The Phoenix real estate market has witnessed incredible growth in the last decade with impressive returns of up to 400% especially with cities like downtown Phoenix, Mesa, Gilbert, and Scottsdale. As we step into June 2023, I will be exploring the current outlook of the market, going into the major concerns that lie ahead, how buyers are navigating with these new market dynamic conditions. Overall I will examining the the state of the Phoenix real estate market.
Examining the market challenges in the first half of the year
In the first half of this year, the real estate market has encountered some challenging times, with certain properties experiencing a significant decline of 10-15% in their values. This has caused a major concern for people which has caused doubts on the overall stability of the real estate market.
However, the last two months we have witnessed the momentum of buyers picking up once again. The allure of a 10% decrease in real estate property prices has created an impulse feeling for many individuals to go ahead and purchase that property now that it looks to be on a discount.
Are the properties really selling at a discount? In my opinion, it seems more like a temporary rebound during a market decline. The real estate market is currently experiencing a small retracement of trying to push the prices up, but overall, sellers still have the upper hand, which will result in the downward trend to likely still continue.
For example, the market conditions are still unknown, with a blend of both good and bad news coming out every day. On the positive side, unemployment rates are dropping 3.6% from the start of the year to 3.4%.
However there’s also a concerning downside as properties are sitting vacant. Just today, a whopping 30% of offices in Los Angeles were reported to be empty, leading to the largest office landlord defaulting on three building mortgages. This is why we are in a very difficult spot in the market.
Stay tuned for the NFP (Non-Farm Payrolls) news coming out this friday. The market’s direction this month will heavily rely on this data. Once the data is released, I’ll provide my analysis and output.
what factors are influencing the market decline?
Multiple factors can contribute to a market decline. One of the significant factors of the decrease of market value in homes has to do with the new interest rates, which have reached nearly 6% for traditional loans. The higher interest rates lead the difficulty of qualifying for more because the mortgage payments are a lot more now.
In the image shared, is a clear comparison on the impact of rising interest rates on mortgage payments. The images illustrate a significant shift in interest rates over the past two years. Nearly two years ago, interest rates were in the low 3% resulting in much lower monthly mortgages. However, in the current economy the new 6.7% interest rates has translated to an alarming monthly mortgage increase of over $800.
It is quite evident that these sharp interest rates have played a crucial role in the declining property value.
“In the image shared, a clear comparison reveals the impact of rising interest rates on mortgage payments. The graph illustrates a significant shift in interest rates over the past two years. Nearly two years ago, interest rates stood at a modest 3%, resulting in lower monthly mortgage payments. However, the current image showcases a staggering increase, with interest rates now reaching 6.7%. This substantial rise translates to an alarming monthly mortgage increase of over $800. It becomes evident that these sharp interest rate hikes have played a crucial role in the declining property values, as affordability becomes a pressing concern for homeowners and potential buyers.”
when is the right time to buy?
Determining the “right” time to buy a property can be subjective and dependent on various factors such as, market conditions, interest rates, how the buyers and sellers are reacting, supply and demand etc.
- Financial stability is the most important when deciding when it’s time to purchase a home. Decreasing your overall debt from your car loan to credit card debt. Decreasing all this and increasing your credit score will go hand to hand to secure the best deal for you.
- Market conditions is also very important, buying a property when its over valued is definitely not what you want to do. Look into the housing inventory, are there little supply and high demand then that might be a sign of a decent time to purchase as compare to high supply, low demand which will be dangerous.
- When exploring the vast majority of homes for sale there are some big opportunities to be sure you have a safe investment long term. Firstly assess the level of demand in the area and understand is there a good amount of demand in the area and why is there demand? Evaluate the property potential for improvement to increase the equity of the property possibly converting your garage into an ADU in the future.
When is the wrong time to buy?
When navigating the real estate market, it’s just as important on identifying when it’s not a good time to purchase a property and we’ll going over that right now. Consider the following factors to make an informed decision.
- Decline market conditions: paying attention to signs of a declining market can help save you, such as decreasing property values, to creating increasing inventory, and longer days the home has been on the market.
- Unfavorable financing options: if interest rates are extremely high than the risks are higher and lending is tighter than usual. These unfavorable financing conditions may result in higher mortgage payments which makes it difficult for home buyers.
- Overpriced properties: Properties can go up in value in such a short amount of time, and when that occurs it increases the risks of prices to quickly drop, as fast as the prices go up is as fast it can come down. So I recommend to be cautioius when you see any of these points occurring.
