By Sean Colón
Image via Cromford Report July 2024
The Arizona real estate landscape is undergoing significant shifts in the second half of 2024, making it essential for realtors to stay informed and guide their clients effectively. Whether you're working with buyers or sellers, understanding the current market dynamics and mortgage trends can make all the difference in your success.
For Buyers: A Brighter Outlook Ahead
The latter half of 2024 presents a promising environment for buyers, especially when compared to the turbulent first half. Last year’s spike in mortgage rates from 7% to 8% between July and October caused a significant disruption in the market, pushing many potential buyers to the sidelines due to increased monthly payments. However, 2024 is expected to be different, with analysts predicting a more stable and potentially favorable mortgage rate environment.
The Federal Reserve's actions are critical here, with all eyes on when they might reduce the Federal Funds Rate. The good news is that inflation, a key factor influencing these decisions, has shown signs of easing. June's inflation report surprised many, dropping to 3.0%, which had an immediate positive effect on mortgage rates, bringing them down to 6.82%. This decrease in rates translates to real savings—up to $187 per month on a $400,000 loan compared to earlier in the year. As rates continue to improve, affordability increases without the need for a corresponding drop in home prices.
“...trends signal a shift towards a more balanced market”
For buyers, the market is becoming more favorable. In June, half of the homes under contract had been on the market for over a month, a significant change from the 21-day median seen last year. Price reductions are up 88% year-over-year, and seller-paid incentives have reached their highest levels this year, with 51% of sales involving concessions. The median concession in June was $9,900, up from $9,400 in May.
These trends signal a shift towards a more balanced market, which is especially beneficial for first-time homebuyers or those with less-than-perfect credit. Buyers looking for FHA or VA loans, or those using down payment assistance, will find more opportunities now than they did a few years ago when cash buyers dominated the market.
For Sellers: Adapting to a Balanced Market
As the Greater Phoenix real estate market moves into a balanced state, sellers need to adjust their strategies accordingly. Over the past two months, the market has favored buyers more, with cities like Peoria and Paradise Valley shifting from a seller’s market to a balanced one. Meanwhile, Surprise, Goodyear, and Cave Creek have transitioned into buyer’s markets. Out of the largest 17 cities in the Valley, 14 have shown a weakening in market measures, further favoring buyers.
“For sellers, this means preparing their homes meticulously for sale...”
Currently, nine cities in Greater Phoenix are categorized as buyer’s markets, particularly in the West Valley and Pinal County, where new construction is booming. Single-family home permits have increased by 56% year-to-date compared to last year, reflecting strong builder confidence in these areas. This influx of new builds, which now make up 27% of all single-family home sales in the first half of 2024, poses a significant challenge for resale sellers.
Despite the market shifts, home prices in Arizona have remained relatively stable. The median sales price has seen a modest increase of 1.9% from last year, while the average price per square foot is up 2.6% annually. These figures suggest that price appreciation will likely stabilize around the rate of inflation, reminiscent of the 2014-2015 market conditions in Greater Phoenix.
For sellers, this means preparing their homes meticulously for sale, setting realistic price expectations, and being open to negotiating buyer concessions. In a balanced market like this, the expertise of a professional real estate agent becomes even more critical.
Key Takeaways for Realtors
As the Arizona real estate market continues to evolve, realtors must stay ahead of the curve to provide the best possible service to their clients. Understanding these trends and being able to explain them clearly will not only help your clients make informed decisions but also strengthen your position as a trusted advisor in the real estate industry.
With a market that’s becoming more balanced, now is the time to refine your approach, whether you're assisting buyers in securing the best mortgage rates or helping sellers navigate a more competitive environment. The key is to stay informed, adapt to changes, and continue providing the expert guidance that your clients rely on.
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.