By Sean Colón
Image via Cromford Report October 2024
The Arizona real estate market is experiencing a unique period of stability and opportunity for both buyers and sellers. For the first time in months, listings under contract have surpassed last year’s levels, driven by a favorable mortgage rate environment and an increase in inventory. As a realtor, staying informed about these shifts allows you to offer your clients timely and valuable guidance. In this blog, we'll break down key insights about the current Arizona housing market, explore factors impacting both buyers and sellers, and provide practical advice on how to navigate the upcoming months effectively.
For Buyers: Why Fall 2024 Is the Ideal Time to Purchase in Greater Phoenix
After a year of fluctuating mortgage rates, September brought some stability to the Arizona real estate market. For four consecutive weeks, average conventional mortgage rates held steady between 6.1% and 6.2%, while FHA loans dropped slightly lower, to 5.6%–5.7%. This created a sweet spot for buyers to act, leading to a 12% increase in weekly accepted contracts. This trend underscores that buyer demand picks up significantly when mortgage rates drop below 6.5%.
Many believe this dip in rates followed the Federal Reserve’s decision to lower the Federal Funds Rate by 0.5% on September 18th. However, the rates had already begun declining in anticipation of this move, giving buyers the certainty they needed to enter the market.
As we enter the fourth quarter, the environment is more favorable for buyers than it has been since December 2022. Back then, active listings in the MLS exceeded 20,000, and rates hovered around 6.1%–6.5%, sparking a flurry of buyer activity. Today, mortgage rates have settled back into a similar range, with active listings once again surpassing 20,000. This combination of ample inventory and attractive financing options offers buyers a unique window to secure a home with less competition.
In Greater Phoenix, this seasonal period—when listings increase, and weekly accepted contracts typically decline—is historically the best time to buy. With the Cromford Market Index indicating a balanced market, prices are less volatile. For every small dip in mortgage rates, homes effectively go "on sale," making it a prime opportunity for clients eager to buy.
Quick Stat:
As of September, listings under contract have surpassed last year’s numbers.
Mortgage rates have been hovering between 6.1% and 6.2% for conventional loans and 5.6% to 5.7% for FHA loans.
“Encourage your buyer clients to take advantage of this environment while it lasts.”
Takeaway for Realtors: Encourage your buyer clients to take advantage of this environment while it lasts. Arizona's market has only been this favorable twice in the past decade, with similar conditions lasting just nine weeks in 2022 and five weeks in 2014. With inventory up and prices stable, it’s a unique opportunity that may not last beyond the new year.
For Sellers: What to Know About Selling in a Balanced Market
For sellers, recent fluctuations in mortgage rates require a more strategic approach. After four weeks in the low 6% range, rates edged up slightly due to a strong employment report indicating rising wages and a lower unemployment rate. While this report may temporarily pause further rate reductions, mortgage rates are expected to trend downward over the next year.
This slight buyer advantage in the current market requires that sellers make an extra effort to attract offers. With over 20,000 active listings in the MLS, buyers have plenty of options, meaning that sellers can no longer rely solely on price reductions or incentives. Homes need to make a positive first impression. Basic improvements, like replacing worn-out carpet, refreshing paint, or adding brighter lighting, can make a substantial difference. In today’s market, buyers are often unwilling or unable to take on renovations, so move-in-ready properties have a clear advantage.
For properties in the $275,000–$500,000 range, it’s also essential to budget for buyer incentives. Over 62% of homes in this range sell with $8,000–$10,000 in seller-paid closing cost assistance, which can often be directed towards temporary mortgage rate reductions. Sellers who have owned their homes for less than three years may face limitations due to flat appreciation, but those who bought at least three years ago may find they have the flexibility to offer these incentives.
Quick Stat:
62% of homes in the $275K–$500K range are selling with $8,000–$10,000 in seller-paid closing cost assistance.
Seasonal Timing for Sellers: The best time for sellers in Arizona is typically the first half of the year, when tourism peaks, buyer demand rises, and marketing times decrease. If mortgage rates continue to decline in 2025 as predicted, the spring market could outperform recent years, potentially providing sellers with the best conditions since 2022.
“Sellers should list before the holiday season to take advantage of higher buyer activity and avoid the seasonal slowdown.”
Takeaway for Realtors: Encourage sellers to make necessary updates to create a move-in-ready presentation and discuss the importance of competitive pricing and buyer incentives. The balanced market is here, and the days of simply listing a property and waiting for an offer are behind us. Sellers should list before the holiday season to take advantage of higher buyer activity and avoid the seasonal slowdown.
Navigating the Luxury Market in a Shifting Economy
The luxury market in Greater Phoenix has seen unique trends, particularly in high-end areas like Paradise Valley. Mortgage rates have less impact here, as 55% of sales over $2 million are cash purchases. However, luxury sales are vulnerable to broader economic uncertainty, especially if stock market performance falters or corporate profits decline.
Despite fears of an economic downturn, the luxury market remains resilient. Active listings under contract are high, and cancellation rates, which spiked mid-year, have since stabilized. Paradise Valley even shifted back into a seller’s market as supply tightened. Still, the upcoming election and potential recession may lead to volatility, particularly in Q4. For those aiming to sell luxury properties, optimism should return by early 2025, along with Arizona’s peak tourism season.
Quick Stat:
55% of sales over $2 million in Greater Phoenix are cash transactions, making this segment less sensitive to mortgage rate changes.
Takeaway for Realtors: Luxury sellers may be cautious in the fourth quarter, but they should prepare for renewed interest in early 2025. Encourage them to list early in the new year when market conditions improve, as Arizona’s tourism season brings in buyers and the economic outlook could stabilize.
Conclusion: Positioning Clients for Success in a Shifting Market
The Arizona real estate market is in an unusual but favorable position, with stabilized mortgage rates, increased inventory, and balanced conditions. For buyers, this is one of the best opportunities in recent years to secure a home with ample selection and relatively low rates. For sellers, this balanced market demands preparation, strategic pricing, and a focus on property condition to stand out.
As a realtor, you have the opportunity to guide your clients through these market changes with timely advice and expert insight. By understanding the current trends and preparing buyers and sellers accordingly, you can help them make informed decisions that capitalize on the evolving Arizona real estate landscape. Now is the time to take advantage of these market conditions—and ensure your clients are positioned for success.
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.