The Phoenix real estate market in 2022 was quite a ride! Appreciation in the first half of the year was followed by falling prices in the last 6 months. The result was that prices at the end of the year were roughly where they began at the first of the year. What happens in 2023 is the speculation that real estate pundits, commentators, and Youtube channels love to embrace. There is no lack of opinions on this subject.
Outlook for the real estate market in 2023
Low interest rates were the motivation behind the strong market that we’ve enjoyed for the past couple of years. Once interest rates began to rise, buyers fled to the sidelines and affordability plummeted. Mortgage applications for perspective buyers took a dive. The result was a decrease in sales and ultimately prices. The median sales price for a home in the Phoenix area peaked in May of 2022.
The Dance between Supply and Demand
One fundamental in real estate is the relationship between supply and demand. It still applies today. While buyer demand is lower than normal, the number of homes for sale has not skyrocketed leaving the market in a more balanced position. And remember there are variations across the Phoenix valley in different individual cities. There some cities that find themselves in a buyer’s market while others are considered balance and even a few are technically in a seller’s market believe it or not.
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Affordability is Key
At the end of the 3rd quarter of 2022, the housing affordability hit an all-time low. The was a perferct storm brought on by the intersection of rising prices and escalating interest rates. This made monthly mortgage payments an extreme burden causing buyers to head for the sidelines. Remember a 1% increase in interest rates results in a 12% increase in the loan payment. This was the catalyst for the peak in the median home price in May and since then the market has been correcting with a 12% decrease.
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As always, feel free to call me at 480-326-8571 for specific questions about the Phoenix real estate market.