By Steven Hensley | Builder
Housing market conditions in the Phoenix MSA have changed rapidly in the latter half of 2022. An affordability crunch along with growing macroeconomic concerns and inflation levels higher than the national average are resulting in quickly deteriorating demand for homes.
Historically high prices and 7% mortgage interest rates shrank the potential buyer pool considerably and are also making new-home buyers rethink their purchase decisions out of choice or necessity. A quick income-to-payment calculation shows that the typical Phoenix household would need to spend close to 40% of their monthly income on housing, higher than levels seen during the mid-2000s housing boom.
Data from Zonda’s new-home database indicates that monthly net new-home sales contracts have fallen every month since January across the Phoenix MSA. Current new-home sales contract activity is the lowest since at least 2015. The slowdown in net sales contracts can largely be attributed to continued high cancellation rates. According to Zonda, the cancellation rate (gross sales divided by cancellations) has hovered at 50% or higher since late August. Buyers are canceling for a variety of reasons, including qualification issues, economic uncertainty, and fear about how the housing market will progress.
