By Steven Hensley | AZRE
Those involved in the Greater Phoenix housing market are beginning to feel the fury of years of rapidly rising home prices and now rapidly rising mortgage interest rates. The latest Zonda data shows the average new-home base price sits at $697,135, which is 44% higher than two years ago. From year-end 2021 to today, the double whammy of rising home prices and rising mortgage interest rates results in an estimated monthly mortgage payment increase of 52%.
It is well documented that Phoenix area housing prices were rising at a pace well above the national average. It can be seen in the S&P CoreLogic Case-Shiller Index—until the most recent reading for March, home price growth in greater Phoenix led the index for nearly three consecutive years. Yes, almost 36 consecutive months. Logic says this cannot go on forever.
Today we know several indicators to help us understand what could be ahead. Resale listings are rising quickly, presumably related to investors looking to take their equity and put it elsewhere, households hoping to sell “at the top,” households with enough equity to downsize without the need for a mortgage, and, of course, the typical lifestyle reasons. Listings price cuts are occurring, likely due to an underestimation of how quickly affordability has eroded. Pricing a home based on March conditions stands little chance in today’s conditions. New-home demand is falling quickly as consumer confidence is starting to see fractures. Buyer traffic levels are down noticeably with modest incentives becoming more common. Isolated instances of new-home price cuts exist today, but it is not widespread.
