Phoenix Housing Market Slipping Fast | Is a 2025 Price Drop Inevitable?

What's up everybody? Is the Phoenix housing market slipping fast or is a price drop inevitable in 2025? What's interesting is the price drop aspect of the marketplace right now actually did occur last week when we hopped on here, but it actually turned around a little bit, which is very weird because supply is increasing, demand is continuing to decrease. Guys, we haven't seen a month of May where demand has been this low in quite some time. So it's interesting to see what the summer will bring because typically the summer for Arizona doesn't have a lot of demand. So now we are heading into an area where we know we typically get slow, but we're already way slower than what we typically are. Now, in the comments, please comment below if you're watching the replay. By the way, please let me know where you're watching from if you're watching live. We had some good comments last time, going back and forth, some good commentary. And I guarantee if you're thinking it, someone else probably is too. So go ahead and put in there what your thoughts are and I will address it. But for now, we are looking at a market that is slowing down heading into the summer, and we're already not having much demand. So it is an interesting time in that standpoint. What's up, JM Starks, North Phoenix. Thank you for saying that. I appreciate it. We do a lot of business in North Phoenix, so love that area, especially with what's coming in the future with all of the development and the tech quarter. I am calling it the tech quarter. Maybe someone else has said it, but I'm calling it right now because it's obvious. It should be maybe the semiconductor quarter of the 303 and I-17 up there. So anyways, thanks for tuning in today. We're going to jump in and share my screen right now. And guys, I like to start typically at this index because that sets the table for where we're going to go with the conversation in the marketplace because we are driven by data, not opinions on this show. So here we go, market index says 74.9. Guys, it is going in which direction? Yeah, not the direction we want it to go. It's going down. Well, some of us actually do want it to go down because guys, if I look at the comment section, a lot of people who are commenting on this show and other social media videos I do, they want it to burn. They want to burn the house down here in Phoenix and like start from scratch where a house costs like, I don't know, $64,000, which by the way, that did happen not too long ago. This is not the great depression era, guys, in the great recession in 2009, 10, 11. Personally, guys, I experienced it. I was selling real estate and I happened to buy a couple of houses, guys, in two houses I purchased were below $50,000 in the like North Phoenix, Central Phoenix area. So now they're worth a lot more, but it's crazy how cheap they were. And looking back on it, we all should have been buying like hundreds if we could have done it, right? Because you knew it wasn't going to stay that cheap forever, but people want it to burn. Will it? Let's dive back in and check it out. Now let's go to the Crawford report because this is interesting. Now, I like doing and showing the different suburbs, okay? This is not good, right? There's a little bit of green on Fountain Hills, but really it's zero, it's flat. So why it's green? I guess they're feeling generous to flip a coin and give it to the green side as opposed to the red side here today. But the reality is right now we have three suburbs, that's it, three guys that are in what would be a seller's market. And again, a seller's market in this situation is a weak seller's market because the trend is going in the opposite direction and they're really, really close to the boundary of 110 on the CMI. 90 to 110 is balanced, as you know. And from that standpoint, we have some balance, but we have a lot of buyer's market. So guys, if it's a buyer's market, what does that tell you? It tells you that this is your time if you want to jump in. I'm not saying rush to make a bad decision or a rush decision even, but the reality is, is you do have the leverage when you're buying a house right now in most places across Maricopa County. So buyer beware, okay? But again, who wants to catch a falling knife? I don't know. But I can tell you one thing that, again, I'll say it again because I say it all the time, guys, I've never had, I've been selling real estate 20 years, 20 years, okay? I've never had anyone tell me, man, I wish I wouldn't have bought that house 10 years ago. I have had someone tell me that two years ago, a year and a half ago, but 10 years, no, because that exceeds a market cycle. Now, if your exit strategy may be within 10 years, then maybe you reconsider buying. Maybe if it's within five years, maybe you reconsider. But it's interesting to see the mixed approaches and emotions that coming from what people are prognosticating for 2026, because that was supposed to be a very good market everyone was predicting. Now, people