More Foreclosures in Phoenix Arizona! | Phoenix Real Estate Market Update

Foreclosures, a word we haven't talked about in a while. Plus, I was wrong about the CMI. We're going to talk about that along with what to expect from the Fed meeting this week. So let's get into it. So first, foreclosures. If you're not familiar, in Arizona, we have something called a notice of trustee sale. So basically, if you are not making your payments, you get a notice of trustee sale, which gives you 90 days to sell the property or come current with your payments before you're actually in foreclosure. So it's like a pre-foreclosure. And the Cromford Report is saying that they've noticed that there is a little slight uptick in pre-foreclosures. Now, as you can see from this graph, this is just really, really small, and they don't have September on here yet, so it's very hard to see. But basically, we are seeing an uptick, but it is so small that it is pretty insignificant. Where we're at today is like the low hundreds of pre-foreclosures. And back in 2010, we had about 19,000 pre-foreclosures and short sale listings. And right now we don't even have 19,000 listings on the market. So yes, we are seeing maybe a slight uptick in pre-foreclosures, but compared to how many homes we have on the market, it is very insignificant. Now, the question is, will this continue? How will it impact the market? So it's certainly something worth watching. Now, speaking of active listings, for the past few weeks, I've been sharing where we're at with our active listing count because we started to see an upward trend. And that trend has continued over the last week. So today we're at about 17,000 listings on the market throughout the Phoenix Metro area. And as you can see over the last, let's see, one, two, three, four, five, six weeks, this has continued to climb. As I mentioned last week, this is kind of a timeframe where we don't see these active listings increasing. It's usually as we get into September, we may start to see listings increase kind of like we did last year around this time, but August typically remains fairly flat. So it's interesting that we are having this occur. Now, one theory that the Cromford report has is that perhaps with the decrease in mortgage rates that we've been seeing lately, it has prompted buyers to upgrade their home. And in that situation, they would have to actually sell their home first. So maybe these new listings are people that are ready to make a move, list their home, find a new property. Now that the rates are a little bit lower, but time will tell if this trend increases or flattens out, or if we just start to see more buyer demand and fewer listings on the market. Either way, the Cromford report is anticipating seeing a little bit of an increase because they do believe that buyer demand is finally picking up as we are seeing mortgage rates come down. The reason that they are saying that is because we saw just the slightest uptick in our listings under contract last week. As you can see, it was pretty flat, went down a little bit, but the last couple of weeks we did see more listings under contract on a weekly basis. And this is basically our demand because it's showing that there are buyers out there that are getting under contract with sellers. So the fact that we're seeing a couple weeks of this listings under contract starting to increase means that we might be beginning to see our demand return. Rates have been trending in a pretty good direction for buyers, and we're going to talk more about that in a little bit. But just to kind of recap where we're at, pre-foreclosures starting to tick up the slightest bit. We are seeing our active listing counts go up, and then we are also seeing under contract counts go up. So we'll see how this continues. Either way, it's more movement in the market. If you are interested in pre-foreclosure listings, check the description, we have a link below where you can check out some pre-foreclosure listings. Last week, the CPI report came out and prices rose 0.2% in August as annual inflation rate hits the lowest since early 2021. Basically, it put the 12-month inflation rate at 2.5%, down 0.4% point from the July level and the lowest since February of 2021. With this new news, traders are pricing in an 85% chance that the Fed will approve a quarter percentage point or 25 basis point cut at the Fed meeting, which is happening on Wednesday. But there is some potential for them to do a 50 basis point cut, and I will talk about that in a second. So all in all, the CPI came in as expected last week, which was important because all of this talk of what the Fed is going to do this week, that could have shifted if the CPI came in higher than expected. So mortgage rates have been trending downward for the last couple months, almost at this point. And last week, we ended the week around 6.2% for a 30-year fixed rate. As I've talked about before, the mortgage market is already pricing in what the Fed is going to do. This article is talking a little bit about that. Rates have already been priced in what the Fed is going to do. I do not see a major impact to the mortgage market or credit card financing or anything else by the Fed starting to drop rates this week. In fact, some people are saying that it could cause rates to be a little bit more volatile this week because there is that question of whether or not the Fed is going