Market Summary for the Beginning of September 2024

Here are the basics – the ARMLS numbers for September 1, 2024 compared with September 1, 2023 for all areas & types:

The re-sale market continues in the doldrums and has reacted very little so far to the lower mortgage rates that have emerged since July. Under contract listings went down a further 8.6% during August rather than staging a recovery. Demand appears to be stronger in the new home sector but that has a relatively modest effect on the MLS statistics because the bulk of new homes are not listed on the MLS. However, one look at the stock price charts for the major homebuilders will tell you they are in a good mood.

Re-sale supply usually rises between August and November, but this year the trend got off to an early start and we have 5.5% more listings active and without a contract than a month ago. With demand weak and supply rising, sellers are not getting the break they were probably hoping for. Concession to buyers and price cuts continue to be common and widespread.

The contract ratio is somewhat less stable, and this represents a further cooling in the market. It seems many potential buyers want to see rates drop below 6% before they make a move.

The only bright spot for sellers is that pricing improved during August with the average $/SF rising 1.3% from July. However, the median sales price was unchanged and is up only 1.1% from a year ago. This is less than inflation so in real terms homes are cheaper than this time last year. This statement does not apply to the very top end of the market which has significantly risen in price over the last 12 months. In fact, we saw a new record of almost $32.4 million paid for a new home just completed in Paradise Valley’s Mummy Mountain Estates. Unusually, this was a spec home and it sold for more than $2,000 per sq. ft. The market over $5 million is not seeing the same conditions as the regular market.

It would take a resurgence in demand to pump more life back into this dormant regular market and so far it seems that the Federal Reserve has not done enough by suggesting they are in favor of dropping the base rate. The question now is whether actually dropping the rate in September is going to be an event or a snooze for home buyers.

As usual, we will have to wait and see. Look to the under contract count to be the first thing to show any pick-up in demand.  Source Cromford Report

Did you know that the housing affordability index has declined over the past four years; the Housing Affordability Index, which measures whether a typical family earns enough income to qualify for a mortgage on a median-priced home, has dropped to its lowest levels since 1996. This indicates that housing has become less affordable for the average American household.

The average American needs to spend an additional $11,434 annually to maintain the same standard of living they had in January 2021.  This increase is primarily due to higher costs in essential categories like food, transportation, housing, and energy.  Unfortunately, wages haven’t kept up with inflation.  All this impacts affordability for homes that have increased so much. The good news is that if the unemployment rate stays under 4.4% (Arizona is at $3.4%) and mortgage interest rates drop below 6%, it will maintain a robust housing market and economy.  We must get through this slow time of the year and the election; things will pick up again.

There is pent-up demand for housing if mortgage interest rates are below 6%.

VA loan programs allow 0 down out of pocket. Conventional loans require as little as 3% down, and FHA loans require 3.5% down. With a reasonable offer, the seller may pay most or all of the buyer’s closing costs. There are also down payment assistance programs.

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