Home prices hit a 2 year low! The news is wrong.

Home prices are increasing, or are they? We need to talk about this because many of you have made comments and said that home prices actually aren't increasing when we take into account inflation. And you have a very good point. And in fact, Cromford recently came out and dug deep into the data. So that is what we are talking about today. When you are out there searching for what's going on in the real estate market, there is so much out there. Some articles saying home prices are crashing. Some people saying home prices are lower than they've been in a long time. Other people saying home prices are increasing. And it's really hard to follow and figure out what is actually going on because there are so many things to take a look at within that. Obviously, different markets are going to be different, but also different segments of each market are going to be different. Luxury versus that middle price range versus that first-time homebuyer price range. So the Cromford report did some digging for us, and I'm going to share that with you guys today. We're also going to look at where our active listings are at, what's going on with mortgage rates, and all of the good CMI data and supply and demand in the Phoenix metro area. So let's jump in. Thank you for joining me. I'm going to start off with this Redfin article that says home prices rose 0.3% from a month earlier in June. This is just one of the many examples of this happening out there. So why did they really increase? They say prices actually rose 3% on a year-over-year basis, which is the fastest growth rate in 10 months. So you see that and you're like, oh my gosh, prices are still going up. The market is unaffordable. What is happening? How is this happening? Meanwhile, you're seeing something on the news saying mortgage rates are super high and buyer demand has crashed. So it's just confusing. But this is what Redfin is measuring. They say despite the stubbornly high mortgage rates and widespread economic uncertainty stemming partly from the Iran war, home buying demand picked up at the start of the summer. There's still hundreds of thousands more sellers than buyers in the US, but Redfin agents in many parts of the country report that there aren't enough affordable move-in-ready homes on the market to meet demand. And that pushed prices to a record high and contributed to the strong price growth in June. So I think there's a few different things at play here. I think overall, our demand is lower because home prices are not affordable for many people. But I do think that demand is really like sitting on the sidelines waiting for like entry-level starter homes, like that first-time home buyer opportunity. And so I think that demand actually exists. It's just there isn't anything for that demand at that end of the price range in many markets. Obviously, luxury is doing really well. So like the demand there still exists and that's doing well. And we don't have enough supply of the lower home prices options, but we have enough supply of everything else, which is why that's moving slower. Now, you can argue that maybe we just need to bring down home prices across the board and then things would be affordable for the first time home buyer. That would be one way to get there or increasing supply that could be at a lower price point in particular areas. So this is an example of one of those articles where you're like, why are home prices going up? What is going on? But we look at the Cromford report because they give us such great data. They said just recently, they took a look at the annual median sales price across greater Phoenix, and they wanted to see where the price is in the last few years, how it compares. And then they also looked at it when you adjust for inflation and what that actually looks like. So without adjusting anything, the median home price around 450 has been there for a long time. It reached a high of 454,000 on July 18th, suggesting that This is because the chart and most people ignore the falling buyer power of the U.S. currency. And so you can see here at 454, it shows the highest home price in the last couple of years. This is 2024. But they converted the nominal dollars in the chart to inflation adjusted dollars based on the Phoenix CPI and used June as the 2026 base reading. So when you see that, we actually have the lowest home prices we've seen since 2024. Actually, 2024 was lower than 2025, according to this calculation. So they say this puts the price into more realistic context. The after adjusting for inflation. So there you have it. Those are the numbers. Home prices have come down when we adjust for inflation. You can see what that actually looks like. And it says it represents a combination of all dwelling types, all price ranges and home sizes across greater Phoenix. So that is a lot of different things, right? This is really combining all of that. When you look at smaller segments of the market, the story can be a little bit different. So they go on to share a few different examples. This is for Gemini twin homes only. They tend to be a lot cheaper than single family detached homes. They're primarily concentrated in those