Is The Phoenix Housing Market Cooling Down? What Buyers and Sellers Need To Know

The Phoenix housing market has been sizzling for years, with prices skyrocketing and buyers engaging in intense competition. However, recent developments hint at a potential cooling down of this once-fiery market. If you’re contemplating buying or selling a home in Phoenix, it’s crucial to grasp the current market dynamics and their potential implications for you.

A Shift in the Market: Increased Housing Inventory Empowers Buyers

One of the most notable changes in the Phoenix housing market is the noticeable rise in inventory. After a prolonged period of limited supply, the number of homes available for purchase is finally increasing. In fact, Realtor.com indicates that the number of homes listed for sale in October 2024 surpassed the pre-pandemic levels recorded in January 2020. This surge in inventory offers buyers a wider array of choices and reduces the pressure to make hasty decisions, which was a hallmark of the previous seller’s market.

What’s Driving the Inventory Increase? A Closer Look

This uptick in inventory can be attributed to two primary factors:

• A Wave of New Sellers: September witnessed a significant surge in homeowners listing their properties, likely motivated by a temporary dip in mortgage rates. Lower mortgage rates create an opportune window for those with existing low mortgage rates to sell their homes and purchase new ones without facing a substantial increase in their monthly payments. This phenomenon contributed to the influx of new listings during September.
• Homes Lingering on the Market: In addition to the increase in new listings, homes are also spending more time on the market before finding buyers. This slower pace of sales further contributes to the overall inventory levels. In October 2024, homes remained on the market for an average of 58 days, marking the slowest October since 2019. This suggests that the frenzied pace of the market is easing, giving buyers more time to consider their options.

Price Cuts: A New Reality in the Phoenix Market?

As inventory levels rise, buyers are becoming more discerning in their choices, and sellers are beginning to adjust their pricing strategies accordingly. Realtor.com highlights that the percentage of homes experiencing price reductions reached 18.6% in October 2024.

This trend reflects a shift in market dynamics, with sellers displaying a greater willingness to negotiate to entice buyers.

While the increasing prevalence of price cuts might raise concerns about a significant drop in home values, it’s essential to maintain perspective. The Phoenix housing market has witnessed substantial price appreciation in recent years. The observed price cuts could simply be a sign of sellers adapting to a more balanced market, rather than a harbinger of a major price correction.

The Future of Phoenix Real Estate: A Struggle Between Supply and Demand

Ultimately, the trajectory of the Phoenix housing market hinges on the interplay between supply and demand. Several key factors will influence this delicate balance, shaping the market’s future direction:

• The Pulse of the Economy: A robust economy, coupled with favorable mortgage rates, typically stimulates buyer demand. When the economy is thriving and borrowing costs are low, prospective buyers are more inclined to enter the market, which can drive up prices.
• The Pace of New Construction: An increase in the construction of new homes can effectively boost housing supply. As more newly built homes become available, the overall inventory expands, potentially moderating price growth.
• Seller Sentiment and Actions: If a larger number of homeowners decide to list their properties, inventory levels will continue to rise, potentially leading to a more pronounced moderation in prices. Conversely, if sellers hold back, inventory could remain relatively tight, supporting continued price appreciation.

Navigating the Shifting Sands: Guidance for Buyers and Sellers

For Buyers:

• Seize the Opportunity of Increased Inventory: With a wider selection of homes to choose from, buyers are empowered to make well-informed decisions without feeling rushed. Take your time to explore different neighborhoods, consider your needs and preferences, and compare options carefully.
• Don’t Shy Away from Negotiations: The growing trend of price cuts suggests that buyers may find themselves in a stronger position to negotiate. Don’t hesitate to submit offers below the asking price, particularly for homes that have been listed for an extended period.
• Secure Pre-Approval for Your Mortgage: Obtaining pre-approval for a mortgage before you start actively searching for a home streamlines the buying process and gives you a clear understanding of your budget. This allows you to move quickly when you find a property you like and demonstrates to sellers that you are a serious and qualified buyer.

For Sellers:

• Strategic Pricing is Key: In a market that is potentially transitioning towards more balance, setting a competitive price for your home is paramount to attracting buyers. Research recent sales of comparable properties in your area to determine an appropriate listing price.
• Showcase Your Home’s Best Features: Ensuring your home is in pristine condition and visually appealing to potential buyers can make a significant difference. Consider investing in professional staging and high-quality photography to enhance your online listing and create a positive first impression during showings.
• Embrace Realistic Expectations: The days of receiving multiple offers well above the asking price may be waning. Be prepared to engage in negotiations with buyers and potentially accept an offer below your initial asking price. Flexibility and a willingness to work with buyers can facilitate a smoother transaction.

Navigating the Evolving Market: Expert Guidance is Invaluable

While the Phoenix housing market exhibits signs of cooling down, it’s important to recognize that each market possesses unique characteristics, and conditions can shift rapidly. Whether you’re a buyer or a seller, seeking the advice of an experienced real estate agent like Troy Elston at WestUSA Realty with deep knowledge of the local market is essential.

Troy can provide you with valuable insights into current market trends, assist you in strategically pricing your home (if you’re selling), and effectively negotiate on your behalf, whether you’re buying or selling. By staying informed about market developments and collaborating with the right professionals, you can confidently navigate the changing Phoenix housing market and successfully achieve your real estate objectives.