The Housing Market Just Changed | Phoenix Real Estate Market Update

Positive mortgage rate trends from the last few weeks are gone. Like that. Ouch, is all I can say. But there are some positive signs for the real estate market, and we're going to take a look at that today. So let's get into it. First, let's look at this very painful-looking graph for our mortgage rates. Do you see this huge spike that we had over last week's time? I mean, this is like this beautiful downward trend for quite a while, and then we slowly started to come up. And then last week, boom, all the way up back to the levels of mid-August. So I'm sorry, buyers. But what happened here? So the jobs report actually came out on Friday, and it came out much higher than expected. And because of that, the bond market reacted, and that affected mortgage rates. So from Mortgage News Daily, they're saying the much-anticipated jobs report ended up coming out much stronger than expected, and it caused carnage relative in the mortgage market. And that's definitely what we're seeing. They're saying a caveat is that these rates are still much lower than they were several months ago, but the average lender is now back in line with mid-August levels. So it was pretty exciting times to see everything moving over the last couple months, but we've kind of lost all of that just in one day because the jobs report came out stronger than expected. So Logan Motoshami from Housing Wire is talking a little bit about this. He's been saying that we need to be watching the labor market over inflation as it relates to the economy and what the Fed is going to do. And so he talks about how this recent jobs report has come out stronger. However, it is not breaking the labor market. He says, will we get revisions to this report? Most likely. Is the labor market getting softer? Yes, but it's not breaking, at least not yet. So he talks a lot about how the lower mortgage rates really affects new construction because that gives builders confidence to continue to build. However, when rates are higher, they're not sure how quickly they'll be able to sell homes, and so they're not building as many. So construction labor grew again. Lower mortgage rates since mid-June have made life easier for home builders. Their confidence has been increasing so much that single family permits are rising again, which is critical to keep residential labor employed. So he's really looking at the bigger picture of what's going on in the labor market, how that relates to new construction, and then, of course, how that will also affect the real estate market as a whole. He says, with this latest jobs report, the headline number beat estimates, and the other positive data line was that we saw positive revisions of $72,000, which is noticeable. Wage growth picked up in this report, and the unemployment rate for those with high school education fell from 7.1% to 6.8%. With the positive revisions in this report and the headline number, the labor market is now slightly beating Logan's forecast for job growth in 2024. So overall, this came out a little bit more, a little bit stronger than expected, which is really what happened to mortgage rates because the bond market reacted to that. So we'll see how this week progresses. I don't expect to see big changes in mortgage rates this week. I would imagine they'll probably stay close to where they're at now, but we'll see what happens. Now on to the good news. This indicator in the market is showing that the market has kind of turned a little bit, and it's not only being seen nationally, but it is here in Phoenix as well. So let's dive into that. September was a turning point for demand. Pending home sales flat after nine months of declines, and tours are hitting the highest number since April. So Redfin's reporting that they're seeing pending sales increased year over year in 27 of the 50 most populous U.S. metros, the most since January. They say they rose the most in Phoenix with a 13% increase, followed by San Jose and Portland. Home buying demand is starting to improve in those places after dropping to a low point last year, but pending sales are still below pre-pandemic levels. They go on to talk about how home buyers are starting to return to the market because housing costs are coming down. We'll see if that continues now that we saw this big increase in mortgage rates. And declining rates are also encouraging homeowners to sell. And that's something that the Cromford report just mentioned, that although rates coming down has been good for buyer demand, we're in fact seeing more sellers than we are buyers. So that means that there are a lot of buyers that are actually going to be contingent on their home sale. And most of these sellers are coming out of the woodwork because they want to move up or downsize or whatever it is. And finally, rates make a little bit more sense for them to do so. So the Cromford report is reporting on this change in listings under contract, or buyer demand, basically seeing that activity out there. And they're saying that there's been a sharp increase over the last four weeks, and you can see that right here, actually up about 13, almost 14% year over year in terms of the listings under contract number for the Phoenix metro area. So with this, the Cromford report is saying this is good news seeing this activity, but it is kind of dampened by the fact that supply is actually up 52% year over year. So for sellers, it's not that great of news because you have a lot more competition and there's not as much upward