THE Phoenix Market News
- There were 6,081 closed transactions with a median sales price of $464,990
- Closings were down 15% from July 2022, and down 20% from June 2023
- The median sales price was down 2.1% from a year ago and down 1.3% from last month
- The median sales price has fallen for the first time since January and is now up 5.7% from the low point of January 2023.
- New home closings totaled 1,352 with a median sales price of $533,592, an all-time record high.
- The new home closed sales count was up 7.6% from July 2022 but down 18.4% from June 2023.
- The new home median sales price is up 3.2% from a year ago, and up 2.8% from last month
- The re-sale transaction count was 4,729 with a median sales price of $445,000.
- The re-sale count was down 20% from July 2022 and down 21% from June 2023.
- The re-sale median sales price was down 4.1% from last year and down 0.5% from last month
The annual sales rate is a useful tool to measure the amount of activity in the market.
The annual sales rate avoids all three of these problems
- it uses data from all days of the year, so there is no seasonal effect at all
- it uses data from 365 days, a constant number except for a leap year, when the variation is just 1 day in 366.
- it is a steady reliable number with minimal meaningless fluctuations in the count reported, thanks to the large sample size
The annual sales rate for all areas and types is currently 73,800. This is a low number, down from 102,822 a year ago. It is also still showing a slow decline, having been 74,148 this time last month. However the decline month to month is now very small (0.5%) and there is no longer much downward momentum.
We can expect a few sub-markets to be showing some annual sales growth on a month to month basis. Looking at the single-family market by ZIP code, we find:
- 60 out of 148 ZIP codes are showing higher annual sales compared with a month ago.
- The best growth is in Fort McDowell 85264, Carefree 85377, Scottsdale 85250, Surprise 85387, Glendale 85305, Waddell 85355, Rio Verde 85263, Glendale 85307, Chandler 85224, Scottsdale 85262
- The following are showing the worst declines month to month: Stanfield 85172, Gila Bend 85337, Morristown 85342, Phoenix 85009, Casa Grande 85193, Arlington 85322, Peoria 85381, Phoenix 85035, Tempe 85284, Phoenix 85043
The short-term rental market appears to have peaked in a number of over-supplied locations. This is leading to ludicrous prophecies by a few deranged real estate gurus that a huge flood of former short-term rental homes will hit the market in the near future. So many owners joined the Airbnb party that there are sometimes far more short-term rental properties than there are people wanting to rent them. This means lower occupancy and price competition, making ownership of a short-term rental much less attractive than it was a couple of years ago. Over the last 2 years average occupancy is reported to have dropped from 60% to 56%. This is a negative trend but hardly of catastrophic proportions.
Some owners are considering converting to long-term rentals instead. The theoretical advantages are higher occupancy and greater peace of mind but the main disadvantage is a relatively low gross income compared with the owner’s original expectations. We are seeing plenty of new higher-priced rental listings in the Northeast Valley, some being furnished and probably former short-term rentals. The number of potential tenants for these is limited, because of the relatively high rent.
There is currently no great shortage of potential tenants at the affordable end below $2,000 a month. However if people can afford a rent over $4000 a month, then they are usually of a mind to buy a home. The exceptions would be those who expect to be renting for only a year or two. This includes students sharing a home and recent graduate who expect to move soon for their career advancement. Settled families with children in school are unlikely to want a high-price rental unless they are in a secure high-paying job. And in those circumstances, a mortgage should be easy to obtain.
As a result we have already seen weakness in the rental rate per square foot for homes over $2,500 per month in Scottsdale. $1.89 was the July average, The peak was $2.16 in February 2022.
We currently have 49.8% more active rental listings than we did 12 months ago. About 800 of them are in Scottsdale and their average asking rent is $4,380. This time last year there were only 517 with an average rent of $4,290. The average is going up because those with a higher rent are staying active longer, not because rents are increasing.
Real Estate News in Brief
Mortgage rates always matter. But in this housing market, mortgage rates are the key to unlocking inventory AND affordability. Core inflation rates (CPI) continue to trend down; just not fast enough for the Fed. Meanwhile, home prices keep moving up as the modest inventory rebound has ground to a halt.
Headline CPI (Consumer Price Index = inflation) for July rose to 3.2%, from 3.0% in June. But core CPI (more closely watched by the Fed) dropped to 4.7% in July, from 4.9% in June. Both the headline and core figures were slightly lower than expectations (which is a good thing). [BLS]
Importantly, the YoY growth in shelter costs in CPI (rental rates + owners equivalent rent) continued to decline. July was the 4th-straight month that shelter inflation eased. The downtrend is now well-established and should last more than a year. [BLS]
More on that. The San Francisco branch of the Federal Reserve forecasts that “shelter” cost inflation (rental rates + owners equivalent rent) will drop below 5% by November 2023 and go negative around May 2024. Why is this important? Because the shelter component in CPI (35% weighting in headline CPI, 43% in “core”) has been — by far — the biggest driver of inflation over the last year. [San Francisco Federal Reserve]
Job growth slowed (but stayed solid). The US added 187,000 jobs in July and the June figure was revised down to 185,000. Both are the lowest figures seen since late-2019. That said, the unemployment rate was basically unchanged at the very low level of 3.5%. [BLS]
Black Knight’s Home Price Index rose 0.7% MoM in June, a new all-time high, with 30 of the 50 largest cities setting new price records. As a result of higher home prices, “tappable” home equity climbed to $10.5 trillion, within 4% of its 2022 peak. [Black Knight]
The mild inventory recovery that started in early 2022 has come to an end. In July 2023, active inventory (which excludes pending sales) fell 6% YoY to 647,000 units. That’s the first year-over-year decrease since April 2022. Compared to July 2019 (pre-COVID), active inventory is down 48%. [realtor.com]
That said, the local supply picture is highly varied across the country. In some cities (like Austin TX), active inventory today is HIGHER than it was in July 2019. And in many cities (especially in the Midwest and Northeast), active inventory is down 60–80% compared to July 2019. [realtor.com]
In the second quarter alone, US credit card balances grew by $45 billion pushing the total balance over $1 trillion for the first time in history. So while US consumers have been remarkable spenders during and after the pandemic, they’ve increasingly relied on plastic to fund their purchases — and the average interest rate on credit cards is around 22–23% [New York Federal Reserve]
DeDe’s Social Media this week!
This week, I’m talking about Moving in the heat, preparing your home for sale when you’re short on cash, factors that shape your home’s selling price, not letting “what-ifs” derail your homebuying experience and Exploring New Build homes around Phoenix. Let’s stay connected on Facebook, Instagram, You Tube, Pinterest, And my Google Page!
What’s DeDe Up to this week?
This week was busy at work, happy to report my dear friend/client Jim’s Home went under contract this week! Check it out here:
Got a wonderful RF Microneedling face treatment at Salon D’shayn, got to see some wonderful friends for dinner then went with my bestie to the Offspring Concert! Pups are doing great and got to spend some time with their Papa!
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