By Sean Colón
Image via Cromford Report
Inflation is a buzzword circulating in financial circles, prompting discussions on strategies to hedge against it. For many young adults, transitioning from renting to homeownership serves as a primary step in this endeavor. This shift is driven by the significant weight shelter costs carry in the Consumer Price Index (CPI), constituting 36% of its composition. While food and energy are often spotlighted, shelter expenses, especially rent, exert substantial influence. Interestingly, the 12% CPI increase since June 2022 dwindles to 2.1% when shelter costs are excluded. This data sheds light on the two-year inflation rate for homeowners versus renters, a pivotal consideration given that about 64% of Maricopa County households own their primary residences.
As we enter the peak Spring buying season in Greater Phoenix, sellers may find themselves navigating a slightly altered landscape. The market dynamics are tilting towards balance, driven by an accumulation of supply amidst tepid demand. Although listings under contract have seen a modest 6% decline compared to last year, active listings have surged by 26%. This surplus has extended the pre-contract timeline by an additional week for sellers, a departure from the typical three-week period. Notably, resale homes in need of remodeling are facing prolonged market stays, partly due to the burgeoning activity in new home construction. Single-family permit issuance has skyrocketed by 125% year over year for January and February, with new home sales surpassing the 2021 record by 16%.
The competition isn't confined to the sub-$500K bracket; luxury new home sales above $3M have surged by 79% this year, with a 28% increase in the $1M-$3M range. However, traditional resale listings requiring updates are encountering challenges. Financing constraints and difficulty visualizing potential renovations are deterring buyers. Moreover, investor purchases face hurdles, with wholesale offers becoming less attractive due to escalating holding costs and diminishing returns. Flip sales have plummeted by 74% from two years ago, approaching levels last seen in 2015.
“In such a dynamic market, professional representation and strategic guidance are invaluable”
In such a dynamic market, professional representation and strategic guidance are invaluable for both sellers and buyers. Whether obtaining renovation quotes, creating visual renderings, or advising on crucial updates, expert guidance can make a difference. Despite prevailing challenges, sellers are closing deals at 97.8% of their last list price on average this month. Seller-paid closing-cost assistance has dipped by 2% to 44% of sales, while the median sales price has climbed to $444,900, marking a 6% increase from last year.
This Arizona real estate market presents both opportunities and challenges for buyers and sellers alike. While inflationary pressures drive the importance of homeownership as a hedge, sellers must navigate shifting market dynamics amidst increased competition and evolving buyer preferences. However, with the right guidance and expertise, both buyers and sellers can capitalize on the current market conditions. Professional representation, strategic advice, and a keen understanding of local trends are crucial for success in this dynamic landscape. As we move forward, staying informed and adaptable will be key to thriving in Arizona's ever-evolving real estate market.
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