Every couple of days, I receive a text, a call, an email that basically asks the same question: “Melanie, am I good?” The inquiry is a business and personal quandary. With the fear-based headlines immersing our social platforms, it’s hard to deflect the obvious consumer lack-of-confidence from infiltrating our perception of what is to come of real estate going forward. This writing is to help distinguish between conjecture and fact in residential real estate for Phoenix 2022.

Follow Local Phoenix Real Estate Insights for Guidance

Be discerning about where you pull your information from to get an understanding of where we are at in the real estate market. It isn’t just about the source of the data (or misinformation) but also realizing how important it is to take in analysis of our local market.
Phoenix residential real estate is its own animal, so to speak. We roar, often, when other markets remain hidden. Since the pandemic, and now in 2022, people see the value in homeownership like never before.
Each of us as taken a hard long look at where we live and how we live. In this reevaluation, population migration continues across the U.S. The Phoenix metro and surrounding areas are the recipients of new residents driving the need for housing (both ownership and rentals).

We remain in a shortfall. But for how long?

Market Volatility Brings Insecurity

In uncertain times, it’s natural to seek refuge into something we perceive as safe. Whether it is an emotional, intellectual, or physical need for greater security, housing typically comes at the top of our list. When “news” or public sentiment leans toward mistrust of economic strength, we question what we have, where we are, and the likelihood of tangible and intangible assets continuing to gain value in the months ahead.
While there are some real estate markets experiencing diminishing buyer demand and corresponding listing increases with price reductions (i.e. Spokane, Washington) this is not so here in Phoenix.

Here are the highlights of how Phoenix residential real estate stacks up as of April 2022.

Subtle Shifts in Real Estate Listings

Just 60 days ago, the Coming Soon and Active Listings in all of Arizona totaled less than they do now (as of this writing). To date (May 23, 2022) coming soon and active listings total just above 9,500.
Yes, there are more properties available, but the amount is a far cry from what is needed to reach a balanced market between buyers and sellers.

What does the slight increase in housing inventory mean?

As we head further into the end of Spring 2022, Phoenix housing shows a little uplift to perspective buyers. The craze of multiple offers per property listing is waning. This doesn’t necessarily mean that a seller is more willing to come off their list price, offer buyer closing cost concessions or a slew of repairs to be made before closing. It can indicate that the window of opportunity for a buyer to secure a home is better than last year.
Though there is a caveat to the above commentary. Less buyer competition has more to do with a change in consumer confidence about the economy overall and the uptick in mortgage interest rates.

How The Feds Interest Rate Hikes Affect the Buyer Pool

What a buyer qualified for just 90 days earlier may be irrelevant to what the numbers dictate now. Going from a 3 percent interest rate to 5.75 percent will increase a monthly mortgage payment to the point of pricing someone out of the home buying market.
How quickly the numbers can change. The impact doesn’t solely rest on buyers. The rise in rates has many a perspective seller questioning whether it is a good time to put property on the market. For sellers looking to cash in on their equity but still wanting to utilize a mortgage for their next purchase, the decision to sell may bring about more questions than answers.

Will Interest Rates Come Back Down

The Cromford Report housing analysts took a look at the last 20 years of residential real estate and corresponding interest rate increases. Over that period, there were other instances of substantial interest rate hikes over a short amount of time. However, from the moment the rate spikes began to the height of the increase and then back downward, the extent of that progression lasted between two to three years.
If history repeats itself, this tightening is temporary. But for how long? And for how much?

New Home Builders Change Their Business Model

Many buyers have grown weary of being outbid by cash buyers (both owner-occupants and investors). Choosing to work with a custom or semi-custom home builder on the purchase of new construction seems more viable.
New home sales remain wrought with competition but there is a softening. Many builders are reporting an ease in some of the supply chain issues that caused material shortages and subsequent delays in completion. Nonetheless, projected start dates and the relentless closing extensions have tested buyer patience. And then there are the builder escalator clauses. And the consistent interest rate hikes.
Some buyers can barely hold on throughout the 15-to-24-month transaction period as pricing on all fronts puts their ability to close at risk.
Just last week, I met a buyer at a new home development in Northeast Mesa. She had been waiting for nearly a year on when the models would be built and ready for showing. I met her there and learned more about the builder offerings, community amenities, and the process for lot reservation and specific home choice.
We expected the typical lottery. A multiple-offer situation. A less-than-ideal slow reveal of available lots. What we heard was refreshingly different and took a lot of pressure off both buyer and builder.