pressure on prices. So let's talk about where we're at with active listings because we've been tracking this every week for the last couple months, and it's been increasing for sure. Before I get there, if any of this information is helpful for you, I'd love if you'd subscribe and join us here every Tuesday or share this with someone who would find it helpful. So for our active listings, we are still on this upward movement. We're at 17,887 as of today. And you can see over the last eight weeks, we have increased our active listings on the market consistently. So as nice as it is to see more listings under contract and the demand coming back a little bit, it's being outpaced by the amount of supply on the market. So that always makes us consider if there is a larger number of supply and that is growing, then how easily are these homes actually selling? Well, we haven't looked at this in a while, but this is the sale price to list price ratio on a monthly basis. And we're sitting at about almost 98%, meaning that sellers are getting about 98% of their most recent list price. So they may have started higher than that. This is really just measuring the last list price that was listed before they went under contract. So if they did a number of price drops before that point, it's not accounting for that. So we're at about 98% sales price to list price ratio. So sellers are still getting a good amount of their list price. And then if we look at our median sales price, which we haven't looked at in a while either, we're sitting at 455,000. Now, this has increased quite a bit over the year. When we started the year, we were at, let's see, 435,000. We're up about 20,000 this year. And you can see year over year when we were in October of 2023, we were at 439,990. So the monthly median sales price has increased year over year and has seen an increase throughout this year, although we've obviously had a little bit of a peak, a valley, and back up. Now, the median sales price obviously varies based on location in the valley. So if you're a homeowner and you're curious what the median sales price is in your city, check the description below. I have a link where you can request that information. Where we're not seeing a lot of great activity is the number of sales per month. This is looking pretty dismal. So obviously had a peak here in May, and it has gone down since then. I do think with the number of listings under contract that we're seeing taking place, we'll probably have a spike in this number in the October, November, maybe even December, especially if that continues. But for now, we are trending at pretty low sales for the year, a little bit less than last year, which was the lowest number of sales since 1995. I talked about this a little bit further in a previous video. And 2022, 2021, you got to go back pretty far to start to see the number of sales being as low as we've seen this year. Now let's talk about the Cromford Market Index and where we stand this week. This has gone down yet again, and our supply obviously has continued to go up. So supply is at 78.9, demand at 74.8, and our overall index, 94.8. So based on the CMI, 94.8 is considered a balanced market, although we are trending towards a buyer's market. Once we get below 90, according to the CMI, we will be in a buyer's market. Now there are a number of cities here that are trending downwards, meaning that they're going towards a buyer's market. So we have everything from Surprise to Buckeye in a buyer's market. And then as far as a seller's market, it's really everything from Phoenix up to Fountain Hills. There are only six cities that have seen an increase in their CMI over the last month. And last week when we were looking at this, there were a total of seven cities. Also the average change month over month was about negative 2.7% this week. And last week it was negative 1.9%. So we continue to see this deceleration in the CMI over all of these cities as a whole. So this is where the Cromford Report is saying it's a great sign to see that demand is rising overall with rates coming down. However, supply is actually rising faster. So this decrease in mortgage rates has actually brought out more sellers than it has buyers. And now that we lost all of those gains in mortgage rates, I'm not entirely sure how things are going to continue if things slow down altogether, or if maybe we'll stop seeing those sellers that are trying to list their homes in order to buy something new, and maybe buyers will continue to come out slowly. Looking at the contract ratio heat map, we still see a lot of green here, a few zip codes that are warmer, and one that is on that hotter side of things, which is Glendale 85310. We see a few areas of like Scottsdale and Phoenix that are cooling off with a CMI of 15 here, and anywhere between 10 to 20 is considered colder. Some areas of Central Phoenix that is being considered cold because it's about 30, between 20 and 30 on the CMI. And then a lot of areas of the Valley that are actually in that balanced market range. Now, if all of this fluctuation in mortgage rates is stressing you out as a buyer, keep in mind you can look for homes with assumable loans. I've had some clients have success with that in the past, so check the description below where you can look at homes that are available for sale with assumable loans. And homeowners, if you just wanna get an instant home value or know that median price in your city, check the description below for a link to do that. I'll be back next week with another market update.