Real Estate Market Update: Time Traveling Back to 2014

Photo byCaitlin McKeague

The Real Estate Market Repeats Itself | Phoenix Real Estate Market Update

Today, we are going to time travel to a faraway place—10 years ago, back to 2014. So come with me as we explore the changes in the real estate market over the past decade.

Photo byThe Cromford Report

As you look at this map, you may be surprised to see that these two maps are 10 years apart. The map on the right is from June 8, 2024, and the one on the left is from June 7, 2014. They look quite similar, don’t they?

If you've been following my channel for any length of time, you know that I've been talking about the contract ratio from The Cromford Report. This ratio compares the number of listings on the market available for sale to the number of listings already under contract, giving us an indication of the market's heat. Here’s the key: everything from zero to a thousand, and right now, we're sitting in this balanced warm area for most of the market, which is represented by the green color. Some areas are showing yellow, which is considered hot, and some are showing hotter, which is more of that red-orange color.

In 2024, we have a lot of green, quite a few areas of yellow, and some reddish-orange spots. The same was the case in 2014: a lot of green, some yellow, and a few reddish-orange areas. A few of these zip codes are behaving similarly to how they did 10 years ago. For instance, areas like South Phoenix and Tolleson show similar colors to what they had before. All of Scottsdale, up into the North Valley, and Carefree are in that green color, as is much of the far Southeast Valley in both cases.

So, why am I sharing this? What does this mean? Well, it means we are back to a balanced market, much like in 2014. Understanding this helps us know what to expect from the market.

Interest Rates

Mortgage rates are slightly higher to start this pivotal week. The Federal Reserve is meeting on Wednesday. While they are not expected to cut or hike rates, their commentary will be crucial in understanding future trends. According to Mortgage News Daily, there was a small increase in rates on Monday. Over the past two weeks, there has been a lot of volatility with mortgage rates. Last week, rates went down significantly, but then there was an uptick on Friday due to the jobs report. This volatility is expected to continue, with Wednesday being the most important day of the month due to the release of pivotal inflation data and an updated rate announcement and outlook from the Fed.

Based on what happens on Wednesday, rates may react positively or negatively. It’s important to stay updated by talking to your lender. The Fed is widely expected to keep the benchmark interest rates steady. They are holding steady until they get more data, with the last projections in March showing three-quarter point rate cuts in 2024. However, with inflation being more stubborn than anticipated, the prospect of three rate cuts is diminishing, possibly to just one or two this year.

Mortgage Rates

The federal funds rate is not the same as the mortgage interest rate, but Fed commentary affects the market and thus mortgage rates. According to Freddie Mac, mortgage rates are about 7.1%. We've been around 7% or higher for most of this year. The last time rates were below 7% was during the slower holiday season around December and January. Since the start of the year, rates have been quite volatile.

Market Sentiment

Rates significantly impact what buyers are willing to do. Recent surveys show that nine out of ten Americans agree that May was a bad time to buy a home. Interestingly, despite this sentiment, homeowners' perception of selling conditions has only slightly declined and remains largely positive. This suggests that despite the so-called lock-in effect, some homeowners may want or need to sell their homes for various non-financial reasons, potentially leading to an increase in listings.

Active Listings

Active listings in the Phoenix area have been increasing. Typically, listings decrease as we enter summer, but this year we’re seeing a different trend. Supply is accumulating, and demand is not increasing due to current market rates and home prices, resulting in a balanced market similar to what we saw in 2014.

Cromford Market Index

According to The Cromford Report, supply is 52% higher this year than last year, while demand is 5% lower. The Cromford Market Index (CMI) shows supply and demand very close to each other, indicating a balanced market. The last time we were in a balanced market for any length of time was in 2014.

City-Specific Trends

Different cities can behave differently. Chandler leads with the highest CMI at 26.4, though it has softened slightly. Fountain Hills saw a significant increase of 14% month over month. The overall change in CMI month over month is -2.1%, continuing a trend downward away from a seller's market. Some cities are still moving towards a seller’s market, while others are moving towards a buyer's market. Currently, only Goodyear, Cave Creek, and Surprise are in a balanced market.

Conclusion

Understanding market conditions can be confusing. For personalized insights, you can check out a market snapshot for your area on my website or set up a discovery call with our team. Thanks for time traveling with me today, and I will see you next Tuesday for another market update.

SOURCES: The Cromford Report and Freddie Mac