less expensive areas of the West Valley. And they've come down hard in price when adjusted for inflation, almost 14% cheaper than at the start of 2024. So a very big difference there. They also took a look at which have become more expensive, which is anything over 5,000 square feet, aka luxury for the most part, right? And they're up to a median of 3.7 million with a much lower price of 3.2 million at the start of 2024. So a pretty big increase when we actually look at just that segment of the market, which is not really new news. Luxury has just been doing very, very well. And then when we take out the inflation adjustment, we see nominal prices for these high end homes are up 18% since the beginning of 2024. They say this is a completely different trajectory than for smaller and less expensive homes. So this is still looking at that over 5,000 square foot market. And you can see regardless, it is still doing better than the previous years. In fact, these homes have continued to rise in price even faster than inflation. So overall, of course, this depends on how you're looking at things. But when we adjust for inflation, we can see that home prices actually have come down significantly. And that is going to vary based on the type of home and the price point and price range of homes that are out there. So you would think that with home prices coming down, we would have more buyer demand. So what's going on with demand? Home sales are positive, but higher rates are slowing demand. So when we actually look at the rate of home sales, it is trending in a positive direction. But rates last week went up quite a bit. So that might affect where we're heading from here. They say demand indicators stayed slightly positive year over year, but pending sales growth cooled and purchase application growth slowed to 0.2%. So they're tracking this week to week. Last week, mortgage rates hit a yearly high. Demand is still positive. But over the past few years, when we've seen mortgage rates get above 6.64% and break over 7%, housing demand slows. I'm going to share where we're at with mortgage rates here in a moment, but we are getting quite close to that. Housing data always improves when rates move lower than 6.64% and stay near 6%. Now they say in terms of pending home sales, and this is nationally, not Phoenix. Two weeks ago, we saw a smidge of a decline year over year. Last week, we saw a smidge of an increase year over year. Make no mistake, housing is slowing. For now, the growth rate has really cooled off, they're saying. So you can see the weekly pending sales for U.S. single-family homes is lower here in 2025. Now they also look at the total pending home sales, which is an average of sales rather than pure weekly data. They say it's showing the same thing. We have growth, but growth is slowing down. Now that said, they're also looking at housing inventory, and I'm going to share where we're at in Phoenix with active listings here shortly. They say housing inventory has slowed a lot since mid-June. Most of the weeks in the past two months have been negative year over year, only slightly. However, as rates have risen, inventory growth has picked up a bit, showing a slight year over year growth. So we can see that growth rate here. A lot of that can be seasonality, it can also be affected by rates, of course, which have started to increase, which is likely why we're going to see a little bit more buildup of inventory potentially if that demand can't keep up. So Yahoo Finance is asking, are 7% mortgage rates next? It says the treasury market is flashing a warning sign for homebuyers. So that's not the best news if you are trying to look at your budget for buying and really relying on rates. They say mortgage rates jumped to a new high for the year, putting another hurdle in front of house hunters eager to buy. The question is whether the 30-year fixed rate mortgage will go back up to 7%. So they talked to an economist who is at Zillow who said it's hard to rule anything out. Mortgage rates jumped eight basis points to an average of 6.85% last Thursday, and that's according to Mortgage News Daily, which we're going to take a look at. Mortgage rates are sensitive to political developments and economic trends. The last time the 30-year mortgage rate topped 7% was in January of 2025, so over a year ago at this point, and at the time the 10-year treasury yield was near 4.6%. The 10-year treasury yield surpassed 4.7% last Thursday morning. But that does not mean that we're actually going to hit 7% rates because there's a lot of factors going into that. So as of this week, mortgage rates slightly higher despite no Fed rate hike. So the Fed met this week. We had a lot of economic news going on. The Fed met. They also got CPI this week. And the Fed basically said that they're not going to hike the rate, which you would think would be good news for mortgage rates. So Mortgage News Daily says the Fed funds rate is relevant to loans of the shortest duration, mostly overnight lending between the largest financial institutions. Mortgage rates, which are different, are more closely linked to longer-term loans, bonds with durations averages 5 to 7 years. So the Fed outlook and what