to cut by 25 basis points or 50 basis points. So even though this likely isn't going to affect mortgage rates in the sense that if the Fed cuts, mortgage rates go down, we are probably going to see some market reaction. And what I think is really interesting for us to realize is that it has been 14 months since the Fed last hiked the interest rate, which was from 5.25% to 5.5%. And it's been 54 months since the Fed actually cut rates. So we have lived a long time in an environment without rate cuts, and we are finally coming back to see that. As I said, we're kind of divided on what is going to happen at this Fed meeting. And depending on that, they're saying that it might move stocks mightily. If the announcement doesn't, two more events could. So they're saying that some things to watch out for that could actually move the markets is Jerome Powell's news conference, where he often surprises traders with a point not in the announcement. So something like that could happen. Also, the release of the dot plot chart, which is basically the guesses of the Fed officials on where the economy inflation and interest rates are headed over the rest of the year. So depending on what comes out from that after the Fed meeting, that also has the potential to move markets. So bottom line, make sure you're checking in with your lender if you are a buyer out there and about to get under contract, because there could be some volatility in mortgage rates this week, regardless of where mortgage rates are at and home prices are at and demand. We are seeing a decrease in a particular type of buyer that I want to share with you. And before we get there, if any of this is valuable for you, make sure to consider subscribing. I'm here every Tuesday talking about the Phoenix market and the economy. And you could also just share this video with someone who might find it valuable. So demand for second home mortgages falls to an eight year low, which is kind of surprising. I'm not surprised that second home mortgages are falling, but an eight year low isn't quite what I expected. They're saying that mortgage rate locks for second homes have dropped 13% since last summer, which is more than twice as much as rate locks for primary homes. Obviously, we've seen our demand go down for primary homes as well. Demand for second home mortgages is likely cooling in part because some buyers are paying cash to avoid the elevated mortgage rates. But in addition to that, obviously with some question marks in the economy, and they're also saying the fact that employers are asking workers to return to the office, it makes sense that there is some decrease in purchases of second homes. So this is reported by Redfin, which is looking nationally, but I also wanted to take a look of what's going on in the Phoenix market. And not surprisingly, we have seen about the same thing. So here, this little teal color is second home purchases. And this is really just based on the intended use when a home is purchased. So eight and a half percent, and this is in Q3. And last quarter, we saw 10.7%. Before that, it was 10.9%, 9.7%. A year ago, actually we were at 8.6%. So we actually saw a little increase in second home purchases and then back down. But if we look back to the years of 2021 and 2022, obviously that pandemic timeframe, we were seeing a pretty big jump in second home purchases here in the Phoenix area. Now I said I was wrong about the CMI and I was, I was pretty convinced that we were headed back over a hundred and it turns out we are not. We have gone lower to 97 with demand falling. Although I know you're going to say, wait, you just said demand is on the increase. This is not reflecting that just yet. The CMI is going to be seasonally adjusted. It's a little bit slower to react. Those listings under contract that we're seeing is reflective of a little bit more demand over the last two weeks. This is probably not going to show that just yet, but demand has calmed down. Supply has gone up slightly and put us a little bit lower. We're still in balance, but we are under 100. So for anyone new here, anything between 90 to 110 on the Cromford market index is considered a balanced market. Now, if we look at every city in particular, we're seeing a good mix of red and green arrows, but overall the change month over month is more negative than it was last week. It's actually negative 0.7%, whereas last week we were just at a 0.1% change. So we have nine out of the 17 cities that are in a seller's market. We have a few that are in a balanced market, which is Tempe, Peoria, and Cave Creek, and then Goodyear down to Maricopa are all considered a buyer's market. We saw the biggest increase over the last month in Paradise Valley moved in favor of a seller's market, and the biggest decrease of Avondale moving in favor of buyers over the last month. Now, if we look at the contract ratio map, overall seeing most of the Valley is in a balanced market with a few zip codes that are a little bit warmer. I'm going to keep an eye on what's going on with our active listings and those pre-foreclosure listings. Again, if you want a list of pre- And to all the homeowners who are thinking, what is my home worth now that the market has kind of been going back and forth? I've got a link to an instant home value below. So make sure to click on that to get all the information. I will be back next Tuesday with another market update.