October 2024 Arizona Real Estate Market Update: Key Insights, Buyer Opportunities, and 2025 Planning

Welcome to this month’s Arizona market update! For those receiving this for the first time, welcome. October has been a busy month, with many new clients and increasing interest from those exploring the Arizona market. Whether you’re a new real estate partner from across the country, a Veteran, referred by your CPA or financial advisor, or recently connected due to a job change, referral, or one of the companies relocating here in 2025, I'm here to provide insights to help guide your real estate journey.

Each month, I personally craft these updates—no automation, no outsourcing. My goal is to bring you valuable information and actionable knowledge to help you make well-informed decisions.

Arizona Market Update and Insights for October 2024

Market Sentiment: Buyer Hesitation, Seller Caution

Buyers are showing less motivation, and sellers are losing some confidence, leading to more frequent price cuts. Homes listed at lower or bargain prices are selling faster than those at full market value.

For the past five months, the market has seen month-to-month fluctuations, yet the annual averages remain relatively steady, hinting at a more stable long-term outlook than monthly shifts might imply.

Multi-Family Permits Drop, Interest Shifts to Single-Family Homes

In the third quarter of 2024, multi-family permits slowed significantly with only 3,142 units approved in Maricopa and Pinal counties—a 43% drop from last year. Investor enthusiasm for multi-family projects, strong from 2021 to 2023, has cooled, shifting back toward single-family homes, where demand remains steady.

Mortgage Rates on the Rise

Adding to the current climate, mortgage rates have edged higher. The average 30-year fixed rate now sits near 7%, up from 6.68% just last week—marking the highest level since late July.

Market Activity by City

Only four major cities showed an increase in their Market Index this past month. Phoenix, which makes up about 25% of all transactions in the area, held steady, while Paradise Valley saw the steepest drop, losing 30% over the month. On the positive side, Tempe and Cave Creek posted gains of over 7%, with Phoenix and Peoria also seeing positive movement. Most declines, aside from Paradise Valley, were concentrated in the Southwest—specifically Avondale, Goodyear, and Buckeye, areas with significant new construction.

A Rare Window of Opportunity for Buyers

For the first time this year, homes under contract have surpassed last year's numbers! September saw stability in mortgage rates around 6.1%-6.2% for conventional loans and 5.6%-5.7% for FHA loans, sparking a 12% increase in weekly accepted contracts. This suggests that rates below 6.5% are the tipping point for boosting buyer demand.

Contrary to some beliefs, this rate dip wasn’t due to the Federal Reserve’s 0.5-point cut in September, as mortgage rates had already adjusted ahead of time. This stability gave buyers confidence to make moves, offering a brief relief to the industry.

Currently, Greater Phoenix is a prime market for buyers. With active listings up and weekly contracts down, buyers enjoy a broad selection with less competition. In the past decade, Phoenix has only seen such buyer-friendly conditions twice—once in 2022 for nine weeks and in 2014 for five weeks. If you’re looking to buy, now is the time to take advantage of this unique window.

How Sellers Can Stay Competitive

While rates held in the low-6% range for a month, they’ve recently jumped back to nearly 7%. This increase, fueled by strong employment numbers, suggests a Federal Reserve rate cut may not be in the near future.

For now, it’s a buyer-friendly market, making it essential for sellers to be competitive. Serious sellers should ensure their property is in top condition to appeal to today’s buyers, who aren’t easily won over by price drops or allowances alone. Small, impactful upgrades—like fresh carpet, clean grout, or a bright coat of paint—can make a big difference in appealing to buyers who may lack the time or funds for home projects.

Homes priced between $275K and $500K may need to offer buyer incentives and expect longer marketing times during the holiday season. Many recent sales in this range included $8K-$10K in closing cost assistance from sellers, which can help offset mortgage rates for buyers. Sellers who purchased within the last two to three years may find it challenging to compete due to flat appreciation, but those with longer ownership periods have more flexibility.

Remember, today’s market competition isn’t just your neighbors—it's also new construction. Many builders are offering creative incentives like price flexibility and rate buy-downs, with some offering fixed rates as low as 3% for 30 years. One of my clients recently took advantage of this opportunity, highlighting the flexibility available in new builds.

Why ‘Average Days on Market’ Isn’t the Full Story

“Average days on market” is a common metric, but it doesn’t tell the full story. A more useful measure is the listing success rate, which currently sits at 71%—slightly above the long-term average but below last year’s 75%. Here’s a breakdown by price:

• Under $200K: Success rate of 56%, often reflecting property-specific challenges
• $250K-$400K: High success rate around 79%
• Over $2M: Lower success rate at 50.6%

Success rates vary by area, so broad market data often provides a more reliable perspective.

Planning Ahead for 2025

As the market shifts, planning for the future becomes more important. Until the end of the year, I’m offering 2025 planning sessions, including a detailed cost comparison analysis. For instance, I recently helped a client evaluate a move from Oregon to Phoenix, breaking down costs like housing, utilities, and taxes. We found that Phoenix offered a 15% lower cost of living, translating to an estimated annual savings of $32,000—allowing them to boost retirement savings and even consider an investment property.

Final Thoughts

In today’s market, every shift creates new opportunities. Buyers have a slight advantage, while sellers need to focus on quality and strategic incentives to stay competitive. If you’re interested in exploring how a move could impact your finances or want to look at other markets, let’s connect to set you up for success in 2025!