Inventory Spike!! Should We Be Worried? | Phoenix Real Estate Market Update

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Phoenix Real Estate Market Update: July 2024

The Phoenix real estate market is experiencing a significant increase in inventory, raising questions about the implications for buyers and sellers. Here's a detailed breakdown of the current trends and what they mean for you.

Inventory Surge

The supply of homes in Phoenix has surged, with active listings at approximately 15,890 homes, compared to around 10,000 homes at the same time last year. This represents a 57% year-over-year increase in inventory, which can be concerning. The increase varies by price range:

• Below $300,000: Up 94%
• $300,000 - $350,000: Up 64%
• $400,000 - $450,000: Up 76%
• $500,000 - $600,000: Up 77%
• $1.12 million - $2 million: Up 64%
• $5 million - $7.5 million: Up 59%
• $700,000 - $800,000: Up 31%
• $2 million - $3 million: Up 28%
• $7.2 million - $10 million: Up 35%

For buyers, this means more options across various price ranges. However, for sellers, it indicates increased competition and a potentially slower market.

Market Conditions

The additional supply, coupled with chronically depressed demand due to high mortgage rates, has created a weaker market. Buyers are more selective, taking longer to make decisions, which can be frustrating for sellers.

Economic Indicators

The recent jobs report showed a softening labor market, with the unemployment rate rising slightly from 4% to 4.1%. This news, combined with other economic data, increases the likelihood of the Federal Reserve cutting rates in September. Although the federal funds rate isn't the same as the mortgage rate, it can influence mortgage rates indirectly.

Mortgage Rates

Last week's jobs report led to a slight decrease in mortgage rates. While the average 30-year fixed rate remains close to 7%, there is potential for rates to soften further, especially with the upcoming election year. Historically, mortgage rates tend to decrease ahead of elections.

Seller Opportunities

Sellers may have an opportunity to attract more buyers if mortgage rates decrease. Additionally, checking if your mortgage is assumable could be a valuable selling point. Assumable mortgages, often found with VA or FHA loans, allow buyers to take over the seller's existing loan at a lower interest rate.

Market Sentiment

According to the Fannie Mae Home Purchase Sentiment Index, only 14% of consumers believe now is a good time to buy a home, down from 20% in April. The sentiment that now is a good time to sell has also decreased, from 67% to 64%.

Cromford Market Index (CMI)

Phoenix remains in a balanced market, with a CMI of 102. Demand is about 24% below normal, while supply is 26% below normal. Transaction volumes have significantly decreased, reaching the lowest levels since the 1990s.

The CMI for various cities in the Phoenix metro area shows a trend toward a buyer's market, with many cities experiencing a month-over-month decline.

Contract Ratio

The contract ratio, indicating market heat, shows more green (balanced market) and fewer hot areas compared to a month ago. This cooling trend is evident across the Phoenix area.

The Phoenix real estate market is currently characterized by increased inventory and decreased demand. Buyers have more choices, while sellers face more competition. Economic indicators suggest potential for lower mortgage rates in the future, which could impact market dynamics. Whether you're buying or selling, staying informed and adapting to these changes will be crucial.

For more detailed market insights and listings, visit the Cromford Report. If you're interested in homes with assumable mortgages or need an instant home value estimate, check the links in the description.

For regular updates on the Phoenix real estate market, make sure to like this article and subscribe for our weekly market updates. See you next week!

Sources:

• Cromford Report
• Fannie Mae Home Purchase Sentiment Index
• Federal Reserve Economic Data