Key Trends and Opportunities in Arizona’s Housing Market – September 2024

Housing Market Trends in Arizona – September 2024

We’re starting to see subtle, yet significant, signs of improvement in Arizona's housing market. This shift is largely driven by lower mortgage rates, leading to a 2.5% increase in listings under contract compared to this time last year. It’s a crucial change, considering the last year-over-year increase happened in January.

However, active listings are rising too. This means many of today’s buyers are also sellers, creating more movement in the "move-up" market where homeowners upgrade to larger homes. While this is great news for those looking to upgrade, the overall market index is still trending downward, showing that we’re not quite in full recovery mode.

How Falling Mortgage Rates Are Impacting Arizona's Market

When the Federal Reserve cut its benchmark rate by 50 basis points, many expected mortgage rates to follow. But instead, mortgage rates ticked up slightly. Why? Mortgage rates are more influenced by the 10-year Treasury bond yield than by the Fed’s decisions. This unpredictability shows just how tough it can be to time the market based on interest rate changes.

Many people try to time their real estate decisions, waiting for lower rates or political changes to make their move. But the reality is, housing isn’t as driven by politics as many believe. For example, the recent rate cut weakened the dollar, making Arizona real estate more affordable for foreign buyers. However, this shift was more influenced by underlying economic factors than political ones.

Buyer’s Leverage Is Increasing

As buyers begin to gain more negotiating power—especially in the lower and middle price ranges—we’re seeing a gradual shift in the market dynamics. Cities like Fountain Hills have posted a 10% increase in their market index, while Paradise Valley surged with a 25% gain. Buyers are starting to see more leverage in these negotiations, though the overall shift remains moderate.

Other cities, like Buckeye, Scottsdale, Cave Creek, Surprise, and Glendale, have also seen modest improvements. On the other hand, cities like Phoenix, Mesa, Avondale, Chandler, and Peoria are experiencing declines in their market index, making them more favorable for buyers seeking negotiating power.

Struggles in the Outer Edges of Arizona’s Market

The outer areas of the Arizona market are facing the most challenges. Cities like Coolidge, Arizona City, Tonopah, Eloy, and Florence have been the weakest performers this past month. Meanwhile, 55+ communities like Sun City and Sun City West posted modest gains of 1.7%, with Sun Lakes performing slightly better, holding steady with a 4.6% increase.

Opportunities for Savvy Home Buyers

Did you know that recessions can often signal the beginning of a housing market rebound? After more than two years of slower sales, both buyers and sellers are beginning to re-enter the market.

Historically, home prices remain stable, and mortgage rates tend to decline during recessions. Arizona's employment report shows that private sector earnings rose 7.3% year-over-year, outpacing both inflation and home price growth. This creates a favorable environment for buyers, with higher incomes, lower rates, and steady home prices offering more opportunities for those ready to take action.

If you’re in the market to buy, cities like Phoenix, Scottsdale, and Peoria are showing increased listings, and fewer buyers mean less competition. The next few months could be the perfect time to find the right home with more flexibility in negotiations.

Why Now is the Time to List: Sellers Seize Opportunities

September and October are typically the last major months for home sales before the holidays slow things down. Right now, homes spend an average of 33 days on the market before securing an offer. So, if you’re considering selling, now’s the time to ensure your home stands out.

For homes under $2 million, lower mortgage rates are expected to drive demand. In the luxury market—particularly properties priced over $2 million—demand is a bit more sluggish. That’s because 55% of luxury transactions are cash deals, unaffected by mortgage rates. Even so, September’s luxury listings have performed better than in previous years.

Debunking the Myth of Political Impact on Arizona Real Estate

With the upcoming November elections, many wonder how political outcomes might affect the housing market. The truth is, presidential elections have little impact on home sales.

Looking at historical data, home sales in election years tend to follow normal patterns:

• Stronger sales: 2004 and 2020 saw stronger sales than typical non-election years.
• Normal trends: 2012 and 2016 aligned with regular market activity.
• Weaker sales: 2000 and 2008 had weaker sales, but those coincided with recessions, which had more to do with the slowdown than the election itself.

In the end, home sales are driven more by personal life events—family changes, job relocations, estate planning—than by election outcomes. While politics can influence economic policies, the housing market tends to respond to economic fundamentals, not political headlines.

Final Thoughts: Focus on the Big Picture

As always, I encourage you to stay focused on the long-term picture. Real estate is a long game, and trying to time the market based on rate cuts or political shifts can lead to missed opportunities. Instead, focus on sound strategies and the fundamentals that drive long-term success. The market may fluctuate, but a solid plan is your key to building and preserving wealth in real estate.

If you’re ready to buy or sell in Arizona, feel free to reach out. Whether the market is rising or falling, having a solid strategy is always your best bet.