Greater Phoenix Residential Market
September 30, 2022
Historic Mortgage Rates
Purchase Price Drops
Rents Hold Steady
Arizona Economy Update
August Single Family Resale Results: Rents Hold Steady While Purchase Price Drops
Unless otherwise mentioned, the following results are for single-family resale homes in Greater Phoenix (Maricopa County). The information used in this report was compiled from data provided by the Arizona Regional Multiple Listing Services, Inc.
The overall median purchase price (MPP) for a single-family resale home dropped for the third consecutive month. In August 2022 it was $500,000. In July $510,000. In June $529,000. In May the MPP was $540,000 for an all-time high. From this May to August, the MPP is down 7.4%. The August 2022 MPP of $500,000 is $50,000 or 11.1% higher than August 2021 when it was $450,000.
Table One has two MPP comparisons for 30 cities located in either Maricopa or Pinal Counties. It compares the MPP for each city month-over-month and year-over-year. From July 2022 to August 2022, 23 of the 30 cities had decreases in the MPP. Six cities had MPP increases and one had no change. Year-over-year, August 2021 compared to August 2022, all 30 cities had increases in the MPP.
The number of sales for single-family resale homes in August 2022 were a little higher than July 2022, but significantly lower than August 2021. There were 4,032 sales of single-family resale homes this August compared to 3,864 in July for an increase of 168 sales or 4%. Year-over-year, August 2022 sales were 1,931 or 32% less than August 2021. When comparing sales by price range, the number of sales under $450,000 were dramatically down. There were 1,510 or 49% less sales under $450,000 in August 2022 compared to August 2021. Not so for the luxury market. There were 14 or 41% more sales of $3,000,000 or more in August 2022 than August 2021.
Listings: Less sellers listed their homes in August. The number of new listings for single-family resale homes in August 2022 were lower both month-over-month and year-over-year. There were 6,589 listings in August 2022 compared to 7,758 in July 2022 and 7,383 in August 2021. While less sellers listed in August, inventory has been increasing because of the decline in the number of sales. Overall estimated months of supply as of September 5 was 3.1 months (not too long ago it was three weeks). See Table Two for the estimated months of supply, the number of sales and how homes were purchased all by price range. In August 2022, 22% of purchases were cash, 54% with a conventional loan, 10% FHA loan, 6% VA loan and 7% other. There were 12 homes with a selling price of $900,000 or more that were purchased with a VA loan. The highest purchase price with a VA loan was $1,860,000.
Median monthly rent (MMR) for a single-family resale home in August 2022 was $2,355. This is $5 more than July 2022 and $60 more than August 2021. August 2022 was the fifth consecutive month that MMR was over $2,300. How much home buying power does a monthly payment of $2,355 have? If a potential buyer put 10% down, and their thirty-year mortgage rate is 5.22%, and if their monthly principal, interest, property taxes and home insurance payment was $2,355, they may qualify for a purchase price up to $371,000. Of course, this example is theoretical. It is so important for a buyer to know how much house they may qualify for. They can do this by meeting with a lender before starting their home search. Once they know what price range they qualify for, they should start their search with their REALTOR!
Historic Mortgage Rates
As mortgage rates rise there is always a certain percentage of potential buyers that no longer qualify to purchase. Then there are those buyers, who can qualify to purchase, but complain that mortgage rates are too high. Mortgage rates are high today when compared to last year. Currently the thirty-year fixed mortgage in 2022 is over 5%. This is high when compared to 2021 when the thirty-year fixed mortgage rate averaged 2.96%. According to Fannie Mae, the thirty-year fixed mortgage rate in 2021 has never been lower since they started tracking it in 1971. Now let’s put today’s thirty-year fixed mortgage rate in a historic perspective. Chart One shows the average thirty-year fixed mortgage rate for different years since 1971. In 1971 it averaged 7.57%. In 1975 9.05%. Then in 1980 it leaped to 13.74% and in 1981 climbed to 16.63%. It stayed over 10% until 1991 when in that year it averaged 9.25%. At the turn of the century, it was 8.05%. From 2015 through 2021 the thirty-year fixed mortgage rate has been the lowest since Fannie Mae started reporting. Falling all the way to 2.96% in 2021. Since May 2022 it has averaged monthly over 5%.
Arizona Economy Update for July 2022
The following information is from the most recent Arizona Commerce Authority job report. Month-Over-Month Highlights • The Arizona seasonally adjusted (SA) unemployment rate remained unchanged at 3.3% in July 2022 from June 2022 • The U.S. SA unemployment rate declined to 3.5% in July 2022 from 3.6% in June 2022 • Arizona nonfarm employment increased by 18,300 jobs • The largest gains were recorded in Professional and Business Services (6,400 jobs) and Education and Health Services (5,200 jobs) • Job losses were recorded in Other Services (-600 jobs), Government (-3,000 jobs) and Information (-100 jobs)
Year-Over-Year Highlights • Arizona nonfarm employment increased by 117,700 jobs (4.0%) • Arizona private sector employment increased by 115,900 jobs (4.6%), while government employment increased by 1,800 jobs (0.5%) • All eleven major sectors recorded job gains • The largest gains were recorded in Leisure and Hospitality (25,600 jobs) and Education and Health Services (25,300 jobs) • All seven Arizona metro areas (MSAs) gained jobs • The largest percentage gains were recorded in Flagstaff MSA (5.9%) and Yuma MSA (4.8%)
The total number of sales in both August and July in Greater Phoenix were very low for this time year. The primary reason for this low number of sales is the combination of much higher mortgage rates along with tremendous price appreciation. These two factors have made it too expensive for some buyers to purchase. Median Purchase Prices reached such a high point in May 2022, in which they could no longer increase but have decreased the past three months. Furthermore, high inflation and recession talk have lowered consumer confidence. Because of all of the aforementioned, there are less sales. Now that there are less sales inventory is spiking, making things more competitive amongst sellers. Now some sellers are not only reducing their list prices, but also are offering a seller concession to buyers.
For those buyers who have the ability to buy, but feel mortgage rates are too high, they should know that historically mortgage rates are not that high. These buyers should determine what is their motivation for waiting to buy or for buying now. Some questions they should consider are the following: How long do they plan on owning a home? How secure is their job? Historically, while home values may fall – they have ended up, going up.
The following are factors which will increase buyer demand to own. The most recent job report for Arizona was positive. More Arizonians are employed today than ever before. Arizona most likely will finish the year only behind Texas and Florida for numeric population growth. Where will these people live? Adding to the influx of people coming to our beautiful state will be the Superbowl, the Waste Management Phoenix Open, the Barrett-Jackson Auction, the Scottsdale Arabian Horse Show, other events and those people getting out of the snow.
People have to live somewhere. They either own or pay rent. If paying rent, they should meet with their real estate and lender professionals to determine if they would be better off continuing to rent or purchasing a home.
Chart One: Historic Thirty-Year Fixed Mortgage Rate
Table One: Median Purchase Price for Thirty Cities in AZ by The Wilcox Report ™
Table Two: Sales, Estimated Months of Supply & How Purchased by Price Range by The Wilcox Report ™