Scottsdale, AZ - August saw the Scottsdale housing market continue to experience a period of stability, with sales, inventory, and prices remaining relatively unchanged for several weeks.

Although inventory levels remained low, this ensured that the market stayed in favor of sellers. We advise keeping an eye on any developments in the Market Action Index (MAI) as any significant increase in market activity may result in prices resuming their upward trend.                                        

Technically Still a Seller’s Market...

Despite the typical "summer slowdown" in the Greater Phoenix market, the average marketing time before signing a contract has remained at a reasonable 21 days for the past two months. Additionally, 41% of closings involve seller-assisted closing costs, with the median cost to the seller being $8,000. However, there has been a noticeable increase in the number of sales closing above the asking price. In June, it was 21%, July saw 22%, and so far in August, it is approaching 23%. In a normal seller's market, this statistic does not exceed 18% and usually peaks in June or July. In July, the median amount over the asking price for closings was $6,000, and most sales last month with seller concessions and prices over the list were for properties listed under $600,000.

New home construction represents approximately one-third of the available inventory. Although permit activity dropped significantly last year, it has rebounded this year, although not to the same level as in 2022. Instead, the number of new single-family permits year-to-date is at a level that Greater Phoenix has not seen since 2017. For existing homeowners, this means that fewer new homes will be added to the already competitive supply pool. Multi-family permits have outpaced single-family permits and continue to reach new highs. However, the majority of these units are intended for rental purposes, so they will not pose much competition to existing owners of townhouses and condominiums.

The most recent employment report for Arizona indicates that the state's labor force has been growing at a rate of 2.5% year-over-year, which is faster than the national growth rate of 1.8%. Non-farm employment has increased by nearly 72,000 jobs, and private sector earnings have risen by 2.4%. The unemployment rate stands at just 3.5%, significantly lower than the pre-pandemic measure of 4.9% and the lowest it has been in Arizona since 2007. The diverse employment base and positive economic indicators for Greater Phoenix continue to support price stability and a gradual increase in home values, despite the current limited demand.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report

" The housing market is currently experiencing a lack of significant changes, with buyers and sellers seemingly waiting for a sign before taking action. "

Conventional mortgage rates have remained relatively stable in the high 6% to low 7% range for about three months, indicating little sign of decline. As a result, contract activity has been stagnant since the 4th of July, leading to an overall demand that is 22% below what is typically expected during this time of year. While the continuous decrease in supply that we have witnessed since October has slowed and leveled out in the past weeks, it is still 52% below the normal supply for the past month and 37% lower than last year's count. 

Although this ratio between supply and demand suggests a seller's market in Greater Phoenix, it is less intense compared to the preceding three years, resulting in a more subdued upward pressure on prices. However, between September and December, it is anticipated that the annual appreciation rate will become positive and may return to levels similar to those seen in 2018 and 2019, with average annual appreciation rates ranging from 5% to 8%.

There has been a lot of talk that interest rates will adjust down by the end of the year and only time will tell,  if rates do indeed decline over the next three months, we can anticipate both buyers and sellers breaking the holding pattern and a resurgence in housing market activity and once again we may see trends like we have in the recent years. 

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report

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