are saying that 2026 may not be so hot, or at least not as good as they thought they would. But then you have the pressure of rates coming down, guys. This is all dependent on rates coming down. We all know that, right? I can sit here and say, 2026 is going to be not so good. You can agree or not agree. I can say it's going to be fantastic. You can agree or not agree. But the reality is, is the speed in which this happens will, in my opinion, not fact, opinion this time, be completely determined on interest rates. If rates get down in the high fives, and the economy is just average, like it is kind of right now, right? It's just kind of average, right? You know, the unemployment rate is going up a little bit, but it's still low, generally speaking, but rates are high. And for the most part, foreclosures are not doing much of all of anything, okay? We're going to hit that in just a little bit here. Then what will happen? I think that the housing market will take off. I really do. Even if the economy is just fairly flat and not up or down necessarily. Now, if it's a bloodbath and we're talking, everyone's getting laid off, that's a different story. But I don't see that happening. That black swan event is not happening. And the main reason why, guys, why is that? Because people have equity. In 2008, people, and seven, people did not have equity. Very few had equity, okay, in that timeframe. So I think that is a big, big reason. What's up, Steve? Nice panoramic. Oh, my man, you know, your watches. I love it. I love this watch, by the way, guys, you have a chance this one time, my wife got it for my anniversary. Okay. And I said, you know, I, but I said, okay, I'll accept it. Cause I love this. I want to get like 10 more, but I'm, I'm, I'm restraining myself. Cause that's not probably the smartest thing to do, but that's debatable, right? What's up, Michael? Keep up the great work, Kelly. In your opinion, do you foresee the 10 year treasury and the mortgage backed security market coming into a healthier balance by the end of 2025? I do. I really do. Um, now it depends what happens at the end of the day, how long this tariff war continues to, you know, move on because guys, the inflation rate, just inflation reports came out. I got an article right here that I want to share with you guys that mortgage rates hold fairly steady after inflation data report comes out. And what this talks about is the CPI consumer price index. Okay. Came out and it was actually lower. Inflation went down, which is great. Okay. But what'd that do for the rate? Not a whole lot. You can see right here that we're at 6.92 still. So rates are still around that 7% hovering around there. And so it didn't do a whole lot. Now, typically in the past, just about two years ago, if you had a report where inflation was coming down, like this one was, you would see a good jump in the rates potentially. And you've just not seen that right now because of the uncertainty. Now, right now the AP has reported that the United States and China has agreed to a temporary halt on the enormous tariffs they had against each other. US had a 145%, I think 145% tariff on China goods, Chinese goods, and China then slapped a 125%. It was in the ballpark tariff on us. So they had now conceded to halt that for 30 days, 90 days, excuse me, my fault on that, 90 days. And it's now a 30% tariff on Chinese goods and China agreed to lower their rate from 125 down to 10%. Okay. What will that do in the near term? Right now, everyone's saying not a lot because we still don't know what's going to happen in 90 days, right? Now that gives the framework of 90 days to hopefully get this all figured out where they will have a more permanent solution in 90 days. That's the point of this. Meanwhile, trade can go back and forth, back and forth, right? But right now that is not happening. So unfortunately, we don't have a whole lot going on there from that standpoint, keeping rates around where they are 7%. But I know the White House has put pressure on the Fed to bring rates down. And the main reason they're signing is because inflation is right at their target or close to it of 2% on the inflation right now. It's just above 2% right now in the low twos, but it's close. And so, because it's close, rates haven't adjusted. If I share my screen again, you can see right here that guys' rates have not adjusted much at all. Look at the data over the past. See a timeline here. Forget my cursor out of the way. Since 24, 23, even up here, right? This is May of 2023, two years ago, rates were at 6.9%, 30-year fixed. Now, where are they at today? 6.92%. So it hasn't moved hardly at all in two years. I mean, it has gone up and down, but we're still in the same spot where we were two years ago. And so, the White House is arguing that in this situation, in May of 23, inflation was what? 7%? 