Home buyers are SHOPPING! Home sales were down the first two months of the year. I believe some of this was contributed to the interest rates towards the end of the year. They reached a five year high.
Statistically, January and February sales are low months to begin with. We typically see less activity in December with all the holidays, travel, and other year-end events and expenses that occur. January is also a slower month, I refer to this as recovery month.
So, when you compound that these historically low sales months with high-interest rates like we saw things appeared to be “shifting.” The good news is, interest rates have dropped. They’ve gone down to a 15 month low. And as interest rates have been dropping we’ve seen the amount of activity in the market place increase quite dramatically. We have now surpassed last years numbers. We now have more homes under contract at this point then we did last year. Take a look a look at this graph from the Cromford report.
Supply is low, and demand is increasing. It’s not just locals that are buying. Many families are migrating from other states. Here are a couple of great articles that talk about Arizona’s population growth in more detail. If you’ve been thinking of buying or selling this year. Expect home prices to continue to rise.
The below commentary is written by Tina Tamboer, Senior Housing Analyst with The Cromford Report ©2019 Cromford Associates LLC and Tamboer Consulting LLC
Buyers got a break last month as 30-year mortgage rates dropped significantly from an average of 4.41% to 4.08%, which is the lowest they have been since January 2018. On a $267,000 home (the median sales price in Greater Phoenix) the drop equated to nearly $50 per month in savings on principle and interest, which was enough to get many buyers off the couch and looking for homes. This rate drop combined with an increased conventional loan limit up to $484K and a 32% increase in weekly seller price reductions meant that price ranges between $200K all the way up to $800K saw a combined 19% increase in contracts written over the last 5 weeks. Contract activity is expected to increase at this time of year anyway due to seasonality, but last year over the same 5 weeks it only increased 8.6%. For buyers who are still waiting for prices to begin declining, their wait just got longer.
Sellers: The drop in mortgage rates could not have come at a better time for sellers. Up until 6 weeks ago the negotiating advantage sellers have been enjoying for years in Greater Phoenix had weakened to the point where the market was on track to enter balance within a matter of months and price appreciation would have begun to slow even more. However by April 4th the average 30-year mortgage rate (as reported by Freddie Mac) had dropped to a 15-month low. This spurred buyer activity and resulted in Listings Under Contract, which were 10.2% below 2018 last month, to sharply increase and surpass 2018’s April count by 0.8%. Currently sales volume is down 9.6% from last April, however when these contracts close escrow over the next 4-6 weeks May and June should fare much better. Don’t get too excited though, the seller market is still much weaker than last year. Affordability and demand were helped by this interest rate drop but could quickly be negated as prices continue to rise. Sellers still need to be mindful of their asking price to get under contract before buyer activity seasonally begins to decline between May and the end of the year.