Will Phoenix Homebuyers Catch a Break in 2023?

Will Phoenix Homebuyers Catch a Break in 2023?

One-by-One, Most Cities in Greater Phoenix Succumb to a Buyer’s Market

44% of October Sales Involve Seller Paid Concessions to Buyer

For Buyers:

Greater Phoenix as a whole has been in a balanced market since August, but is expected to glide into a buyer’s market by mid-November. Buckeye, Maricopa and Queen Creek entered a buyers market in July. Surprise, Chandler, Gilbert and Tempe followed in August. Goodyear, Peoria and Avondale joined in September with Mesa and Goodyear falling in line by October. Phoenix is expected to succumb this month within a matter of days. The only holdouts remain in the Northeast Valley cities of Paradise Valley, Fountain Hills, Cave Creek and Scottsdale.

The 2022 peak of price was achieved in May, which was the result of contracts accepted in late March and April. Starting in June, sales prices revealed their decline in response to mortgage rate increases. At the end of October, the decline in average sales price per square foot since May was recorded at -9.1%, but still positive year-over-year at +5.7%. The largest declines happened between June and July at -4.5% and between August and September at –3.6%.

Mortgage rates have stabilized between 7.0-7.3% for the past 6 weeks, all of October and November-to-date, and continue to keep buyer demand low for now. This provides an opportunity for buyers as more sellers agree to contributing to closing costs and rate buy-downs. October sales saw 44% of sales involve a seller contribution to the buyer at closing, with a median contribution of $7,400. Closings in the first week of November showed a median contribution of $9,000.

The tricky thing is that these seller-paid concessions are not recorded with the sales price. It’s common to see a buyer offer a higher price in exchange for closing cost assistance or a rate buy-down. This tactic can make the sales price measures appear to drop slower or even stabilize as the cost to the seller increases underneath that number on the settlement statement.

The flaw in waiting for the market to bottom out before purchasing is that no one knows they’re buying at the bottom when they buy there. The bottom, or top, of the market does not become apparent until 3-4 months after the contracts were written. By the time most buyers figure out that the market hit rock bottom, they’re too late to the party.

The bottom line: Homebuyers and renters hoping for some financial relief in 2023 will likely be disappointed. But they won’t get whiplash either. The dramatic swings and wild gyrations in the housing market are expected to taper off as the real estate ecosystem continues to slow.

“It’s going to be a tough year for homebuyers, home sellers, and the overall housing market,” says Realtor.com Chief Economist Danielle Hale. But “we’re going to take some steps toward a better balance between buyers and sellers.”

One bright spot for buyers will be the number of homes for sale, which has been hovering near crisis level and is finally expected to rise. But will that be enough to bring buyers back into the market?

This is what homebuyers, home sellers, and renters can expect in the new year.

* Source by The Cromford Report & Realtor.com

* Video by Victor Huerta

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