6%? And now we're at 2%. So why haven't rates moved? And that's a good question for Jerome Powell, but yet they're saying the economy is not overall stable, and that's why they're not taking the chance to move them right now. But if they did, guys, my opinion still holds. If they did, and the economy stays where it's at right now, you're talking, at least in Phoenix, Arizona, you're talking a floodgate to an extent. Not like the dam's breaking completely, but there's going to be some serious flood overflow of people jumping into the housing market and buying properties. Why? Because they have the leverage right now, and until that pendulum swings, they will jump in when you have a five in front of that interest rate, 5.9, 5.8, 5.7, it will happen. Mark my words, because we already knew, guys, listen, I won't go into the diatribe on this, but we know that's going to happen, and here's the reason why. Because as rates were increasing in 2022, let's go back to our screen here, I'll show you, okay, as they are increasing right through here, there was a time, okay, if I get my cursor here, there was a time right about here, this was July of 2022. See that dip? It's kind of small, but you see that dip, it was going to dip right back down and held in the summer of 2022. Now, when that happened, there was about a three-week time period where it held around five and a half, five and three quarters, and in Phoenix, you saw demand at that time being very stagnant, all of a sudden, increase, right? For three weeks, we had this like, boom, contracts were being written and buyers were jumping off the fence. And so now I know three years later, the economy is not exactly the same, things aren't exactly the same, but I do believe based upon all the research that MBS Highway has done, Barry Habib and his crew, for every four, excuse me, every 1% that the 30-year fix decreases, there are about 4 million homebuyers ready to jump off the fence pre-approved. Now, if they do or not, different story, but they believe they will because they're already pre-approved, ready to roll, all the indicators are saying that such. Now, that's nationwide, not just Phoenix, but a good amount of those obviously are in the big markets across America. So I just wanted to get that off my chest because that is real data and some of that is opinion, obviously, and I could be wrong, but I do think that's more likely to be right than wrong in this scenario. Now, let me jump back over here and I'm going to show you a couple more things with the Crawford report because this is interesting, guys, this really is. Not this, here we go. Let's read what the May 7th report says on Crawford. Here you go, this is interesting because it's not good overall, especially for sellers, but it could be good for buyers. That's how you look at it. The month of May has started off with two new trends. Here they are. For sellers, the news is mixed. The first trend is that supply did not grow over the last week. In fact, it's slightly down with fewer listings than we have seen for some time. That's kind of good. We counted 9,800 new listings added over the past four weeks. Since January, we have been seeing well over 10,000 per four-week period. This will come as relief for sellers who have been faced with increasing competition for a long time and are in need of a break, but just wait because there's a second trend, and that is not so welcome. Demand has started to decline. Guys, we don't see demand decline in May. It has been a pretty low ebb for the last couple of years now, but for the first four months of 2025, it showed occasional sparks of life. We had that coming. Now, we are seeing the week 18 count of listings under contract fall to a level that is lower than any year since the year 2000, with the exception of the simply awful years of 2007 and 2008. Coupled with a persistently weak annual sales rate, this does not look too promising for sellers over the next two months. Now, we should see that the conference supply index flattens out because obviously supply will not keep going up because it's going to be the summertime. However, the Crawford Demand Index is already starting to decline in the Crawford Market Index overall, which combines both and started a trend of a more rapid decline than you normally see. Now, here's go. Let me just sum it up right here. We are currently measuring a monthly average price per square foot for all areas and types of $295 a square foot, which is 2.4% lower than this year and 3.7% lower than one year ago. That's negative. That's not good. Even if we still stay at today's prices, we'd be down for the year by December with the CMI at 76, staying would still be a pleasant surprise. If we could keep the CMI right here at 76, right now it's at 74.9, that would actually be a pleasant surprise. That's not good, but we would be happy for that to by the end of this year, according to their prognosis for the data they're seeing right now. Hopefully that makes sense. What does this all mean? What does this all mean for you? This means right now that the market is weak. The market is weak and it's not getting better anytime real soon over the next several months. If you want to time the market to buy, you could probably wait. We hit this about two