While conventional mortgage rates were in the low-6% range for 4 weeks, they popped up to the mid-6% range after the release of a positive employment report citing a decline in the unemployment rate and an increase in wages. The report, while positive, caused disappointment and uncertainty for those anticipating further rate cuts by the Federal Reserve, which indirectly could further improve mortgage rates and housing demand for sellers.
It’s not uncommon for mortgage rates to bounce up a little after significant drops, so it may only be temporary as rates are expected to glide down over the next year. In the meantime, only serious sellers need apply in this market with a slight buyer advantage. With a high count of competing listings for sale, property condition should be a top priority. Gone are the days of simply dropping the price for a less-than-perfect home, or offering a carpet allowance. Small jobs such as replacing carpet, deep-cleaning grout, or brightening up a living room with paint or lighting can make a huge difference in creating a positive first impression on buyers who may not have the funds, the time, nor the desire to do home projects.
Properties listed between $275K-$500K should also budget for incentives to the buyer and longer marketing times over the holidays. More than 62% of sales in this price range close with $8,000-$10,000 in closing cost assistance from sellers that typically contribute to temporary mortgage rate relief. This may be a stretch for those sellers who have only owned their home for 2-3 years as property appreciation has been flat year-over-year since September 2022, providing little equity to accommodate the added expense. Sellers who have owned for at least 3 years or more have more flexibility to provide buyer incentives.
Seasonally, the first half of the year is the best time for sellers in Greater Phoenix as buyer demand rises in the 1st quarter and peaks in the 2nd, tourism is at its peak and marketing times decrease. If mortgage rates decline in 2025 as many lending outlets predict, the Spring season could outperform the last two years as suppressed demand returns.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
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