Arizona Real Estate Market Update: June 2024 Insights for Buyers, Sellers, and Investors

Welcome to the Arizona Market Update for June 2024! Whether you're a buyer, seller, or investor, staying informed about the real estate market is crucial. Let’s dive into the latest trends and insights that matter to you.

Current Market Conditions

The real estate market is witnessing significant changes this month:

• Increased Inventory: The number of homes for sale has grown faster than last month, offering buyers 54% more choices compared to last year.
• High Mortgage Rates: With 30-year mortgage rates still over 7%, buyers are finding it tougher to make purchases. Sellers face increased competition, and agents are working diligently to close deals.

Price Trends

• Average Price per Square Foot: Up by only 3.5% over the last year.
• Median Sale Price: Increased by just under 6%, largely unaffected by the luxury home market.
• Price Forecast: Expect prices to remain flat or decrease over the next three months after a strong rise from January to May.

Seasonal Trends

• Summer Slowdown: From June to September, luxury home buyers are fewer, preferring cooler locations over Phoenix’s summer heat.
• Investor Activity: Investors are active during the summer, capitalizing on good deals and healthy profit margins on fix-and-flip houses, which lowers the average price per square foot during these months.

New Construction vs. Resale Market

• New Home Market: Healthier than the resale market, adding extra competition for sellers.
• Incentives: New construction incentives have been significantly higher, with discounts of 8-9% off the purchase price, plus extras like closing cost credits, appliances, and blinds.

Market Index and Area Performance

• Current Market Index: At 103 and trending down. Sellers are getting worried, and buyers aren’t too excited.
• Market Conditions: Out of 17 cities, 11 are still seller's markets (though mostly weak ones), 1 city (Goodyear) is balanced, and 5 cities are buyer’s markets.
• Key Areas: Gilbert, Peoria, Goodyear, Paradise Valley, Mesa, and Glendale are moving in favor of buyers, with Gilbert's market deteriorating the fastest. Maricopa is moving in favor of sellers.

Federal Reserve and Mortgage Rates

• Interest Rates: The Federal Reserve kept the Federal Funds Rate steady for 12 months straight.
• Inflation and Mortgage Rates: The Consumer Price Index showed a drop in the annual inflation rate to 3.3%, causing conventional mortgage rates to decrease from 7.16% to 6.98% in one day.
• Future Outlook: A potential rate cut later this year, possibly in September, could further lower mortgage rates and improve the market.

Buyer and Seller Strategies

• Homes Under $500,000: Buyers focus on monthly payments over final sale prices. About 55% of sales in this range include seller incentives, with a median incentive of around $14,600, making the true sale price about 4% off the list price.
• Homes Over $1 Million: Buyers prefer direct price negotiations, resulting in an average price reduction of $51,000 this June, closing at 94.9% of the list price.

Seller Tips

• Navigating the Market: Sellers, especially in areas with new construction, need to navigate carefully. Homes that need repairs or maintenance are struggling the most. Even well-maintained homes may face longer market times and potential price reductions. Managing expectations and staying patient are key to successful sales.

Rental Market Opportunity

• Explore Rental Options: Renting out your home can be a profitable option. By renting, you can keep your low interest rate and cost basis while turning your property into an income-generating asset. Enjoy long-term appreciation, leverage, tax benefits, and a steady income stream. Contact me to review your potential rental income and estimated tax benefits.

Conclusion

As we move forward, expect stability in pricing with a slight tendency towards weakness. While we're not in a situation like 2007, buyer enthusiasm for resale homes remains low. However, if the 30-year fixed mortgage rate drops below 7%, the market could improve. Let’s stay positive and keep a close watch on these trends as we navigate through the rest of the year.

Schedule a Chat

If you want to discuss the current market and what it means for you, please schedule a time for us to chat below.