weeks ago on our YouTube live. You can maybe time the market in July, August, and you might be dead on, but you might be off a little bit because maybe it goes down a little more. I don't know, but one thing we do know is that you never know you're in the bottom of the market or the top of that matter until you're out. The key with this whole thing, the catalyst will be mortgage interest rates. That being said, I'm going to share with you a couple more things because what are foreclosures doing? That's an interesting one, I think. Let's go over here now. Let's go over a couple of things. Foreclosures per month. Here you go. No, this is not today. This is 2009. Look at 2009, guys, compared to where we are today. That red dot isn't barely moving. We're still below 1000 foreclosures per month in Maricopa County. Not even close, guys. That's just a notice. Look at the trustee sales. We're even lower. We're about 48, 56. Guys, you know that Arizona is a deed of trust state. We are not a judicial foreclosure state. It's the same thing at the end of the day in layman's terms, but the reality is 56, guys, per month. That's nothing. Look where we were. The notices were over 10,000 in one month in 2009. Granted, the trend isn't really moving that high up. I don't think you have a lot to worry about when it comes to foreclosures per month, but let's look at one more here. This is foreclosures, another graph, pending. It has a little uptick. Pending, you're at 1411. Again, last year, you were at 1100. Excuse me, that's 2023. My fault. 2024, you're even lower. Again, perspective, here's 09. Just give you guys a perspective. 09 is so large, it makes the other little years just all come together. Again, I'm not saying that everything's rosy because it's not. We just went over demand. Demand is really weak right now, but foreclosures are not happening. Why? Because people have equity. That's the big deal. All right. Builder Bob, what's going on? Good evening from Manchester, UK. Man, it's got to be somewhat late there, Bob. I appreciate you staying up to watch this. Meanwhile, I hope you don't mind staying up to watch your lives. Thank you. I appreciate it, and I am blushing. Thanks, Builder Bob from the UK. I really appreciate that. Now, if I jump back over here to my chart, I'm going to show you sales. Now, this is an interesting one. Now, look at May 2025 because we're talking demand. Where are we going here? Demand. This is 571. That's who we are. I'm sorry, 567 for the month of May of 2025. Now, if you look at 2024 in May, now granted, we're not through the whole month right now, but we are, what, the 13th or so of May, so about halfway through, we'll call it. Well, look, we're not halfway towards 1805 where we were last May of last year. We're not even close, guys. This puts us on track to be around 1,100 home sales for the entire month. That's not good. Demand is weak. If I go to this one here, this is even more interesting because, well, let me jump around here and come back to that one because before I go to the contract ratio, let me show you something, guys. Look at the median sales price. Look at this, 449 last week. Last month, excuse me, May, 459. It went up. What in the world? Median home sales price went up, but let me show you something. Look at the sample size. Can you see that on my screen? Sample size says that there are 6,942 properties, transactions as a sample size, okay? Ranging from $2,500, that's like a mobile home somewhere, up to 15 million that sold, okay? Now, look at this month of May so far. Sample size is only 1,899. Seriously? Look at that. The amount of transactions are so much lower so far in the month of May, and the range is even less. The high is 7.5 million, okay, for a property that sold. Why did this go up? Because the sample size is less, so less people are buying. Demand is weak, but median price point went up. Huh, interesting. Well, how about the average price point? I'm glad you asked. Look at this one, guys, even more profound. Last month, 524, 444 was the average price across Maricopa County. This month so far, $530,000. It went from 524 to 530. It went up $6,000. What is happening, right? So, what you see, guys, right now, okay? Oh, Adam, what's going on? Oh, thanks for commenting. Just snagged up a pretty nice bill in Glendale. Good. Let us know your wins, guys. I love when people win. I love when people win. If you feel that's a good deal, I'm glad you said that, Adam, because you know what? Could that property you bought in Glendale go down a little further? It could. It could in value, but what if it doesn't? What if you hold onto that property for just one year, and in one year, whatever goes down, it just goes right back up? Or what if you hold on it for five years, and in five years, it's up a total of 32% or 70%? Did I tell you the story, guys? Real quick, real quick story. I bought a property in Scottsdale. First house I bought in Scottsdale, and it's for me and my wife. We were engaged at the time, and bought a property, a 3-2, about 1,700 square feet, single-story