Home sales are heating up across the country, with NAR’s most recent numbers indicating that existing home sales are up 5.7 percent over 2015, buoyed by strong job growth nationwide and high consumer confidence levels. However, looking regionally, NAR chief economist Lawrence Yun indicates that the West is seeing a drop in pending sales due to lack of affordability in markets that have seen high appreciation over the last three years.
Phoenix Valley Outlook
Here in the Phoenix Valley, the outlook is a bit sunnier. Price increases have been more moderate that other areas of the West, making affordability less of an issue. Case-Schiller ranks Phoenix 13th in the nation in price growth, with a 6% price increase year-over-year compared to 2016.
That means that the Phoenix Valley market is likely to remain a hot one. The Cromford Report indicates that listings are up in the mid-market price ranges between $175,000 and $600,000, which will help to ease the sales bottleneck caused by too many buyers vying for too few listings.
However, sellers still rule the day at the lower end of the market, where already scarce listings are getting harder and harder to find. Below $175,000, listings are down between 28% – 36%, indicating that a highly competitive seller’s market is likely to remain in place.
In the luxury market above $1.5 million, listings are down 12 – 17%, however with fewer buyers looking in these price ranges, fewer listings will likely lead to a more balanced market.
So, what should we expect to see over the next month? Most indicators point to a continued seller’s market in the Phoenix Valley. Currently, absorption rates for the Phoenix Valley are sitting at around 3.17, indicating that we have about 3 months of supply. That’s a seller’s market – but not to the extremes seen in other parts of the West – so we should continue to see continued buyer competition and the moderate increases in price that come with that.
Mortgage rates are the force that is driving all of this. Right now, after some wiggling in late April awaiting Fed guidance, rates have settled back down at historic lows. How long these rates will last is anyone’s guess but it’s unlikely they’ll drop any further. If you have buyers looking to make a move any time in the next 12 months, it’s probably time for them to make their move before either rates or home prices go up.
One news items we’re watching closely this month is possible upcoming changes to the TRID rules later this year, so stay tuned.