Real Estate Market Hitting Another Record | Phoenix Real Estate Market Update

Photo byCaitlin McKeague

The real estate market has hit yet another record in 2024, but unfortunately, it’s not the kind of record you want to celebrate. We’ve all been anticipating the Federal Reserve’s recent meeting and the expected rate cut that occurred last week, but despite that, mortgage rates still increased. So, let’s dive into what happened and what this means for both homebuyers and sellers.

A New Real Estate Record—Again

The latest news for 2024 has an all-too-familiar tone. It could be the worst year for home sales since 1995. Does this sound familiar? That’s because we had this same conversation last year when 2023 hit the lowest number of home sales since 1995. Now, it looks like we’re on track to break that same record again this year, with experts predicting 2024 could see even fewer home sales.

Nationally, listings are up by more than 20% compared to a year ago, but the dramatic increase in home prices during the pandemic continues to pose significant affordability challenges for buyers. Unless something changes—whether through an increase in incomes, lower home prices, or reduced mortgage rates—home sales will likely remain strained.

The National Association of Realtors (NAR) reports that existing home sales declined 4.2% from a year ago, with a seasonally adjusted annual pace of 3.86 million sales in August . That’s a slight drop, with 14,000 fewer sales than the previous year when sales plummeted by 16%.

What’s Happening in Phoenix?

While this outlook is based on national data, let’s take a closer look at what’s happening in Phoenix. It’s not quite as dramatic, but sales are still down. Starting the year on par with last year, home sales have slowly been trending lower month by month. In fact, if you compare this year with previous years, it’s clear that 2024 has been tracking well below average.

However, there is a silver lining. Phoenix hasn’t experienced quite the same level of decline as the national market, but home sales here are still much lower than our typical average. The trend is concerning, especially as we head into the fall, which is historically a slower time for the market.

Federal Reserve Rate Cuts and Mortgage Rates

Now, if you weren’t living under a rock last week, you likely heard that the Federal Reserve cut the federal funds rate by 50 basis points, which was more aggressive than many anticipated. But to the surprise of many, mortgage rates actually went up after the rate cut. Why?

It’s essential to remember that the federal funds rate is not the same as the mortgage interest rate. Mortgage rates had already priced in the expected cut over the past couple of months, which is why we saw a slight increase last week despite the Fed’s move. According to Mortgage News Daily, while rates moved slightly higher mid-week, a modest recovery left the overall week-over-week change almost perfectly flat, with mortgage rates ending around 6.15% .

Phoenix Market Update: Supply vs. Demand

Let’s pivot back to the Phoenix market. We’re currently seeing an interesting mix of increasing demand and rising supply. Listings under contract, which is a key measure of demand, have been increasing over the last three weeks. This uptick is likely due to the recent declines in mortgage rates. Simultaneously, we’re seeing a rise in active listings, which means that while buyer demand is increasing, so is the competition among sellers.

For buyers, this increased demand means more competition for the homes on the market. However, with more listings becoming available, there are more options. For sellers, the increase in competition means you need to be strategic in pricing your home, marketing, and making sure your home stands out in a crowded market.

Closing Thoughts

To wrap things up, it’s a mixed bag for the real estate market in 2024. Nationally, we’re seeing some of the lowest home sales numbers in decades, with Phoenix showing similar, though slightly less dramatic, trends. Both buyers and sellers face unique challenges, with rising mortgage rates and increasing competition in the market.

If you’re a seller, make sure you price your home appropriately and consider the active competition in your area. Buyers should keep an eye on mortgage rates and be prepared for increased competition.

Be sure to stay tuned as I provide more updates on the Phoenix real estate market.

Sources:

1. National Association of Realtors: https://www.nar.realtor
2. Mortgage News Daily: https://www.mortgagenewsdaily.com
3. HousingWire: https://www.housingwire.com
4. Cromford Report: https://www.cromfordreport.com