Metro Phoenix Median Home Price Set to Drop by $25K, but Don’t Expect a Crash. Here’s Why

Article originally posted on AZ Central on August 1, 2022

A for sale sign is posted outside of a home in Phoenix on July 27, 2022.

Metro Phoenix’s overly hot housing market cooled quickly in June, and prices are expected to drop in July.

Rising interest rates, stock market swings, a jump in supply of houses for sale and slower sales all hit the market this summer.

As a result, the Phoenix-area median home price is poised to fall by $25,000 to $450,000 in July, according to pending sales tracked by the Arizona Regional Multiple Listing Service.

The drop comes after home prices have climbed every month but one in the past two years, and sellers had a big upper hand.

Metro Phoenix’s hot housing market: What to know about buying, selling, renting

“Our market is cooling rapidly, with a balanced market next on the horizon,” said housing analyst Tom Ruff with ARMLS’ Information Market.

“There may still be a buyer or two out there that has not received the memo, but for the most part the days of multiple offers and bidding wars have ended as ‘For Sale’ signs begin to multiply in metro Phoenix,” he said.

Slowing but no crash

Phoenix area home sales fell almost 7% in June from May and are down almost 20% compared with June 2021.

The supply of homes for sale, which had been at record lows earlier this year, jumped 30% in June and is up almost 78% from June 2021.

The number of days it took to sell a home inched up two days from month to month, to 30 days in June.

A four bedroom home for sale in Phoenix's Alhambra neighborhood on July 27, 2022.

The median home price was flat in June at $475,000, but that price was based on sales started in April and May.

Interest rates climbed to 5.54% last week, up from 3.2% in early January, according to Freddie Mac. The difference adds about $600 to the monthly payment on a $450,000 mortgage.

“Despite knowing that the market was going to normalize — no market lasts forever, especially not savagely unbalanced, unsustainable markets — the speed of this change has been surprising.” said Sarah Perkins, director of strategic accounts at Clear Title Agency of Arizona and a housing market analyst.

Falling fast, but for how long?

In early June, the Cromford Report’s ZIP code map of metro Phoenix tracking contracts for home sales was mostly red, signaling a frenzied or very hot market.

By mid-July, most ZIP codes were shaded green – the color signaling a warm market, which is three categories slower than frenzied.

But a “warm” market is considered a balanced market, Perkins said. “And that’s good news for buyers.”

Pending home sales contracts are down 22.59% from earlier in the summer, reports ARMLS.

“As inventory increases, we are seeing more sellers cutting their asking price,” Ruff said.

The number of sellers reducing their asking prices hit 3,140 in late June, according to Cromford. There were only about 400 price drops on listings for Phoenix-area houses in March.

All are signs of an overheated market cooling back to normal and not of anything close to a crash, housing analysts say.

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