home in a great area, and we still own that house today. But I bought it, and this was in 2008, guys, and I was catching a falling knife. I was catching a falling knife. I wasn't as smart as I am today, right? Wisdom comes with age, to an extent, because this was, shoot, this was 2008, right? This is 17 years ago or so. So I bought the house. One year later, it was, oh wait, one year later, market went down lower. Caught the falling knife. The house I bought was $327,000, and it went down to, I remember checking it at the lowest point, about $274,000. And I'm sitting there going, first house I bought, what did I just do? I screwed up my financial future for me and my wife and my family. I'm an idiot, blah, blah, blah. But I believe in real estate. I'd already owned a rental house or two. I just never owned a house. I lived in Arizona at the time, and I saw what was happening there. So I knew that if I held on long enough, probably good things would happen. Well, fast forward to today, and I just checked the value on this property about a week ago, and that property now is worth $698,000. Okay? This is 2008. I bought it for $327,000. So the moral of the story is, again, I've yet to hear someone say, I wish I would never have bought that house 10 years ago. I know you can make mistakes in the short term, but the long term, it's tough, especially in a market like Phoenix, where you have a lot of people moving down here. Population is increasing at a pretty good rate. And on top of it, you have all the building and the development occurring as well, which are bringing more high paying jobs than we've ever had in our local economy here in Phoenix, like literally ever. Okay? So that's pretty cool. Adam, what's going on? Four bedroom, two bath. Okay, here we go. I love the story. Built in 1999, original owner, new HVAC, new water heater, new floors, listed at $390,000, got it for $370,000. Boom. That's what I'm talking about. Now, I know nothing about the house except for what you told me, Adam, but I'm telling you right now, hold on to that property, brother. Hold on to that property as long as you can. And that property one day will be worth a lot more than $370,000. Could be 10 years. Could be 17 years. I never thought I'd have that property that I mentioned to you in Scottsdale, I just told a story about 17 years later. I bought it. I was just trying to figure out life. And 17 years later, I have it still as a rental. And it's now like a piggy bank. So instead of getting a 529 from one of my kids, let's say, I do have that, but let's say I didn't do that, that could be the gift. Or whatever you want it to be, right? That's the cool thing. You have options. So really appreciate that story, Adam, and sharing that with the group here live because that's a cool story. And I hope I have a chance to talk to you five years from now, heck, three years from now, and see where we stand with that property. And I hope that, and I think in three years from now, just three years from now, it'll be a very good deal. Now, share my screen. I want to show you a couple more things, guys. Contract ratio. Okay. This is an interesting map. It's interesting if you get in the weeds on it, I'm not going to, but it color codes some things. And you can see right here that the contract ratio right now is 33.4 for Maricopa County. Now, it's been lower in December, which it usually is because the holidays, it was at 29.3. Anytime it dips below 30, not so great. And right now, we're at 33.4. So it's not the worst thing in the world. And with supply starting to shrink, it's helping because demand is shrinking. So you have that. And of course, I love the map, showing the map by zip code. And you can see where the blue is. It is really cold. Oops, got to refresh here. The blue is really cold. And the green is where it's a little bit warmer. And then of course, where it's brown or beige, it's even hotter. So there you go, right? You can see where it is. You have some channels zips down here. Okay. This is 85224 in Chandler. You have 85284 in Tempe, South Tempe, which are doing really well. They're hot areas. You have 85259, which is doing really well right now in Scottsdale. Okay. And then you have 85254, the magic zip code. Guys, you know why they call it the magic zip code? They call that zip code right there in 85254, the magic zip code, because it is the Scottsdale address. It's the trifecta, Scottsdale address. You are the Paradise Valley Unified School District, and you are Phoenix taxes and city services. So that's interesting, right? Phoenix taxes. So that being said, I'm going to show you a couple more things, guys, and we're out of here. Time flew by today, but I'm so glad you guys joined me. I really do. All right. National Observer, real estate, housing affordability challenges aren't limited to home purchases. Well, what else could they be, Kelly? Oh, Adam, talk to me. Here we go, Goose. Talk to me, Goose. That's the plan, going to be a rental eventually. Yes, sir. And that's how you will end up building long-term wealth. Key