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Arizona fares slightly better as high mortgage rates, low inventory hit home sales
High mortgage rates and tight inventories are hitting home sales nationwide, but agents in Arizona say the continuing influx of new residents to the state has softened the impact in the Valley.
The National Association of Realtors reported this week that existing home sales fell 2.2% from June to July, when 4.07 million homes were sold nationwide. That was down more than 16% from July 2022, the report said.
The reverse was true in Arizona, where a report from the Arizona Regional Multiple Listing Service said sales fell steeply from June to July, but were only down 3.1% from the same time last year.
The national report attributed the decline in part to rising interest rates, which are making homeowners reluctant to sell and making it difficult for homebuyers to get into the market. That is reducing the number of homes on the market, driving up prices for those who are looking to buy and depressing sales.
“Two factors are driving current sales activity – inventory availability and mortgage rates,” Lawrence Yun, the association’s chief economist, said in the report. “Unfortunately, both have been unfavorable to buyers.”
The report said existing home prices nationwide were 1.9% higher than they were a year ago, with a median sale price of $406,700 in July, the third-highest average on record. Besides paying more for the home, buyers are paying more for their mortgages: Rates for a 30-year fixed mortgage have climbed steadily from under 3% just two years ago to 7.09% in July, according to the Realtors report.
Real estate agents in the Valley say Arizona is facing all the same challenges – rising interest rates, shrinking inventory and higher prices. But those are offset by the number of new residents flooding the state annually, they said.
“What is happening now is the interest rates are currently around 7.5% and there are rumors that they are going to be pushing over 8% in the next few weeks, but because our market is in such high demand … ,” said Sindy Ready, first vice president for Arizona Realtors. “There is just more demand than there are houses, so it is just pushing the market up.
“We are very blessed in that regard, that our market is and has been over the years fairly steady. People want to be here and it definitely shows in our market numbers,” Ready said.
Phoenix and Arizona consistently finish near the top of Census Bureau rankings for population growth from year to year. The bureau said Queen Creek and Maricopa City were the seventh- and 12th-fastest growing cities in the country in 2022, and Phoenix added the second-most new residents that year. The 19,053 people who moved to Phoenix from 2021 to 2022 trailed only Fort Worth, which added 19,170.
Phoenix’s population of 1.6 million is fifth in the nation, a fact real estate officials attribute to the state’s climate and economy, among other factors.
“Arizona always has its pluses, its demands, its reasons for people to move to Arizona,” said Russell Diehl, a designated broker for Arizona Network Realty. “Employment, jobs, recreation, climate, those things are very appealing to people.”
While agents say demand remains high, supply in Arizona is tight, as in the rest of the country. Diehl said there are typically “about 18- to 22,000 resale listings” in Arizona, but not this summer.
“I just checked this morning and we are … just above 12,000 with active and coming soon (listings),” he said Tuesday. “Homes are getting multiple offers, so there is still demand.”
That was echoed by Tina Tamboer, a senior housing analyst at the Cromford Report, which tracks the greater Phoenix resale market.
“Compared to this time last year in August we are down about 40%” in existing housing inventory, Tamboer said.
Ready noted that while interest rates are at a 20-year high, they are nowhere near the 17% and 18% rates of the early 1980s.
“We have just had such unusually low rates for so many years that now anything above 6 % people are thinking is high, although for many years that 6% to 6.5% was pretty normal interest rates,” she said.
Despite the falling housing stock and the rising interest rates, the Phoenix market is better off than others because of factors that make it what one agent calls “a diamond in the rough.”
“I don’t think we are at the same pace as the rest of the country,” said Brandon Robben, managing broker Arizona Network Realty. “I think we are a diamond in the rough and I think our economy here is going to continue to grow for many years to come.”