Aug 26, 2022 - Real Estate

Valley housing market cools

Share of listed homes that had their prices cut
Data: Redfin; Chart: Erin Davis/Axios Visuals

About half of all home sellers in the Phoenix area decreased their initial asking prices last month, one of several indicators that the Valley's red-hot housing market is cooling off.

What's happening: In July, 50.1% of home listings dropped their asking prices, compared with 21.7% in July 2021, according to the real estate company Redfin.

  • That gives the Valley the eighth-highest share of home listings with price decreases last month out of the top 97 metro areas in the U.S.
  • Redfin cited the Phoenix metro area as having the 17th fastest-cooling housing market in the country, based on changes in inventory, price drops and several other factors.

Zoom out: Shauna Pendleton, a Redfin agent in Boise, which led the country in share of house listings with decreased asking price last month at nearly 70%, attributed the trend to unrealistic expectations by home sellers.

  • "​​They priced too high because their neighbor's home sold for an exorbitant price a few months ago, and expected to receive multiple offers the first weekend because they heard stories about that happening," she said in an article on Redfin's website.

By the numbers: The Arizona Commerce Authority (ACA) has seen other signs of a cooling housing market over the past few months.

  • From April to July, the Valley's housing inventory saw a massive spike, jumping from 3,970 to 14,095, according to its monthly employment report.
  • The Valley saw a similar trend with the median number of days property listings spend on the market, which jumped from a recent low of 23 in April to 30 last month.

Between the lines: Doug Walls, labor market information director with the ACA's Office of Economic Opportunity, tells Axios that the trends were likely due to recent interest rate hikes by the Federal Reserve.

Of note: Walls says home ownership rates are on the rise and rental vacancy rates are at near-historic lows, indicating that demand for housing is still high.

  • "But as interest rates increase, buyers might be holding off to see … if housing does cool off and they can purchase at a lower price, or they might themselves be priced out with the increase in the mortgage rates," Walls tells Axios.

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