Looking to buy a home? In our post-pandemic world, Arizonans are still dealing with some of the highest increases in home prices in the country. With our interest rates currently sitting at around a whopping seven percent, a disproportionate price-to-earnings ratio, and a population that has nearly doubled in size since 1990, many potential homebuyers and renters alike are asking what's next for the housing market here in Arizona?
The current statistics on Redfin show that:
In March 2023, home prices in Arizona were down 7.3% compared to last year, selling for a median price of $417,400. On average, the number of homes sold was down 27.9% year over year and there were 9,550 homes sold in March this year, down 13,253 homes sold in March last year. The median days on the market was 58 days, up 30 year over year.
The current top 5 markets are:
- Eloy, Az
- Show Low, Az
- Sierra Vista, Az
- Sahuarita, Az
- Prescott Valley, Az
Right now, we are experiencing a seventeen percent increase in the number of homes available for sale versus this time last year. This current trend is proving more homes are becoming available and staying on the market longer. Does this mean you can still grab five acres and a four-bedroom right out of the city for pre-pandemic prices? Absolutely not, but interest rates aside, it is a great sign for potential buyers that the market is finally shifting.
Where are all these buyers coming from? Since January of this year, over 70,000 individuals have moved to Arizona from San Francisco, Los Angles, and New York alone. This has been a contributing factor to an incredibly competitive market over the last couple of years.
As of April, we are looking at thirty-two percent of Arizona homes offering price drops. This is twenty percent more than this time last year. Many seem to think various economical factors will cause us to nosedive into a recession and experience a crash not unlike that of 2008. Due to the lacking of over-leveraged loans for home buyers, this specific scenario is unlikely. However, in today's day and age, anything is possible. If it does in fact occur, it may very well be for a different reason.
The likely culprit could be a crash in commercial real estate, which could potentially bring other markets tumbling down with it. This article from markets insider, quotes Patrick Carroll, a CEO of a real estate investment firm as saying:
"Unfortunately in the situation we're in, things need to bottom out, and they haven't bottomed out yet," Caroll said in an interview with CNBC on Thursday. While some areas of commercial real estate, such as multifamily housing, could stay intact, he predicted areas like offices and hotels would be "destroyed"
Concerning last month's bank fiasco, market insider also shared:
Industry experts have been sounding alarms for the commercial real estate sector since the fall of Silicon Valley Bank last month, warning that high levels of commercial mortgage debt held by banks will need to be refinanced in much tough conditions in coming years. Approximately 80% of commercial property debt outstanding is held by small- and medium-sized banks.
For us, this means it could be a lot harder to acquire loans, and if we do receive them, we could potentially be looking at way higher interest rates. What does all of this mean for you, me, and the average person looking to buy a home right now? Sit tight, we're going for a ride! Albeit a long drawn out and expensive ride, but a ride nonetheless.
How has the market affected your ability to buy a home? Feel free to let us know in the comments.