Market Update September 2nd, 2024

The real estate market exhibited a notable shift in August, with the supply of active listings without a contract increasing by 5.5% since the beginning of the month. This upturn is particularly significant when compared to the same period last year, showing a 57% increase as of September 1, 2023. Typically, such increases in supply are expected in September, making this August's data particularly intriguing. This pattern suggests a deviation from the usual seasonal trends observed in the housing market, hinting at underlying factors influencing market dynamics.

Despite a recent decline in mortgage interest rates, which conventionally stimulates demand and suppresses supply, the expected market response has not materialized. Instead, the overall demand has slightly decreased, while supply has risen. This counterintuitive response highlights the complexity of the housing market's reaction to changes in interest rates. Interestingly, the increase in listings is not uniform across all sectors; the luxury single-family detached homes priced above $3 million actually saw a decrease of 4% in active listings from the previous month, though they are still up 20% year over year. In stark contrast, the segment for homes priced between $300K and $350K experienced an 18% increase in supply during August, a rate more than double that of any other price segment.

Delving deeper into the geographical distribution of these changes, Maricopa County, rather than Pinal, witnessed the largest supply surge, particularly in Glendale and West Phoenix. This spike in listings, primarily occurring over an 11-day period from August 15 to August 26, was concentrated in the more affordable ZIP codes of the inner West Valley. These areas are characterized by older housing stock, predominantly from the 1950s and 1960s, but showed no signs of increased distress sales. Remarkably, active single-family listings in these regions rose by 32% across all price ranges, with an even more pronounced increase in the $300K to $350K bracket.

This unusual surge in supply within the Inner West Valley prompts speculation about the motivations of sellers in these areas. It appears that homeowners might be seizing the opportunity to list their properties in anticipation of further reductions in interest rates, aiming to secure buyers before committing to purchasing newer, larger homes. This strategy suggests a proactive approach by sellers waiting to upgrade, conditioned by the need to have a buyer lined up as they navigate the complexities of a shifting real estate market.

With rates coming down and demand not moving much, It might take rates to come down a lot more for them to make a significant impact on demand. We might need a lot more mortgage rate relief in order to see the demand that a lot of real estate professionals in the industry were calling for. Time to keep your eyes open and pay attention! 

"He that can have patience can have what he will."
-Benjamin Franklin
 

Have a great week everyone!