Are we experiencing a housing bubble ?
I've had many people ask me about the real estate market so I wanted to put this video out there for everyone.
As I'm sure you've noticed the real estate market has been going through changes!
Hi guys I'm Alejandra Paladino your local Arizona real estate agent. If this is your first time to this channel and you want to know everything about moving to Arizona & living in Arizona make sure you subscribe & click that bell so you’re notified every time I do a new video.
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It is very rare for the Phoenix housing market to change as fast as it has over the past month. In fact this represents the most dynamic period since 2000. This rate of change only adds to the uncertainty of where we are headed. It suggests that extreme caution is in order.
Mortgage rates have increased so fast in the past few months, definitely more quickly than anyone expected.
Rates have gone up over 5% which is the highest it's been in years. Even though rates have increased, experts believe that rising mortgage rates will do little to dramatically push prices down. Experts believe prices will continue to increase but at a much slower pace. In the past few years they have gone like this in growth and now it will be a slower increase.
This huge increase in rates, combined with the increase in home prices, means it’s getting more difficult for buyers to afford a home. This is especially true for borrowers that were previously preapproved or have been shopping for some time, now some of them have been pushed out of the market as their purchasing power decreased due to the higher rates.
So what is making interest rates increase?
The main causes are inflation and Russia's invasion of the Ukraine.
Inflation is making everyone nervous. In May, the consumer price index was up 8.6%, that’s the highest figure since December 1981. (Bureau of Labor Statistics reported this week)
To address high inflation, the Federal Reserve has started raising its benchmark short-term interest rate from the near-zero levels it has been in the past few years. Mortgage rates aren’t directly connected to that rate but they are correlated. The experts say the Fed is expected to keep raising rates throughout the year.
As a realtor I've noticed that with the increase in rates it's making home buyers pause to take note of the market and see what is going on and should they wait. This wave of potential buyers waiting, has caused home sales to decrease almost 10% in May. Lower demand means active listings stay active longer and if the arrival of new listings remains constant, supply starts to build up.
In Arizona the Supply of homes has risen dramatically over the last month. If we exclude homes under contract, we see active listings up 42% in a single month and up 92% compared to this time last year.
As of June 3, the number of active listings without a contract exceeded 10,000 today (June 3) for the first in 2 years. At 10,000, the number of active listings is well below normal right now, but if it keeps increasing at the current monthly rate, we would be looking at more than 26,000 active listings without a contract within 3 months. This means that by the beginning of September we would not be a seller's market, unless we see a recovery in demand.
No one is expecting to see a major crash. It’s going to be more of a parachute down — a settling of prices. Investors are slowing down on their purchases, which lets the regular homebuyer back in the market.
Currently the median price in Arizona is $480,000
Closing prices continue to move higher, but at a slower rate than last month. List prices for active listings have started to weaken, as sellers start to realize they need to moderate their ambitions. Some may not realize this and their homes will probably stay on the market for a long time before reality bites and they realize a price cut is in order. We expect to see a large increase in the number of price cuts for active listings over the coming months.
Phoenix is still expected to continue to grow thanks to all of the job growth and people moving into the state, plus the high desirability of living in Phoenix.
Be sure to check back as I will be having more video updates on the market plus I will be sharing with you new construction homes & highlighting different cities in Arizona and what it’s like living there.
Thanks so much for reading through the blog if you have specific questions on the market or areas buying or selling anything Arizona real estate related definitely reach out my team and I would love to.
