It has been a minute since my last market update. Not only are we in a different market today than we were last November but I made some changes too.
I am excited to announce that I joined Navi Title at the beginning of 2023. As the Director of Industry Research & Senior Account Executive, I get to continue my analysis of market data while working with top players in the real estate space.
Navi Title is a two year old title company that hit the ground running. Despite the recent market shifts, we continue to grow and have big goals for 2023. Would you like to learn more? If so, click here.
Market Update – Supply, Demand, and Psychology
Housing demand data gets all of the attention, but to fully understand the housing market, you have to know the supply story too. It is actually the supply story that has been our saving grace, especially after the recent mortgage interest rate increases.
Demand always fades before prices decline. In early January 2022 demand started declining and it wasn’t until June 2022 that prices started declining. If we compare the timelines of our previous market downturn (which was an absolute crash, but today’s correction is only a correction, not a crash) we can see how fast our current market cycle truly is moving.
The speed of change spooked the 2022 housing market, not just the demand market, but the entire market. Interest rates skyrocketed, listings increased quickly, and demand dried up. And you know what else dried up? New listings.
The graph below shows a near immediate increase in supply when mortgage rates increased. This was expected, the quick reduction in new listings was unexpected. As the new listings remained low and demand increased at the end of December, prices stabilized, and our 5 week long buyer’s market came to an end. New contracts were up 53% in January alone. This is for Greater Phoenix:
Then do you know what happened in early February? The Fed raised rates by 25 basis points as expected and the markets were happy. Mortgage rates dropped to a 6-month low of 5.99% on February 2. Until the unexpected January jobs report came out on February 3. Over 500,000 new jobs were created nationwide in January and only 187,000 were expected. Hot job markets = inflationary environment = more Fed rate hikes. Mortgage rates jumped. The following week, inflation data came out hotter than expected = more Fed rate hikes. Mortgage rates are back up to 6.80% and demand has declined. The data here is national:
New listings have also declined. Prices are currently stable, and the median sales price is expected to increase by 1.22% in February to $415,000 from January’s $410,000. There are still sellers chasing the market down but all of these numbers have tightened over the past few weeks.
Despite the slowdown in demand, we remain in a weak seller’s market, just a low velocity one. It is not bad for the market but this is tough on the real estate industry. We live off of transactions, not sales price. Real estate tech strategist, Mike DelPrete told me:
“I don’t know how to say this politely, but Phoenix is such a f’d up market! It goes so extreme on both sides. Being in real estate in that market is a contact sport.”Mike DelPrete
I am proud of his statement. Winning here in Greater Phoenix is like extra winning, especially in a tight market. I couldn’t agree more with Greg Hague (and I am sure he includes the whole industry 😊):
“I believe in Realtors who want to win, need to win, will sacrifice to win, will help each other win, and won’t quit until they win.”Greg Hague
While we hope for interest rates to decline, we have to remember, hope is not a strategy.
Copyright 2023 Sarah Perkins
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
4 thoughts on “Housing Supply, Demand, and Psychology 2/21/2023”
Appreciate what you do.
Your articles are always insightful and much appreciated. Thanks so much for taking the time to write them.