The Benefits of a Spec Home Purchase

Blandford Homes rolled out a new subdivision through spec home only offerings. That’s right. Spec homes. What a brilliant way to promote new homes with the promise of shorter buildouts: 8-to-10 months from start to close.
Buyers can choose the lot (premium may apply) and its associated model already designated by the builder. A form of take-it-or-leave it, there is little room for surprises in this new home purchase relationship which can be of great comfort to a buyer.
The lot location and floorplan are set in stone. Some home upgrades are still available for a buyer to choose and can include flooring, cabinets, countertops, and bathroom surround finishes.
Astonished at the quicker-than-today’s-norm completion projections, I jokingly said, “Are you guys stockpiling product or what?”
The response was, “Yeah, sort of I guess.”
I refer to it as forward thinking.

Phoenix Real Estate Value Increases

“Price is what you pay. Value is what you get.” Warren Buffett

How does one assess value? A Zestimate? A Redfin value estimator? Software? An algorithm? REALLY? An appraisal? Not always. A Broker Price Opinion? Now you’re getting warmer.
A property value assessment, especially in today’s market, can be derived from a combination of factors:

1. Most recent sales (30 days)
   - Comparable square footage and lot size
   - Comparable condition/upgrades
   - Same neighborhood

2. Market stability
   - Increasing, decreasing or stable pricing/values
   - Amount of available supply

3. What the market is willing to bear
   - Intrinsic value of a property is the single numeric point between what a seller is willing to sell for and a buyer is willing to pay.

Supply Shortage Still Looms

If the number 100 indicates a center/balanced point between buyers and sellers, the market remains far from all things being equal. The Cromford Market Index sits at 362.
Sellers are still in the power position. As of the last 60 days, the average listing remains on the market for just 7-9 days before changing to an under contract or pending status. The likelihood of a listing ultimately selling for over asking price is still in play but not as strongly as 90-120 days ago.

Reassess Perspective to Gage Opportunity

Buyers and Sellers may sit across the proverbial fence in home sales. Residential real estate in Phoenix 2022 continues to amaze and bring to the surface new and evolving challenges for both parties. How to navigate our market is personal, best determined by one’s goals for tomorrow and the circumstances that shape today.

For a buyer, though it is difficult, try to remove the emotional aspects of potential home ownership. Look at the numbers that pertain to you.
- Monthly mortgage payment (including property taxes, insurance, and mortgage insurance if applicable)
- Potential increase in living costs (landscape, gas, electric/solar, water, deferred maintenance)
- Associated tax benefits of home ownership (tax deductions, write-offs)
- If the number you qualify for equates to more of a monthly payment than you are comfortable with, lower the purchase price to what is ideal for you
- Consider if waiting on a home purchase is more beneficial
1. Interest rates may or may not come down
2. Housing values may continue to rise
3. More time before buying may allow more time to save for down payment

For a seller, consider the real reasons why listing your property may be a good decision now or later:
- Is your current monthly mortgage payment and associated living costs out of reach?
- Are you chasing a debt service that cannot be managed without tapping into your home equity?
- Do you have a plan A, plan B, or plan C on where to live once your home sells?
- Make sure before you decide to list that there is a realistic plan in place to get you from here to there (wherever that may be)

Phoenix Real Estate Market Outlook for Sellers 2022-2023

Many people in Maricopa and Pinal Counties experienced substantial home value increases since 2020 – some with 20-25% increases year-to-year. This may have you wondering (maybe praying) whether we can continue to sustain this escalation of value.
If all market conditions remain the same (as of April 2022) to stay on this same trajectory of shortened supply, increased demand, and lack of property vacancies, value increases could continue year-to-year, depending on area/city/neighborhood.
Housing analysts, Realtors and Brokers, real estate software programs, and lenders are not fortune-tellers, soothsayers, or beholden to a coveted and reliable crystal ball (does that even exist).
There is a reason why doing a residential real estate transaction in Arizona includes a Market Conditions Advisory document for both buyers and sellers to acknowledge and sign. We cannot promise or guarantee where the market is headed. What we can do is share statistics and history that illustrate patterns and help us better understand what could happen. But life circumstances, acts of nature, and unforeseen global situations affect it all. The last couple of years have laid a heavy hand in teaching us that.
The recommended path towards home ownership or the sale of property is to gather the tools and resources from professionals who can engage, inform, and help assist you in the process.

Is Now the Right Time to Sell? Get a Free Market Analysis Here.