Will shift in trends put housing market in balance by end of summer?

Real Estate | 27 Jun |

Walt Danley Christie’s International Real Estate released its housing market findings and analysis of trends founds in The Cromford Market Index for May 2022, for the Phoenix, Arizona market. According to the firm, concern over the cooling market has intensified. “Inventory is growing at an astonishing rate and prices are softening faster than anticipated. If these trends continue, our market will be in balance by the end of the summer,” explains Walt Danley, President and Founder of Walt Danley Christie’s International Real Estate. “If you have sellers thinking of waiting until the fall to put their home on the market, you will want to share this intel with them.”


READ ALSO: The 3 hottest neighborhoods in Arizona


The following are the latest trends based on Cromford® Market Index data and research for the entire Maricopa County:

The Maricopa County numbers for May 2022:

Closed Sales – down 11% from May 2021

New Homes Closed – down 12% from May 2021

Re-Sale Homes Closed – down 11% from May 2021

Median Sales Price was $490,000 – up 24.8% from May 2021

New Home Median Sales Price was $500,490 – up 27.8% from May 2021

Re-Sale Median Sales Price was $486,000 – up 23.7% from May 2021

The Maricopa County initial numbers for June 2022:

Active Listings (not including UCB & CCBS) – up 92.0% since last year and up 41.1% from last month

Active Listings (including UCB & CCBS) – up 36.7% since last year and up 25.6% from last month

Pending Listings – down 12.5% since last year and down 6.8% from last month

Under Contract Listings – down 16.7% since last year and down 5.9% from last month

Monthly Sales – down 9.7% since last year and down 6.1% from last month

Monthly Median Sales Price was $475,000 – up 21.8% from last year and up 1.9% from last month

Market Index Plunge

The Cromford® Market Index has plunged by over 50% in the last 3 months without losing any of its downward momenta. Most of that fall took place in the last 9 weeks. Dub Dellis, COO of Walt Danley Christie’s International Real Estate, shares that this is a very negative indicator for the housing market and with mortgage interest rates moving sharply higher again, there seems to be little chance of a recovery in demand that would quickly pull the CMI out of its steeply diving trajectory. “If the next two months look like the last two months, then we could hit the balanced zone for the CMI between 90 and 110 during August. Readings below 90 denote a buyer’s market,” said Dellis.

Federal Interest Rate Hikes

According to Dellis, “Federal interest rate hikes have been a significant factor in the rapidly changing market and it is safe to say that this most recent rate hike will have the Fed’s desired effect on the housing market…it will slow it down.”

Dellis shares that the luxury market is impacted less by interest rates than the production home market, but it is still a factor. The performance of the stock market plays a bigger role in the luxury space. “We have been in a seller’s market since the summer of 2018,” he said, “With an even stronger surge in favor of sellers in June of 2020, but the market is changing rapidly, more rapidly than most people anticipated.”

What This Means for The Market

“It is no surprise that demand should fall after a sudden and large increase in mortgage rates,” stated Dellis. “Normally, this would cause a slow increase in supply. However, we have witnessed a fast increase in supply due to a significant increase in the arrival of new listings. Clearly, people are choosing to exit the market – sell a property without buying a replacement. Those with homes that they do not actually need are likely to be the first to sell.” These include:

• Affluent buyers with multiple homes who can easily do without their Arizona getaway

• Landlords with multiple properties who would like to reduce their exposure by selling one or more of their investment properties

• Short-term rental owners (Airbnb style) who can quickly cancel their bookings and exit the market if they see risky times ahead

Long-term rental owners take slightly longer to sell if their properties are occupied by tenants, adds Dellis. If they are empty, then it is quick and easy to add the homes to the for-sale inventory. The new home supply is not distressed and owners will be looking to achieve top dollar. However, they may be feeling an increasing sense of urgency the longer the market cools.

In summary, it is clear that demand is dropping, supply is rising, and with the increase in interest rates, money is getting more expensive to borrow. All of these factors along with inflation, are playing big roles in the cooling of the housing market. “The big unknown is whether this increase in new listings is a short-term blip or the start of a much more important trend,” states Dellis. “The supply increase is only 6 weeks old, but it is getting stronger each week. The key takeaway is selling for slightly less is better than not selling at all.”

Show Buttons
Hide Buttons