Once again, the table looks less favorable than the previous week. We have 15 cities that have deteriorated for sellers over the last month, with Mesa and Gilbert joining the 13 we saw last week. We only have two cities that have improved over the past month, only by 1% in both cases. The average change in the Cromford Market Index (CMI)* over the past month is -8.0 %, while last week we saw -5.5 %.
The fastest decliners are Fountain Hills, down 21%; Maricopa, down 16%; and Paradise Valley, down 14%. But then we see Glendale down 12% and Avondale down 11%.
Seven cities are still seller's markets, five are balanced, and five are buyer's markets.
Demand is showing signs of growth now that the big game is over. However, we are still seeing supply grow faster, and this trend needs to stop and reverse if sellers will feel the benefit of the slight rise in demand.
*Cromford Market Index™ is a value that provides a short-term forecast for the balance of the market. It is derived from the pending, active, and sold listing trends compared with historical data over the previous four years. Values below 100 indicate a buyer's market, while values above 100 indicate a seller's market. A value of 100 indicates a balanced market.
Fact Check February
7 Narratives on Housing
There is no online shortage of armchair quarterbacks regarding prognostications on the future of home values and affordability. However, there are narratives that some people, including journalists, stubbornly hold to that are simply outdated or incorrect. Many were valid a few years ago but are no longer true today. Here are just a few:
Myth #1 - Buyer demand is declining.
This was true in 2022 and 2023 but is no longer true today. While mortgage rates have stifled many buyers, buyer demand is now stable, following last year’s trend, with little reaction to rate fluctuations.
Myth #2 - There is very little to buy under $300K.
This was true a few years ago, but not today. In February 2022, only 90 single-family listings were active for sale under $300,000 in Maricopa and Pinal County. Today, there are 534, mostly in Pinal County. Condo and townhome inventory is even more abundant by comparison. In March 2022, there were only 156 active condo/townhome listings; today, there are more than 1,200 in Maricopa County.
Myth #3 - My income is too high to qualify for homebuyer assistance programs.
Some grant and downpayment assistance programs correlate to an area, not income. Many have income limits as high as $150,000/year, and some don’t have income limits at all. Researching and finding a qualified loan officer to explain these programs could save thousands of dollars.
Myth #4 - I must be a first-time homebuyer or renter to qualify for homebuyer assistance programs.
In most cases, this is not true. They may say first-time home buyer, but if you haven’t owned a home in 3 years or more, you’re a first-time home buyer again, according to HUD’s definition. Also, if you’ve only ever owned a home with a spouse, have a child, and are now divorced, you are also a first-time home buyer. Or, if you’ve only ever owned a mobile home. These are just 3 of the 5 HUD definitions for first-time homebuyers.
Myth #5 - Mortgage rates are too high; nothing can be done about it.
57% of January sales between $200,000 and $600,000 involved seller-paid incentives. Most went towards a temporary buy-down of the mortgage rate, and many home builders are providing permanent rate buy-downs. Other sellers have assumable FHA or VA loans with rates below 5%. About 10% of all active listings fit this criteria. Some buyer assistance programs even allow grant money to buy down mortgage rates. Again, a little research goes a long way in addressing the affordability issues caused by mortgage rates.
Myth #6 - Housing is in a bubble, and home prices are on the precipice of a crash.
Greater Phoenix already had a bubble and price crash in 2022 when prices rose to their peak by May and declined a whopping 12.3% from May to December that year, with short-term flip investors taking the brunt of the pain. Since then, prices bounced and stabilized, with most price ranges seeing less than 2% appreciation year over year today. That is less than the current inflation rate and what is expected after nearly a year in a buyer-leaning market. While Greater Phoenix is officially in a buyer’s market, it’s very mild. Under these conditions, sale price measures show that most non-luxury buyer negotiations are approximately 1.9% below the last list price. That’s a considerable improvement over 2022, where sales prices averaged 2.4% OVER list price. Prices are declining in some areas, but not all, and not by leaps and bounds. Current supply and demand indexes do not support massive declines in sales prices, but shaving 1-2% off lower list prices during negotiations is not out of the question. Sellers are not pushing the market with outrageous list prices. Most are in line or even below last year in some price ranges.
Myth #7 - I’ll sell my home “as-is” and price it aggressively with buyer incentives.
This worked in the mild seller’s market of 2023 and the first part of 2024, but not now. In a buyer’s market, it’s okay to sell your home “as-is” so long as it “is” in excellent condition. The hierarchy of importance isn’t price first, then buyer incentives, then condition. It’s condition AND price; the importance of additional incentives depends on your area and price range. When everyone offers low prices and buyer incentives, properties in good condition rise to the top.
Housing Market
Purchase mortgage applications declined again, falling 2% for the week. However, demand was 2% higher than the same week last year.
ICE reports a 22% growth in for-sale inventory in 2024. At the current pace, the market will return to pre-pandemic inventory by mid-2026.
Rising rental supply fosters a renter-friendly market, but slowing multifamily construction may tighten the market after this year.
Economy
Consumer prices increased the most in 1.5 years in January, reinforcing the Fed's message that it was in no rush to resume cutting policy rates.
In Congressional Testimony, Fed Chair Powell said the economy is doing well, and the Fed can take its time to decide on future policy rate cuts.
New applications for unemployment benefits fell last week, suggesting the labor market remained stable early in February.
In 2025, several home design trends will blend aesthetics, functionality, and sustainability.
1. Sustainable and Eco-Friendly Materials
Homeowners increasingly prioritize environmental consciousness by incorporating sustainable materials such as bamboo, reclaimed wood, and natural stone into their interiors. These choices reduce carbon footprints and infuse spaces with a timeless, earthy ambiance.
2. Biophilic Design
The connection between indoor spaces and nature continues to gain popularity. This approach emphasizes using large windows for natural light, organic textures like woven rugs and stone surfaces, and abundant greenery to create serene, nature-inspired environments.
3. Warm and Earthy Color Palettes
Deep browns, muddy greens, and other earthy tones are becoming prominent in home decor. These colors evoke a sense of calm and permanence, providing a comforting backdrop in interiors.
4. Brass Fixtures
Brass is making a comeback, particularly in unlacquered or brushed finishes. This metal adds warmth and elegance to spaces and is used for lighting fixtures, cabinet pulls, and faucets.
5. Textured Walls
Textured walls are becoming more popular for adding depth and character to rooms. Techniques include using upholstery, wood paneling, plaster, or lime wash to create visually engaging surfaces.
6. Multifunctional Spaces
With changing lifestyles, there’s a growing demand for versatile spaces that serve multiple purposes. Designers are creating adaptable areas that can function as home offices, gyms, or guest rooms, maximizing the utility of each square foot.
7. Smart Home Integration
The integration of innovative technologies continues to evolve, with a focus on creating dynamic, user-shaped spaces. Agentic technologies like conversational agents, robots, and virtual avatars are being incorporated to enhance daily routines and household dynamics.
8. Cozy Sunrooms
There’s a growing trend towards creating cozy sunrooms that maximize natural light and provide comfortable seating. These spaces often feature neutral color palettes, natural materials, and abundant greenery, offering a tranquil retreat within the home.
9. High-Contrast Design
Bold, high-contrast designs are gaining popularity. Homeowners opt for striking color combinations and patterns to create dynamic and visually stimulating spaces.
10. Wellness Amenities
There’s an increasing emphasis on incorporating wellness amenities into home designs. Features like home gyms, saunas, and cold plunge pools are becoming desirable as homeowners prioritize health and fitness within their living spaces. the Spruce
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