By Mike Bodeen · 12 January 2024
It is (or should be) the nature of salespeople to be bullish on their product or service. A downer attitude will pretty much ensure poor sales, unless perhaps you’re in the mortuary business.
Thus, with excitement and reluctance, The Bodeen Team looks to the year ahead. What will residential real estate sales look like in Phoenix, Arizona?
Like last year, we will weigh in on the following five major indexes:
Mortgage Rates
Listing Inventory
Sales
Appreciation
Rental Price Movement
As we mentioned last week, our prognostications for the 2023 market were fairly accurate. Though we missed the mark on how mortgage rates would perform (we were lower – they were higher) and because rates increased, sales declined, which is what we said would happen if rates rose.
Against what many experts predicted, we felt our market would increase in value, which it did. Likewise, many experts thought that house/listing inventory would spike. We thought the opposite. We were correct.
Most all of the following prognostications will assume the direction mortgage rates take. Rates currently follow the 10-year bond, which currently follows inflation, so we’ll start with that.
Mortgage rates: Will lower. The fed’s fight versus inflation seems to be working. Inflation is reduced and rates have dropped from the 8’s to the mid 6.5% range. Assuming inflation stays in check, mortgage rates will drop further as the Fed begins to lower their rates in response to lower inflation.
Listing Inventory: Same or less. This can greatly vary; however I don’t see it rising much above where it is now (15,000). The greater possibility is that it will again drop below 10,000. How could this happen? A lowering of rates to a level (5%-6%) that gets sidelined buyers back into the market, but not low enough for owners to do a sell-off and make a lateral move thereby significantly increasing homes for sale.
Sales: Will hang out in the 70,000 to 80,000 range, which is similar but slightly higher than 2023. This will further hasten the exodus of Realtors and Mortgage professionals from the industry. Two years ago, we were looking at annual sales of 110,000! 2023 sales dropped by a full third of that amount.
Appreciation. The Monthly Median Sales Price and the Monthly Price PSF will increase further – perhaps by a lot. My reasoning is thus, and of course comes with plenty of caveats (ifs): Builders are still not building enough homes – still. Arizona and in particular, the Phoenix Metro area continues to add people – much of it due to the large employment growth needed. Assuming we get no substantial help from more sellers coming onto the market, econ 101 (supply and demand) will again (still) have more buyers than homes for sale.
Rentals: Many apartments that are currently in the pipeline will come to market this year. I think the effect will be a stagnation in pricing, still hanging around the $1.35 PSF range. Single Family Detached (SFD) homes may experience greater price increases as their numbers dwindle compared with apartments (including condos, townhomes)
Well, for what it’s worth, there you have it. These predictions can be an utter flop as our world continues to radically change year to year. Whatever happens, the Bodeen Team will still be here next year to serve you. Lord willing.