes, and both make and accept offers.
And while on the topic of buyers and sellers, it’s important to note that the massive influx of iBuyers and real estate companies looking to purchase inventory to hold onto and rent or eventually sell as the market increases has also dried up substantially and isn’t anticipated to reemerge as a factor in 2023.
What to Expect in 2023
Though a crystal ball into the future doesn’t exist, historic trends along with current data are pointing to a more normalized market.
It’s been smooth sailing across the Valley since prior to the pandemic as homebuyers have become accustomed to low interest rates and inflation levels. Despite rising rates many buyers are still in the market, though they’re being more conservative as they weigh their options, especially between need-to-have and like-to-have preferences in homes.
While these headwinds are anticipated to cool off some of the heat in the market, we are not heading to a market meltdown. In fact, it’s not anticipated that they will have anywhere near the long-term economic impact seen in the early 1980s, where interest rates were at an all-time high.
Also, despite some of the uncertainty in the market, especially as home sales are projected to be down by 1%, overall, prices will remain high, growing as much as 4%.
Finally, the Valley is entering some uncharted territory, but indicators – from pricing to economic development – point to Phoenix continuing to remain a highly desirable and very competitive market well beyond 2023, even though some much-needed balance is returning to one of the hottest markets in the nation.
Andrea Crouch is President of Phoenix REALTORS®, a modern, member-first organization that is the foremost expert industry resource serving more than 11,000 real estate sales professionals in the Valley. Phoenix REALTORS offers free concierge-level member services, responsive support and resources, and the latest industry information, making it both the best-valued and highest-quality option for Valley REALTORS.