August was a pleasant relief after 2 awful months in June and July. The market still moved in favor of buyers, but the rate of change dropped significantly, and a few indicators actually managed to turn positive. We haven’t been able to say that for quite a while.
The supply of active listings grew during the month but only by 4.1%, which is a lot better for sellers than the 24.6% we reported last month. By the end of the month the rate of growth of active listings was almost zero. This is largely because we are now seeing a low number of new listings. This is a big change because June and July gave us an unusually high number of new listings.
Demand has also shown a few tentative signs of growth. This is again a big improvement on large declines month to month. Demand is still paltry compared to a year ago, but it is slightly better now than it was a month ago. You can see this in the monthly unit sales and pending listings. All are slightly higher than a month ago.
The market is still suffering the effects of unusually low affordability. Interest rates are much higher than they were at the start of the year and even if prices drop to the level they had in January, homes will still be less affordable due to these higher rates. The future direction of interest rates is notoriously hard to predict. The last 2 months saw a decline in average 30-year fixed mortgage rates from 5.52% to 5.22% (as reported by Freddie Mac) and a clear drop in asking prices. You could argue that the slight rise in demand we have witnessed is a weak response to both these factors. However at least it did respond. The small increase in buyer enthusiasm could soon dissipate if interest rates rise again.
Ominously we have seen a large rise in rates over the past week and if they stay at this level, demand is likely to fade again quite quickly.
Another factor in demand is that coming from investors looking to buy and rent, or fix and flip. The latest data shows a marked reduction in purchases by these buyers.
All in all, August was not too bad, but it might be just a temporary respite due a small up-tick in demand which could easily fade. The lull in new supply may prove to be more long-lasting and therefore more significant. We will have to wait and see
Market Summary for the Beginning of September
Here are the basics – the Arizona Regional Multiple Listing Service numbers for August 1, 2022 compared with August 1, 2021 for all areas & types:
- Active Listings: 18,694 versus 6,873 last year – up 172% – and up 4.1% from 17,957 last month
- Pending Listings: 8,419 versus 12,032 last year – down 30.0% – but up 4.5% from 8,058 last month
- Monthly Sales: 6,291 versus 9,048 last year – down 30.5% – but up 1.7% from 6,188 last month
- Monthly Median Sales Price: $444,900 versus $401,000 last year – up 10.9% – but down 1.6% from $452,500 last month