Buyer’s season has begun and new listings for January are the strongest Greater Phoenix has seen since 2020. New listings waned in November and December, so this rebound is a refreshing start for buyers in 2025 as supply is rising and sellers continue to be open to incentives and negotiations.
Hovering around 7.25%, mortgage rates continue to limit the general buyer pool. Currently, just over 5,600 listings are under contract in the MLS, but normally we expect to see at least 7,000-8,000 at this time of year. On the other hand, supply is around 21,000, the highest entry point for January since 2016-2017, fostering an environment favorable towards qualified buyers.
These conditions suggest home price projections should remain flat, either at or slightly lower than the rate of inflation annually. However, December price measures were significantly higher than the rate of inflation with a +4.7% growth in the median sales price and +6.7% for price per square foot. How can this be? Well, blame it on the luxury market.
Mortgage rates suppress buyers on the low end of the price scale, but don’t affect those on the high end. As crypto and stock investments spiked after the 2024 election, luxury sales over $1M over surged +37% over last December compared to just +11% for homes under $1M. This caused December’s data set to be more top heavy in luxury and skewed price appreciation measures high.
When December sales over $1M are eliminated, the annual appreciation rate per square foot falls from 6.7% to just 2.5%, in line with the rate of inflation. This is expected in a market that bounced between a buyer’s market and balance for most of the year. While mortgage rates are not ideal, they are temporary. Prices are stable, incentives abound, and sellers are negotiable. There’s no harm in getting qualified and taking a look.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2024 Cromford Associates LLC and Tamboer Consulting LLC
