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Market Summary for the Beginning of September 2023
Here are the basics – the ARMLS numbers for September 1, 2023 compared with September 1, 2022 for all areas & types:
- Active Listings: 11,969 versus 18,694 last year – down 36% – but up 6.5% from 11,241 last month
- Pending Listings: 4,604 versus 5,607 last year – down 18% – and down 4.9% from 4,842 last month
- Under Contract Listings: 7,111 versus 8,419 last year – down 16% – and down 5.8% from 7,546 last month
- Monthly Sales: 6,211 versus 5,916 last year – up 5.0% – but down 1.7% from 6,317 last month
- Monthly Average Sales Price per Sq. Ft.: $282.52 versus $286.71 last year – down 1.5% – but up a tiny 0.01% from $282.48 last month
- Monthly Median Sales Price: $435,000 versus $444,900 last year – down 2.2% – but up a tiny 0.02% from $434,900 last month
Despite comparisons becoming easier with last year, the market still looks in poor shape. We can see that demand is very weak with listings under contract, down 16% from this time last year. The August closing count offers some relief from the gloom, rising 5% from August 2022, but with the 30-year fixed mortgage rate still north of 7%, qualified buyers are thin on the ground.
Sellers are also scarce. Some simplistic commentators are obsessed with imaginary bubbles and assume that if demand is weaker then prices will fall. Not the case. The fact that so many people think we are in a bubble is conclusive evidence that we are not in a bubble. The important measure is the balance between supply and demand, not demand on its own. Supply has been low for several years apart from the brief surge in the summer of last year. This was caused by panic among iBuyers and speculators, both trying to exit the market in too much of a hurry. At the moment supply is down more than demand is down, so prices are firm.
Without a large and prolonged increase in sellers, we won’t have the lop-sided market that causes prices to fall. We do have a small increase in supply compared with last month, but we are still down 36% from this time last year. If supply continues to grow at 6% or more for six months or more, then we could get back close to a balanced market, but now we are seeing just the usual seasonal pattern. Supply tends to expand from August until mid-November and then contract again.
It might seem that prices are weakening given that the median sales price is $435,000, having been $443,000 two months ago. This is a drop of 1.8%. However, luxury home sales are relatively scare in July and August, and we can see evidence of this from the fall in the average home size between June and August. This dropped almost 3% from 2,022 to 1,965 over the same two months, so median prices falling less than 2% tells us the underlying trend is still positive. The luxury home market share and average home size will no doubt bounce back in October and we should be able to see the upward trend reasserting itself more visibly.
HOUSING AFFORDABILITY in Arizona and nationally took another hit in the second quarter of 2023 primarily due to rising home prices and higher interest rates based on the latest National Association of Homebuilders/Wells Fargo Housing Opportunity Index released August 10. Nationally, 40.5% of new and existing houses sold in the second quarter were affordable to families earning the U.S. median income of $96,300. This was down from 45.6% in the first quarter, but still better than the fourth quarter of 2022 which was the lowest recorded measure (at 38.1%). Housing affordability was lower in all Arizona metropolitan areas for the second quarter of 2023 after increasing across the board in the first quarter of the year. In descending order, the share of affordable homes in Arizona were 60.8% in Sierra Vista-Douglas, 54.4% in Yuma, 41.7% in Lake Havasu City-Kingman, 38.6% in Tucson, 30,1% in Phoenix, 27.3% in Flagstaff and 23.5% in Prescott Valley-Prescott. House prices increased in nearly all Arizona metropolitan areas in the second quarter, with only Flagstaff and Lake Havasu City-Kingman posting slight decreases.
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