Impact of High Mortgages and Low Inventory on Home Sales in Arizona
High mortgage rates and tight inventories are impacting home sales nationwide. However, real estate agents in Arizona suggest that the continuous influx of new residents to the state has mitigated the impact in the Valley.
According to recent reports, existing home sales declined by 2.2% from June to July, with 4.07 million homes sold across the country. This reflects a decrease of over 16% compared to July 2022.
Meanwhile, the Arizona Regional Multiple Listing Service stated that sales plummeted between June and July but were only down 3.1% from the same period last year. Additionally, realtors in Phoenix have observed that home prices are stabilizing in the metro area, as reported by the Phoenix Business Journal.
The national report attributes the decline in home sales to rising interest rates, causing homeowners to be reluctant to sell and making it challenging for potential buyers to enter the market. Consequently, the limited supply of homes available for sale is driving up prices and negatively impacting sales.
Lawrence Yun, the chief economist of the National Association of Realtors, noted that inventory availability and mortgage rates are two influential factors affecting current sales activity. Unfortunately, both factors have been unfavorable to buyers.
The report indicates that existing home prices nationwide have increased by 1.9% compared to the previous year, with a median sale price of $406,700 in July. This represents the third-highest average on record. In addition to higher home prices, buyers are also facing increased mortgage rates. Rates for a 30-year fixed mortgage have climbed steadily from under 3% two years ago to 7.09% in July, according to the Realtors’ report.
Real estate agents operating in the Valley acknowledge that Arizona is confronting similar challenges, such as rising interest rates, limited inventory, and higher prices. However, these challenges are tempered by the continuous influx of new residents, which maintains a high demand for housing.
Despite the impending potential increase in interest rates, Arizona’s market remains strong due to the scarcity of available houses relative to the demand. The steady nature of the market over the years reflects the desire of people to reside in the state, as evident in the market’s consistent performance, as stated by Sindy Ready, first vice president for Arizona Realtors.
Phoenix and Arizona consistently rank high in population growth according to the Census Bureau. In 2022, Queen Creek and Maricopa City were the seventh and twelfth fastest-growing cities in the country. Phoenix added the second-highest number of new residents that year, with 19,053 people relocating to the city from 2021 to 2022, just behind Fort Worth’s 19,170.
With a population of 1.6 million, Phoenix is the fifth largest city in the nation. Real estate experts attribute this to the state’s favorable climate and strong economy, among other factors.
Russell Diehl, a designated broker for Arizona Network Realty, pointed out that Arizona offers various attractions such as employment opportunities, recreational activities, and appealing weather, making it an attractive destination for many.
Although demand for housing remains high, the supply in Arizona, as well as the rest of the country, remains tight. Diehl explained that Arizona usually has around “18,000 to 22,000 resale listings,” but this summer the number has dropped to just above 12,000. As a result, homes are receiving multiple offers, indicating strong demand.
Tina Tamboer, a senior housing analyst at the Cromford Report, added that compared to the same time last year, the existing housing inventory in the greater Phoenix area has decreased by about 40%.
While interest rates have risen compared to previous years, they are still far from the exceptionally high rates experienced in the early 1980s. According to Stephanie Ready, an industry expert, anything above 6% may seem high to some, but historically, interest rates around 6% to 6.5% have been considered normal.
Despite the challenges of decreasing housing stock and increasing interest rates, the Phoenix market stands out compared to others. Brandon Robben, managing broker at Arizona Network Realty, believes that the city’s economy will continue to grow for years to come, describing it as “a diamond in the rough” among other markets.