word, long-term, long. Did I mention long? Long-term. Okay. All right. We're on the same page. Cool. Because the short-term reactions and people buying, you know, when they're scared, like, you know, they do in the stock market, they try to stock real quick because it goes down a little bit. Try to hold that sucker. I'm not saying I'm giving you financial advice because I'm definitely not doing that or trading advice by any stretch of imagination, but long-term is the game. Okay. Now, the National Observer, what is that thing that is besides the purchase prices of home that are adding up for being kind of unaffordable for most homeowners? Okay, here we go. Property taxes. Spoiler alert. There it is, guys. But what did they rise by? An average of 10.4% between 2021 and 23 across America. 10.4% more property taxes because typically it goes with higher property values. So homeowners across America are paying a median property tax of $2,969 annually or about $247 a month. Okay. That's a lot more adding to your payment than you probably were paying just two or three years ago. Where are the most expensive places across America? Tampa, Florida. Saw a 23.3% increase in that time period. Indianapolis, that's kind of odd, right? 19%. And Dallas, Texas, 19% as well. The smallest increases were Pittsburgh at 4.4%, Philadelphia at 8.2%, and Milwaukee at 8.3%. Now, obviously you have Texas and Florida that have no state income tax, but they get you on the property taxes to an extent. Now, Arizona. Let's talk about Arizona on the other hand, right? Phoenix, Arizona, and Arizona in general has low property taxes. In fact, we are the 13th ranked state in the union for property taxes or the lowest property taxes for real estate. That's amazing. Okay. That helps keep that low, helps keep our money in your pocket. And with a state local income tax, that is flat at 2.5%. We are the lowest state in the union as well for state local income taxes, if or for states to actually charge a state income tax. Because obviously there are some that have zero. We can't beat that. We're at 2.5% flat no matter how much you earn. Okay. That's pretty cool. Now, if I go back, okay, a couple more things I want to share with you guys here. We are not all positive news on, we're going to give you two straight guys in here, two Chandler companies to lay off workers up to 200 jobs affected. Now it's not 2000, but still 200 is still 200. And so there are a couple of companies that are laying off 33 employers in Chandler right here. And then Tilson Technology furloughs 117 employees as well. So everything is not roses. I'm not ever going to give you all the roses and the positives and never talk about the negatives because every city has negatives. And so we're going to talk about that on lives and on all our videos. You go watch our videos on our YouTube channel, Everything Phoenix. We lay out the negatives as well of an area, a zip code of a neighborhood, a property, a listing that we're selling, whatever it may be, a city, a town. We're gonna give you the good and the bad. And I guess the ugly too sometimes as well. A couple more things and we're out of here guys. So there's a little positive headline. Microchip technology turnaround plan shows progress. Okay, that's good. But here, let me talk about this. New rules for using purified wastewater give Arizona cities more options. What? Purified wastewater? Is that what this is? Okay. Arizona allows direct use of advanced purified wastewater for drinking. Phoenix, Scottsdale and Tucson plan to implement advanced water purification. Thank you, Phoenix, Scottsdale and Tucson. New regulations ensure rigorous testing and oversight of purification facilities. I hope so. But again, water conservation. That doesn't mean we're all drinking brown water. So I hope no one takes this headline and runs with it off the cliff because that is not what is happening. This is just new regulation because guys, did you know that Phoenix is actually the number two city in all the world for water purification and conservation behind Tel Aviv, Israel? That is true. Okay. So that's good. Why? Because when we're in the desert, we have to conserve and we have to have good technology around water conservation and purification. And so it forces us to be good at that, which we are. Thank goodness. Okay. But that's interesting, guys. I can talk more about that article because that's pretty interesting. But for right now, that's all we got for you today. I'm going to wrap up a few minutes early at 28 minutes here, guys. So thank you so much for joining us. And if you have any questions about anything real estate related, call me or text me 480-660-5974. 480-660-5974. Love to help you out or just have a conversation with you about anything real estate related or everything Phoenix, because that's our name. Guys, until next week, next Tuesday, 4 p.m. local time, we'll be back on here again. And I can't wait to chat with you guys again. Thank you for everyone who commented and we'll see you then. Until next week, Phoenix, keep it classy.