As we wrap up 2024, we have entered a buyer’s market for the first time since December of 2022.
According to The Cromford Report, actively listed home inventory is up 35% compared to this time lastyear and the number of pending listings is only up 9% from last year. However, December is always the low point in our local market and this dip is always enhanced in an election year. We anticipate that the new year will bring more activity and there is good news on the horizon. Here is where we see the market heading in 2025.
MORTGAGE RATES
At the beginning of 2024, we had hoped that Fed rate cuts would lead to lower mortgage interest rates, however, that has not proven to be the case. With the exception ofa brief moment in mid-September when rates dipped, we started the year at an average of 6.72% and it looks like we will begin 2025 in the upper 6% range again. However, looking ahead to 2025, we do expect rates to ease. The Fed is expected to keep cutting benchmark rates and the stock market has demonstrated investor confidence. We anticipate that we will finally see a drop in mortgage rates in 2025 and get back into the 5% range. There are plenty of buyers just waiting to jump in when that happens, especially in the lower price ranges.
INVENTORY
In February of 2024, national existing home sales began declining and in September of 2024, existing home sales hit a 14-year low. The sluggish market has lingered although sales have picked up a bit month over month since September. Dr. Lawrence Yun, chief economist for the National Association of Realtors (NAR), predicts that the worst of the past few years is coming to an end. “Directionally, I think there’s going to be roughly a 10% boost of existing-home sales in 2025 and 2026,” Dr. Lawrence said.
PROPERTY VALUES
The amazing thing about the market over the past few years is that even though sales volume has dropped, prices have held steady due to low inventory. At the moment, with the increase in inventory, buyers have more of an advantage, but that could change again quickly if rates drop and buyer confidence increases again.
LOCAL MARKET
We have talked for years about the fact that metro Phoenix has a great foundation of economic development and is primed for continued growth – which will ultimately support our housing market. In December, The National Association of Realtors named metro Phoenix as one of the 10 Top Housing Hot Spots for 2025. Cities were chosen based on demographic, economic, and housing data and Phoenix was the only metro in the Western United States to be selected.
Recently, J. Andrew Turley, president of Phoenix Valuations noted in the Phoenix Business Journal that Phoenix is prepared for continued growth. “As Phoenix continues to balance its affordability concerns with high-end growth, the city remains poised for sustained development,” J. Andrew said. “Its expanding commercial real estate sector, strong job creation, and strategic positioning in key industries ensure that Phoenix will remain a magnet for investment and economic activity in the years to come.”
That strong foundation that has been built since the Great Recession is why we remain bullish on the future of the Valley real estate market. Even though the market has been sluggish since the dramatic jump in interest rates in 2022, there is strong confidence that our market will begin its rebound in 2025.