Greater Scottsdale/Phoenix Market Update. Did we already hit the bottom?

Question

The end is here! Or is it just near?

After almost a full year of receding prices and extended days on market, we have finally turned a corner. I’m not sure if it is the fact that rates have been elevated for some time now and buyers are getting used to the “new normal” with mortgage rates or prices have come down enough to meet the pent up demand waiting on the sidelines, but sales were up significantly in February and that trend will only continue as the buying season is in full swing

I’ve been beating the drum for a while now, that we aren’t going to have another huge drop in pricing, contrary to what some national click bate headlines might have you think. This is not 2008. Distressed properties remain low as most homeowners are sitting on a lot of equity and not motivated to move with a record low interest mortgage anchoring them down.

This is creating a bit of an inventory issue, yet again. We topped out at about 21k available properties In October and as I’m writing this we are under 14k available properties! Welcome back to the time of multiple offers and waiving contingencies. It was nice to get a bit of a break, but guess what? Here we go again…

Where are we going next? Prices have stabilize and this competitive market it going to drive them up the next leg higher.

If you are one that has been waiting to time the market for this perfect bottom, sorry I think you already missed it. That’s the problem with attempting that strategy, you don’t really know the bottom until it’s already passed. Don’t stress though, the second best time to buy, besides yesterday, is today. Now is the time for action.

Account Closed · Answer

Somehow I missed the downturn. Things are normal and going strong.

Carlos Ptriawan · Answer

seasonality factor is stronger than interest rate factor I shall say.To be honest, 2023 is way stronger than 2022.

Chris Seveney · Answer

This is not a market I study but predicting real estate based on a small segment or time period I would recommend against. There are a lot of external forces in play at this time and we will see what the government does with the $2T in commercial debt that is getting ready to go into default. If the government continues to feed more money in the system we are creating problems down the road, if they do nothing then buckle your seatbelts as getting a loan will not be easy. Enjoy it while it lasts but it cannot continue forever.

Mike Dymski · Answer

I am building a hybrid hotel/apartment.

I'm not referring to residential lending.  If business and consumer lending materially tightens, that will push the economy into a recession, which will impact residential real estate.

Ryan Hoover · Answer

What type of project are you building in Phoenix?

It seems the credit crunch will show up in the commercial market far before residential.  Checking in with my local lenders, there hasn't been any tightening of lending standards yet for conforming products, even with the recent banking issues.  Time will tell if that changes.

Ryan Hoover · Answer

Agreed, I don't claim to have the market figured out.  Just giving my perspective as I'm constantly working with investors on the ground in this market.  I find it interesting how we have essentially went from an insanely strong sellers market, to balanced, to a buyers market, back to balanced, and now transitioning back to a sellers market all over the course of 1 year.  That's based solely on the supply and demand of the residential sales in my market.  Yes there are some national headwinds to get through, but for those investors that think that waiting will have better opportunity, I'm not seeing it in Phoenix.

Mike Dymski · Answer

Lots of moving parts.  One of them is the general availability of credit, particularly from small and regional banks.  If credit availability materially tightens up, the economy will surely go into a recession.  Time will tell.

I am building in PHX.

Carlos Ptriawan · Answer

so typically the worst time for re investment is 3rd and 4th quarter, price usually rises in q1 and in q2, price is rising as well but is not as high as q1, so q1 every year is the primary driver of real estate investment. FTHB usually prepare their docs waiting Dec to be over, Jan. is the biggest buyer pool available as they're very aggressive.

So last year, my analysis was, the bond market declined its value so big, that it lost its value to 4th standard deviation, which never happened before. The bottom is reached in October-November, and after that massive decline, we could only go up and flat from there, that's why we've seen 5% mortgage rate now available widely. Most of the buyers are now buying with a 5% rate, so the rate is no longer a major issue as in 2010 the rate is also 5%. It's just this market is very appealing for owner-occupants.

With this current rate of appreciation, we expect Q2 22 price to be reached nationally by the next two years, in our market, 2023 is already way more hot than 2022. The buyers are very agressive these days.

Ryan Hoover · Answer

I agree that seems to be the narrative for 2023.  High rates were able to crush the demand last year during the seasonal buying season though.  There was a lot more uncertainty with the rates/market at that time.

Greater Scottsdale/Phoenix Market Update. Did we already hit the bottom?

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