Market Update October 30th, 2023

In recent data provided by real estate site Redfin, prospective homebuyers would need a yearly income of $114,627 to acquire a median-priced home in the U.S. due to rising home prices and interest rates. This number soars higher for top-tier cities, with places like San Francisco and San Jose, California demanding annual incomes of $404,332 and $402,287, respectively. Contrastingly, while Manhattan, New York holds the title for the highest cost of living, the broader New York metro area ranks ninth on Redfin’s list, needing a salary of roughly $197,734 to afford housing.

The Phoenix housing landscape, although not as exorbitant as San Francisco or San Jose, also feels the weight of rising costs. Higher interest rates have inflated borrowing costs, making potential buyers prove significant earnings to secure a mortgage. This shift is partly due to veteran homeowners utilizing home equity to purchase in more affordable areas, thus raising prices and reducing affordability.

First-time homebuyers are increasingly challenged in this evolving market. September figures indicated that first-time buyers made up only 27% of the market, down from 29% in August. Historically, they constituted around 40% of the market. This decrease is attributed to the rapid rise of all-cash purchases, which stood at 29% in September, predominantly driven by older consumers who lean on housing equity for acquisitions.

The Phoenix market, and others like it, are witnessing a transformative phase. Although there are significant opportunities, the surge in all-cash buyers and the increasing need for higher incomes to afford homes is reshaping the landscape for potential homeowners.

We must keep an eye on supply that has been rising week over week for the last month or two. If this trend continues, this will hurt sellers and help buyers with pricing correcting more. However, if this trend starts running opposite, then this will help slow the price correcting for sellers and bring more pain to buyers.

"Keep your face always toward the sunshine, and shadows will fall behind you."
— Walt Whitman

Have a great week everyone!