Greater Phoenix Residential Market

Fletcher R. Wilcox
Sales Associate
Russ Lyon Sotheby’s International Realty
602.648.1230 Fletcher.Wilcox@RussLyon.com

Market Shift = More Opportunities for Buyers 

Inventory Increases as Mortgage Rates Increase

Overall Purchase Price Dips

Employment Report from the Greater Phoenix Economic Council

June Results: Both Purchase Price and Rents Dip 

The following results are for single-family resale homes in Greater Phoenix (Maricopa County). The information was compiled from data provided by the Arizona Regional Multiple Listing Services, Inc.

The overall median purchase price (MPP) of a single-family resale home dipped in June. The June 2022 MPP was $528,000. This is $12,000 or 2% less than May 2022 when it was $540,000 (all-time high). The June 2022 overall MPP is $83,000 or 19% higher than June 2021 when it was $445,000. While the overall MPP dipped in June from May let’s see how individual cities faired. Table One compares the MPP for thirty-one cities that are either in Maricopa or Pinal Counties. In June 2022, eighteen of the cities had a lower MPP than in May 2022, while thirteen cities had a higher MPP. Table One also compares the MPP in June 2022 to June 2021. Of the thirty-one cities, all thirty-one had year-over-year increases in the MPP. Sellers have built-up a lot of equity over the last year.     

June 2022 sales were 5,245. This is 364 or 6% less than May 2022 and 1,498 or 22% less than June 2022. June 2022 listings were 8,319. This is 132 higher than May 2022 and 1,004 or 14% higher than June 2021. Both May and June had over 8,000 listings. The last time there were over 8,000 listings in a single month was in March of 2019. Days on market (DOM) increased in June 2022 over May 2022. DOM were 27 in June 2022 and 24 in May 2022.  DOM in June 2021 were 24. The estimated months of supply (EMOS) has gone up. Housing inventory is no longer measured in days or hours but we are back to months. The overall EMOS is 1.8 months. This is still very low, but is rising. The EMOS for single-family resale homes under $350,000 is just 1.2 months. The overall median monthly rent (MMR) in June 2022 dropped from May 2022. It was $2,315 in June compared to $2,365 (all-time high) in May, which was a record, drop $50 or 2%. June 2022 MMR is $125 or 6% higher than June 2021. 

The Scottsdale median purchase price for a single-family resale home in June 2022 was $1,096,000. This is $21,000 or 2% higher than May 2022 when it was $1,075,000. The June 2022 Scottsdale MPP is $217,500 or 25% higher than June 2021 when it was $878,500. The Paradise Valley median purchase price for a single-family resale home in June 2022 was $3,650,000. This is $310,000 or 8% lower than May 2022 when it was $3,960,000. The June 2022 Paradise Valley MPP is $605,000 or 20% higher than June 2021 when it was $3,045,000.   

Job Growth Update

Table Two is a report from the Greater Phoenix Economic Council (GPEC). It lists forty-five companies over eleven months that (GPEC) has worked with to increase jobs in Greater Phoenix. The list shows the company name, location, type of operation, the number of jobs and locate date. The list accounts for 9,401 jobs. According to a report from the Arizona Commerce Authority there were 102,900 more people employed this May than last May. They also reported that employment did decrease by 5,500 jobs in May over April. The overall unemployment rate in May 2022 was 3.2%. This unemployment rate is the lowest rate recorded under the current estimation methodology going back to 1976. The unemployment for the U.S. was 3.6% in May 2022   

Conclusion: Market Shift = Buyer Opportunities!

Homeowners have built up a lot of equity over the last couple of years. Overall, the MPP is 23% higher this year than last year and is up a whopping 53% this year compared to two years ago. But the roaring home price gains may be over for a time. Sellers may now have to give a little. Why? Because demand is down. We saw that the number of sales were down considerably by 22% this June compared to last year. At the same time demand is down, supply is up. Supply is rising as more homes have come onto the market compared to last year at this time. In fact, in June and May there were over 8,000 single-family resale listings in each month. Previous, March 2019 was the last month there was over 8,000 single family-resale listings. The primary reason sales were down year-over-year were the combination of rising mortgage rates and rising prices. This combination priced many buyers out of the market, thus lessening demand. Let’s make this relevant by comparing a principal and interest payment that a buyer theoretically would have paid last year compared to recent with the following scenario: According to Freddie MAC, the conventional thirty-year fixed mortgage was 5.23% in May 2022 compared to 2.96% in May 2021. This is an increase of 2.27%. In June 2021 if someone purchased a home for the MPP of $445,000 with 10% down and a thirty-year fixed rate of 2.96% their principal and interest payment would be $1,680. If a buyer purchased in June 2022 with a MPP of $528,000, 10% down and a thirty-fixed rate of 5.23% their principal and interest payment would be $2,618. This is a principal and interest increase of $938 in one year. This one-year surge in a principal and interest payment at the median purchase price has considerably reduced sales. Add to this inflation, spiking gas and food prices and talk of a recession, it is no wonder that sales are down.

Potential buyers, especially those who have tried to buy but were beaten out time after time, now may be your time. Inventory is increasing so you have more choices. Prices are no longer increasing like they were. Of course, the spike in interest rates and the increase in purchase prices eliminated many buyers because of a high principal and interest payment. But there may be a way for a buyer to reduce a principal and interest payment and therefore qualify. What is it? By paying discount points. Discount points, which are paid at the time a buyer closes on a home, will allow a buyer to lower their monthly principal and interest payment. But paying discount points does increase a buyer’s closing costs. However, with increasing inventory some sellers now will be willing to give a seller credit that a buyer may elect to use to buy down their mortgage rate. A lower mortgage rate means a lower monthly principal and interest payment. A lower monthly and principal payment makes a home more affordable. A buyer should determine if discount points are worth paying. To do this a buyer needs to calculate their break-even point. A key to this equation is the cost of the discount points and how long would the buyer own the home. This is why it is so important for a buyer to meet with a lender and find out how much house they may qualify for including a discussion on discount points. (I can refer you a lender). Of course, a buyer may not know how much of a seller credit a seller may give until a contract is submitted to the seller. Overall, today with the market shifting BUYERS, NOW MAY BE YOUR OPPORTUNITY TO OWN.                      

Chart One: Median Monthly Rent & Median Purchase Price  

Table One: Median Purchase Price for Thirty-One Cities

Table Two: Greater Phoenix Economic Council Report on Employment