January 2023 Market Update

by Troy Peterson

THE BOTTOM LINE: The housing market ran at a frenzied pace for two years, followed by 6 months of reckoning. We are now in a healthier and more balanced position to experience a more "normal" year.

2023 PREDICTIONS:

Mortgage rates will slowly go down (to around 6% by end of year), which will increase buyer demand.
Affordability improves as rates lower, coupled with the recent 6 month decrease of home prices.
Sales prices will stop falling, and then rise slowly throughout the year. Early indicators actually show rising prices already in January.
Investors will re-enter the market once they sense market stabilization and prices steadily appreciate.
Transaction volume will increase compared to the last few months, but will likely be lower than overall '22 totals.
I personally think that for our local Phoenix market, the worst is already behind us.

Key Market Indicators

SALES PRICES DECLINED: This is the story of the month! For the first time in many years, the annual change is negative. No doubt future headlines will showcase this, however it could be short lived. Early signs show that prices have already started climbing again in January.
INVENTORY CHANGES: The year over year comparison is still significant. Having more inventory is a good thing. Over the past few months, less new listings has led to a shrinking volume of available homes. This has helped to keep our market balanced.
DAYS ON MARKET: This has continued to increase significantly. Demand is relatively low, so sellers need to be patient.
SELLER CONCESSIONS: 50% of all sales in December had seller paid closing costs. The median amount of seller concessions has risen to $9,450 from a more typically amount of around $3,000.
LIST PRICE REDUCTIONS: The amount of price reductions has returned to "normal" conditions.
BALANCED MARKET: This is the other most significant recent change. The Cromford Market Index (a leading indicator of our market), had dipped into a buyer market for the last couple months, and just recently rose above the 100 (balanced) mark. The outlying cities are mostly still in a buyer market and the NE Valley (luxury) market continues to be a seller market. The Cromford Market Index (CMI) currently sits at 104.
NEW CONTRACTS: The best leading indicator of sales volume is new contracts. They remain well below "normal" conditions, however there are early signs that this is improving. With the recent holiday lull, it will take a couple weeks to notice a trend, but here's to hoping!
SALES VOLUME: Unfortunately this December we had a 10-year low for sales for the month. Real estate is cyclical. Transaction volume will come back... the question is not "if", but "when".

Feel free to share this commentary with others. And if I can be of any support, please reach out!

10 YEAR SALES TREND
Let me know if you'd like this graphic customized with your picture/info. Though we experienced a market correction in the latter half of '22, the overall average was still positive!

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