Change is happening in the Arizona housing market. It is good news for buyers as inventory is rising. Runaway price points, buyer fatigue, and a predictable decline in demand are all factors that we will dive into in this month’s market update.
Arizona Housing Market Update: Gilbert and Queen Creek
While the increased inventory is making national news, and even in our own local news, trends in housing data are shifting. After a few years of little housing, inventory forced prices to historic highs in Gilbert, Queen Creek, and across Arizona, we’re seeing signs of a decline in demand.
Rising Housing Inventory in the East Valley
I mentioned in the March 2022 update that we were starting to see signs that demand was decreasing which meant inventory was increasing. That’s a true statement, even more now than a few months ago, and here’s why.
- Interest Rates. The Federal Reserve made good on its plan to start raising interest rates to combat inflation. Everybody saw this coming and the rate increases had been worked into most mortgage estimates ahead of Fed action. We have had a few increases so far and more at expected to come. This of course has a significant impact on mortgage payments and the affordability of housing. Combine that with months of runaway price points and buyer fatigue and we see a predictable decline in demand.
- Homes for Sale with Guest Suite. We are also seeing the consolidation of households. Multiple generations sharing one roof or roommates are more common as residents search for solutions to rising housing costs. Over the last several weeks we have seen the number of active listings in our local MLS system rise steadily and we are seeing more price reductions than we had in previous months. None of this is unexpected given current market conditions, prices, and now changes to interest rates.
- Demand is shifting. Demand for housing is dropping from extremely high levels. It will be interesting to see how demand plays out in the months to come. Inflation is putting financial stress on households across the country. It doesn’t matter where you live, pretty much everything is more expensive. One of the big drivers of housing demand in Arizona has been migration from other states. That same cost of living issues may drive even more people out of higher-cost areas to Arizona. Even though inventory is rising, it is still remarkably low and the buyers that are shopping continue to scramble for attractive properties.
- Housing Market Update: The market is unbalanced. While the shift is starting, the advantage remains a seller’s advantage. Particularly in parts of Gilbert and Queen Creek, we see homes taking multiple offers and certain price points are being bid up. Our most recent Gilbert listing took a contract three weeks ago after receiving 13 offers and a final price of $110k above the asking price. Suffice it to say, the housing marketing is still HOT in Gilbert. I noticed a statistic that referenced a 40% increase in available listings on our MLS in the last two weeks. Again accurate but considering how low the original number was, 40% isn’t really as dramatic as it sounds. However, given the trends and likely direction this will go, sellers need to be conscious of pricing and how the property shows to buyers in order to get the best results. It’s easier to overprice homes these days and if they don’t look sharp it will impact the results of the sale.
What does this all mean for Arizona home sellers and buyers?
The housing market update indicates trends are clearly shifting some and we can expect more to come in the short term as the Fed battles inflation with the only real tool they have – interest rates.
For buyers, the market remains competitive and generally, you are competing with other motivated buyers to secure the same property. Offers should continue to include strong terms but we may see fewer waivers of appraisal contingencies or other bold offer terms previously employed to stand out.
For sellers, an honest assessment of the property for pricing purposes is vital. Preparing the home for sale and small improvements will still pay off on the sale side. Multiple offers may still be on the table after the first weekend, but there may be fewer of them or they may not be as attractive as they were four months ago.
For months we have only been able to report low inventory, high demand, multiple offers, crazy terms, and soaring prices. All of these apply to a point as of today, but the strength of the seller’s market is diminished slightly and trending that way. Of course, every house, neighborhood, and situation is different for every buyer and seller in the market.
Expert guidance is always valuable and we hope if you are considering a purchase or sale you would consider us a trusted resource.
Until next time my friends,
Mark Newman, Newman Realty