PHOENIX – A variety of market conditions are combining to sour both sides of the homebuying market in metro Phoenix, a local real estate expert said.
According to the Phoenix Business Journal, Valley active listings fell by 3.8% and home sales declined by 2.8% year-over-year in February.
Meanwhile, mortgage rates have been climbing since dipping below 6% in late February, according to Freddie Mac. The 30-year fixed-rate mortgage average was up to 6.46% on Thursday, the highest level in seven months.
Kimberly Winson-Geideman, director of the Arizona State University Division of Real Estate, said the conditions are working against both sellers and buyers.
“We’ve kind of got a situation there where sellers are unhappy, but we also have a problem with interest rates, and that’s going to kill the buyer’s side every single time,” Winson-Geideman told KTAR News 92.3 FM’s Arizona’s Morning News.
High prices, interests rates slow Phoenix home sale market
Winson-Geideman, who also serves as executive director of the International Real Estate Society, said many sellers have unrealistic expectations about the value of their homes in the current market.
“A lot of this goes back to the heady times of COVID when sellers could say, ‘Hey, you know, I want to sell for this price,’ and they could get that and then they could get more,” she said. “But now, we’ve got a situation where sellers are putting their houses on the market, they still want to get that price, they think they’re going to sell really easily, and they just can’t.”
When that reality hits, owners who are reluctant to lower their asking price must decide between leaving their listings up for a long time, which is not advisable, or pulling them down until prices rise again, Winson-Geideman said.
At the same time, potential buyers are being discouraged by high interest rates and asking prices.
“It kills the buyers from the point of being approved for a loan, and it also just gives the buyers the sense that they’re not going to be able to afford what they want, so they pull out of the market,” Winson-Geideman said.
As more buyers sit on the sidelines, prices are bound to drop due to basic supply-and-demand forces, she explained.
“Right now, we do have a situation where supply is exceeding demand,” Winson-Geideman said. “And when you have supply exceeding demand, you’re going to see that reduction in price. But also, when interest rates go up, you also see a reduction in price.”
In fact, the median home sale price for the Valley declined by 1.1% year-over-year in February, the Phoenix Business Journal reported.
What can Valley shoppers do in current home sale market?
A variety of factors can cause the market to shift. For example, Winson-Geideman said the recent rise in interest rates is tied to the Iran war.
“I think we’re going to see a decrease if we can get rid of what’s going on in the Middle East,” she said.
Meanwhile, Winson-Geideman advised shoppers who aren’t in a position to wait for prices or mortgage rates to drop should adjust their expectations and expand their search areas.
“There’s this old saying that says buyers will drive to qualify. And that’s particularly something that we see in the first-time homebuyers market. … They have this ideal home in mind, but they can’t necessarily qualify for it in the area they want, so they move a little farther out until they can qualify,” she said.