was mentioned by Warsh, he basically told the market that he doesn't need to hike if the market is going to do it for him. So we are today, mortgage rates about 6.78%, pushing 7, but not quite there. We will see what happens with this. It's kind of an interesting time, particularly in Phoenix, because it's just a little bit boring, for lack of a better term. Summer is a little bit slower. We're kind of ending summer maybe soon, at least like the month's maybe ending. It doesn't mean our heat is ending, but kids are going back to school soon. We may start to see a little bit more of a pickup in the market as we get towards the end of August. And some of that's really going to depend on where rates go as well. I talked a little bit about what was going on with inventory on a national scale. So let's take a look at what's happening here in Phoenix. We are still below last year. We're still below 2025. We're sitting at about 24,109 listings on the market, still well above 2024 and 2023, but we have kind of maintained this trend below 2025 inventory levels. So hanging out there, the Cromford report said inventory is stabilizing, and we're kind of seeing that. This hasn't really gone up or down all that much over the last month, about four weeks there. So let's take a look at what's going on with the market index. So we're at 80.6. I noticed that the supply is now at 100. So that is at a normal level of supply. So yay for us finally seeing something normal officially, right? And then our demand is 20% below normal. So this isn't anything crazy, you guys. We have a normal amount of supply. So don't let anyone tell you that inventory is skyrocketing just because there's 24,000 listings on the market. That is normal for what the Phoenix market should see. And then demand is below normal, 20% below normal. So demand, not quite keeping up with supply overall. And that puts us at a market index of 80.6, which means we're in a buyer's market. But when we take a look at every city, we've got some cities that are not in a buyer's market, which starting at Mesa up to Fountain Hills, we can see those are all technically in seller's markets. Then we have Gilbert, Avondale, and Peoria, Tempe. All of these are in a balanced market. And then Surprise down to Queen Creek, all technically in a seller's market. The average change month over month is down about 0.8%. So not a huge change. It got a little bit weaker, but really not that significant when we look month to month. Even the Cromford Report is saying the market just does not seem to be able to make up its mind which direction to head. And this is why I'm saying it just feels boring because I don't think there's a whole lot going on. We don't have anything crazy in one direction or the other. And the second we inch in one direction, we inch back and go in another direction. So it's just not been super exciting, which is okay. We can have something stable for a minute. We all deserve that. They're saying this does not add up to a perceptible change in the market as a whole, but several sub-markets are changing to a greater degree. So it goes on to talk about how Paradise Valley stands out for sellers with an exceptional 23% increase month over month. Hello, luxury, right? This is tracking with what we already talked about. Cave Creek and Glendale are quite far behind at 8% and 7%. And then in the other direction where cities are moving in favor of buyers, we have Santan Valley, Tempe, Chandler, Maricopa. In total, there's eight cities in a seller's market, four in a balanced market, and six in a buyer's market. So you will experience something different depending on where you're at in the market, whether you're a buyer or a seller. Now, I always like to look at the contract ratio because this also gives us the heat in certain areas and really kind of like what we can expect. And we still have a lot of blue going on here in the center of the city in Phoenix. And then a lot of green, which is the green is more balanced and warm. The blue is on the colder side. And as we get into some of these warmer colors, Chandler 85226 is considered hot. We also have Phoenix at 85033 hot and Scottsdale 85255 as well as Stanfield, which I brought this up a few weeks ago. There's only one active listing and one under contract. So that is kind of its own anomaly there. There's not enough data. But if you want to know what the contract ratio is for your zip code, I can pull that information for you. Just check the description below to request that. Given all the information we talked about today with home prices and the trends, how they differ from different areas and sizes and price range and whatnot. If want to know what's actually going on in your area with home prices, maybe you're considering listing your home. Maybe you're just considering buying and kind of want to know the trends in that area. Check the description below to get that information. You can put in your zip code to get more information on what direction home prices are trending in that area. Don't forget to schedule a call with our team if buying or selling is on your mind. We would love to chat with you further and I will see you guys next week on my next market update.