By Sean Colón

As we enter the last quarter of 2024, both buyers and sellers in the Arizona real estate market are looking for opportunities to navigate a changing landscape. The economic environment and housing trends continue to evolve, providing a unique moment for realtors to advise their clients effectively. For agents, understanding how recessions impact the market and helping buyers and sellers position themselves for success will be key in this transitional period.

Buyers: Is a Market Turnaround on the Horizon?

Historically, recessions have marked the beginning of a housing market turnaround, and the current economic environment could be no different. While a recession can hurt the broader economy, two factors often lead to an improving housing market: stabilized home values and declining mortgage rates.

• Stabilized Home Values: Since 1970, home prices have experienced minimal fluctuation during recessions, with the only notable exception being the 2008 housing crisis. This creates a window of opportunity for buyers who may have been waiting for more affordable home prices.

• Lower Mortgage Rates: One of the most significant factors for buyers is the potential for falling mortgage rates. Historically, every recession since 1970 has led to lower mortgage rates, while over 90% of the workforce remained employed. As of August 2024, private sector earnings in Arizona rose by 7.3% in June and 5.3% in July, according to the Arizona Department of Economic Opportunity. These income growth figures are higher than both inflation and the rate of home price appreciation, which is helping to make homes more affordable.

Although Mortgage News Daily reports no notable uptick in purchase mortgage applications in August, this trend is likely to shift. Often, potential buyers wait to see if mortgage rates stabilize or decline further before jumping into the market. In the meantime, sellers are starting to list their homes at higher rates, creating opportunities for buyers who are ready now. New listings have increased by 11% since August 1st, a sign that sellers are getting off the fence before buyers catch up.

Sellers: The Final Push for 2024 Sales

The last quarter of the year, especially September and October, represents the final sprint for sellers before the real estate market slows down for the holidays. Sellers who are preparing to list their homes in these months need to ensure their properties are competitively priced and well-maintained. The median marketing time before accepting a contract is currently 33 days, meaning homes listed in September will likely receive offers by mid-October. However, those who list in late October may face slower sales due to the approaching holiday season.

Despite these potential hurdles, lower mortgage rates should give a boost to homes priced under $2 million. In contrast, the luxury market—where 55% of homes over $2 million are cash transactions—may not benefit as much from falling rates. Luxury real estate tends to stagnate during recessions due to poor stock market performance and weaker corporate profits, two major factors that fuel demand in this segment.

The Outlook for 2025

Although uncertainty around the recession and the November election could slow luxury home sales through the end of the year, optimism is expected to return by early 2025. The combination of improving economic conditions, favorable weather, and increased tourism should lead to more contracts and a stronger real estate market overall.

Key Takeaways for Realtors:

1. Educate Buyers on the Timing: Buyers who act now can take advantage of a temporarily relaxed market before competing demand catches up in 2025.

2. Sellers Need to Price Competitively: Homes listed in September and early October need to be competitively priced and well-prepared to attract offers before the holiday slowdown.

3. Luxury Market Challenges: While luxury listings remain strong for now, be prepared to navigate potential slowdowns if economic uncertainty continues.

Arizona Housing Stats at a Glance:

• Private Sector Earnings: Up 7.3% in June and 5.3% in July 2024.

• Mortgage Rates: Dropped sharply to 6.82% in June from 7.51% in April, saving buyers an average of $187 per month on a $400,000 loan.

• New Listings: Up 11% since the beginning of August, indicating that sellers are ready to move.

For realtors in Arizona, now is the time to be proactive in advising clients and making the most of the shifting market conditions as we move into 2025. Whether you're guiding buyers through favorable interest rates or helping sellers position their homes for competitive offers, the market is ripe for expert representation.

By the way, I help realtors improve their online and social media presence by providing beautiful photos of their listings. That is why I’ve created this FREE HOME PREP LIST for your clients to help your listings look their best. Feel free to share.