Welcome to July’s housing market update, I hope you had a fun & safe 4th of July celebration! The first half of 2024 has been a very subdued period for Greater Phoenix’s residential real estate. The market is not in trouble, but the closing volumes have been far below normal and buyer enthusiasm is unusually weak and getting worse.
Here are the basics – the ARMLS numbers for July 1, 2024 compared with July 1, 2023 for all areas & types:
- Active Listings: 18,121 versus 11,545 last year – up 57% – and up 0.4% from 18,044 last month
- Pending Listings: 4,407 versus 4,997 last year – down 12% – and down 12% from 5,015 last month
- Under Contract Listings: 7,402 versus 7,858 last year – down 5.8% – and down 11% from 8,324 last month
- Monthly Sales: 6,318 versus 7,456 last year – down 15% – and down 17% from 7,595 last month
- Monthly Average Sales Price per Sq. Ft.: $295.39 versus $287.67 last year – up 2.7% – but down 0.8% from $297.79 last month
- Monthly Median Sales Price: $450,000 versus $443,000 last year – up 1.69% – and unchanged from $450,000 last month
Supply is significantly higher than last year, but remains below normal and shows a few signs of starting to decline at last. The weak demand is currently well matched, and we are in a balanced market overall, though significant variation can be found among sub-markets based on location and price range. Compared with buyer’s desires there is too much supply on the outer fringes and not enough in the center of the valley.
On the bright side, distress remains extremely low with pending foreclosures and completed foreclosures few in number. We read that the average credit rating of successful home buyers taking out mortgages are higher than they have ever been, so there is almost none of the lending risk that was out of control in the lead-up to the great housing crash of 2007.
Sellers are working with fewer buyers than normal and have more competition from other sellers, so compared with most of the past decade, they are having a tougher time. The average asking price $/SF has fallen a long way over the past 2 months – down 5.6% from $376.65 to $355.68. This is partly because price cuts have been numerous and partly because a lot of high-end listings have been cancelled or expired for the quiet summer period. It is normal for asking prices to fall at this stage in the year, but seasonal patterns are being emphasized by the weakness in demand.
For investors who remain active during the summer months, we see increased gross margins possible from fix and flips, though more effort will probably be required on the selling side than in recent years.
We are firmly into the quiet season and closed sales for June 2024 were already down 15% compared to June 2023. I anticipate low volumes to continue during July and we have 2 to 3 months of seasonal price weakness to endure before the market is likely to pick up steam again in October. This could be jump-started early by a drop in interest rates, but we are not holding our breath.
There is no need for panic, but patience is definitely being tested.
