Rebounding Trends: Single-Family Building Permits Surge in Maricopa and Pinal Counties

Rebound in Single-Family Building Permits in Maricopa and Pinal Counties

In 2024, Maricopa and Pinal counties have witnessed a significant rebound in single-family building permits. So far, 18,498 permits have been issued, marking a 40% increase compared to the same period last year. Although this growth is promising, it still falls short of the peak levels seen in 2021 and 2022, where 21,796 and 19,748 permits were issued, respectively.

For more details on how building permits have fluctuated over the past years, check out our previous market update.

New Home Market vs. Resale Market: What You Need to Know

One of the most intriguing trends this year is the performance gap between the new home market and the resale market. As of June 2024, year-to-date resale closings have reached 45,937, reflecting a 4% decline compared to the same period last year. This divergence highlights the unique dynamics at play, with the new home market showing resilience despite a generally weaker resale market.

If you're interested in the latest trends in the resale market, visit our resale market trends page.

Homebuilders' Optimism and Stock Market Trends

Homebuilders are increasingly optimistic about future market conditions, spurred by the Federal Reserve's stance on potential interest rate reductions. This positive outlook has been mirrored in the stock market, with several publicly traded homebuilders hitting record-high prices recently. This trend underscores the confidence within the industry, even as the broader market experiences challenges.

For more information on how interest rates are impacting the market, let's schedule a 1 on 1 to discuss.

Surge in Building Permits Across Arizona

Maricopa County has seen a 39% rise in building permits, while Pinal County has experienced a 43% increase. Across Arizona's other counties, permits have risen by nearly 38%. San Tan Valley continues to face challenges with incorporation, resulting in many new homes being developed under county jurisdiction. However, there is growing momentum for incorporation, with a vote planned later this year.

Florence, another rapidly growing area, has now surpassed Gilbert in permit issuance and is closing in on Scottsdale’s numbers. This shift highlights the changing dynamics in Arizona’s housing market, with new areas emerging as key development hubs.

Positive Indicators for Sellers in August 2024

The market is starting to show more positive signs from a seller's perspective. As of August 2024, nine cities have seen an increase in their Market Index, up from eight cities last week. Conversely, eight cities are experiencing a decline, indicating a mixed but improving market landscape for sellers.

Notable gains have been recorded in Cave Creek, Paradise Valley, Buckeye, and Fountain Hills. Cities like Scottsdale, Gilbert, Maricopa, Goodyear, and Peoria have also posted increases this past month. However, significant declines have been observed in the Southeast Valley, particularly in Tempe, Chandler, and Mesa, as well as in Avondale.

Currently, nine out of the 17 cities analyzed are in a seller’s market, with a market index above 110. Three cities are balanced, and the remaining five are classified as buyer’s markets.

For a more detailed analysis of the market conditions, check out our monthly market index.

Impact of Interest Rate Changes on Arizona’s Real Estate Market

On August 5th, the housing market experienced a sudden shift, with mortgage rates effectively going on sale. Average mortgage rates dropped sharply to 6.3% before stabilizing at 6.5%, a significant improvement from April’s 7.5%. This decrease has led to a 10% to 11% reduction in principal and interest payments for buyers across all loan amounts.

For instance, loans between $300K and $400K have seen monthly payment reductions of $200 to $270, while loans between $450K and $550K have experienced savings of $300 to $370 per month.

This decline in rates sparked immediate market reactions. Refinance applications jumped 16% week-over-week, as many homeowners with rates between 7% and 8% from the past year reconsidered their options. Purchase applications also saw a modest rise of 1%, reflecting the typical buyer approach of waiting to see if rates will drop further.

For more on how to navigate the current mortgage landscape and to run projection based on your specific situation, please contact me.

Sellers Offering More Concessions

In August, a record 55% of sellers offered concessions, such as covering buyers' closing costs, with half contributing $9,800 or more. Despite lower rates, tools like the 2/1 buy-down remain popular, providing a seller-funded temporary rate reduction that covers 10%-20% of the buyer’s payments for the first two years.

To illustrate the impact: A rate drop from 7.5% in April to 6.5% in August on a $400,000 loan lowers the monthly principal and interest payment from $2,797 to $2,528, saving buyers $269 per month. If paired with a 2/1 buy-down, the first-year rate could drop to 4.5%, bringing the monthly payment down to $2,027—a total savings of $770 per month.

Explore our sellers’ guide for more strategies on how to maximize your home sale in the current market.

Strategies for Sellers in the Current Market

As mortgage rates continue to improve gradually, sellers need to remain patient when listing their homes. Unlike the stock market, where reactions to Federal Reserve announcements are immediate, homebuyers move at a slower pace—they still need to apply, submit paperwork, and plan their moves. Currently, half of the sellers accepting contracts this month were on the market for 37 days or more.

Greater Phoenix remains a balanced market, though buyers have an advantage in several cities. Prices have been mostly stagnant, with only a 1.9% increase compared to last year. While it may be tempting to push for the highest price, this approach can lead to extended market time and more price reductions, which are up 67% from last year.

Setting realistic expectations is key to a positive selling experience. In a balanced market, sellers can't anticipate the high returns seen in a seller’s market. Listings demand careful strategy and effort, even when the property is in great condition. As the real estate industry faces increased scrutiny and changes, the expertise of skilled professionals is more crucial than ever.

In Summary: Opportunities Amid Market Shifts

Sellers have enjoyed a strong market for quite some time, so today’s balanced conditions might feel unfamiliar or even unsettling. While some areas like Buckeye, Maricopa, Queen Creek, Surprise, and Goodyear are showing signs of a buyer's market, we’re still not in a buyer's market overall. The recent dip in mortgage interest rates earlier this month has already brought some improvement.

Looking ahead, I expect price recovery between now and September, with current pending listings showing 99.2% normal transactions, 0.2% REOs, and 0.7% pre-foreclosures and short sales. Foreclosure activity remains low, indicating that the recent softness in sales prices isn’t being driven by distressed properties.

Although the past three months have seen weaker-than-usual sales prices following a strong April, I believe this period of decline has likely ended, and prices are poised to rebound. If recovery doesn’t occur within the next month, I anticipate a turnaround by mid-October. The high-end market has been particularly quiet during the hottest months, but its resurgence will likely boost overall sales price averages in the coming months.

While market shifts can be challenging, they also present opportunities. By staying informed and adaptable, we can navigate these changes successfully and make the most of the current landscape. The market remains full of potential, and positive trends are just around the corner.

FAQ: August 2024 Real Estate Market

Q: What are the current mortgage rates in Arizona?
A: As of August 2024, average mortgage rates have dropped to 6.5%, a significant improvement from April's 7.5%. This has led to a reduction in monthly payments for buyers across all loan amounts.

Q: Is it a good time to buy a home in Maricopa or Pinal County?
A: With recent drops in mortgage rates and ongoing new home developments, now may be a favorable time to buy, especially in areas like Florence and San Tan Valley, which are seeing significant growth.

Q: What should sellers keep in mind in the current market?
A: Sellers should set realistic expectations and be patient, as the market is currently balanced. Offering concessions and pricing strategically can help achieve a successful sale.

Q: How are new home building permits trending in 2024?
A: Building permits in Maricopa and Pinal counties have increased by 40% compared to last year, signaling a rebound in new home construction.

If you have any questions or would like to discuss how these market trends could impact your buying or selling decisions, I'd love to chat. Feel free to schedule a time with me using the link below.