As we move deeper into 2024, the Arizona housing market is poised for a shift, with unique opportunities emerging for both buyers and sellers. Historically, recessions have been the turning point for real estate, stabilizing home values and driving mortgage rates down. Though these periods are marked by economic uncertainty, the silver lining for the housing market is often increased affordability and a more balanced playing field.
For buyers, a combination of higher incomes, declining mortgage rates, and steady home prices presents a window of opportunity. With sellers finally coming off the sidelines, inventory is rising, which could lead to more favorable conditions for those ready to make a move. However, time is of the essence as the market slowly adjusts to these changes.
Sellers, on the other hand, need to act strategically. September and October represent the final push for home sales before the holiday slowdown. Listing your property during this period, with the right price and condition, could secure a sale before the year's end. However, the luxury segment may face unique challenges, as uncertainties around the economy and upcoming elections may weigh heavily on high-end buyers.
In this dynamic environment, being prepared and informed is key to making the most of the shifting market conditions in Arizona. Whether you're looking to buy or sell, the next few months will present opportunities to capitalize on these changes.
-Why Recessions are Good for Most Home Buyers, but Not All -
For Buyers:
It may be hard to believe, but recessions are historically the beginning of a turnaround for the housing market. After enduring more than 2 years of declining sales, sellers and buyers may start moving and transacting again. While recessions are negative for the economy (as they coincide with higher unemployment), two things typically occur that turn the housing market positive.
The first is home value stabilization. In every recession since 1970 (except for one infamous recession in 2008) home values had minimal fluctuation and appreciation year-over-year. The second is mortgage rates. Every recession since 1970 saw mortgage rates decline while at least 90% of the labor force remained employed. According to the August employment report from the Arizona Dept of Economic Opportunity, private sector earnings rose 7.3% annually in June, and 5.3% in July. Both rates are higher than the rate of inflation, and higher than the rate of home price appreciation. The combination creates an environment for increased home sales as affordability improves due to higher incomes, lower rates, and flat home appreciation.
Unfortunately, Mortgage News Daily showed zero improvement in purchase mortgage applications in August. The housing market simply doesn’t move as fast as the stock market, and it takes time for buyers to warm their engines and apply for mortgages after rates begin their decline. Partly because they wait to see if rates continue down or stabilize, but also because they don’t have an acceptable home in sight for motivation. As a result, application data often picks up after showings increase.
Future buyers may have one other obstacle to overcome, and that’s selling their existing home. This is what Greater Phoenix is experiencing now. As expectations of sustained rate declines increase, it’s sellers who are getting off the fence first. Weekly new listings are up 11% since rates began their decline on August 1st. These sellers will most likely become buyers within 1-3 months. This creates a good opportunity for buyers who are ready today. An early boost in supply without an offsetting boost in competing buyers means the buying environment will remain relaxed and accommodating over the next few months until the new year begins.
For Sellers:
September and October are the last hurrahs for home sale activity as 2024 enters its last stretch. New listings activated during this time should be well priced and in competitive condition to the listings around them. The median marketing time before contract is currently 33 days, so most properties listed in September should expect a contract in October. However, sellers who wait to list until late October will run into holiday speed-bumps that could tack on an extra 1-2 weeks before an acceptable contract.
While lower mortgage rates are expected to boost demand in price ranges under $2M, they don’t have much effect on the high-end luxury market where 55% of sales over $2M are cash. Recessions are not good for luxury because they coincide with poor stock market performance and stagnate corporate profits, which are the primary drivers for demand in this segment. So far, multiple headlines warning of an approaching recession are not tanking the stock market, and luxury listings under contract for September are higher than any other year. Other good news for luxury sellers, high cancellation rates from May-July dropped supply counts and launched Paradise Valley back into a seller’s market. In fact, all luxury sellers in the Northeast Valley saw market improvements from lower supply counts.
However, uncertainty can still stall luxury sales in the 4th quarter. If unemployment rates continue to rise and uncertainty grows over a recession and the November election, the hope of an October rally could fade and contract activity stagnate until the election and holiday seasons have run their course. Hope and optimism will return at the kickoff of 2025 along with perfect weather, tourism, and an increasing flow of contracts.
As we approach the end of 2024, the Arizona housing market offers unique prospects for both buyers and sellers. Buyers can take advantage of increasing inventory, lower mortgage rates, and steady home prices, while sellers can benefit from a last push in demand before the holiday season slows things down. Acting quickly and strategically in the coming months could mean the difference between a successful transaction and a missed opportunity.
Whether you're a buyer looking for the right home or a seller ready to capitalize on current market conditions, now is the time to make your move. For expert guidance in navigating these changes, contact Andrea Garcia Realty. We're here to help you achieve your real estate goals in Arizona’s evolving market.
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