Mid-year market update for Scottsdale real estate

It was thought that mortgage interest rates would settle around 6% around this time. But midway through 2024, the Federal Reserve's plan for rate cuts has been delayed due to persistent inflation, maintaining the average 30-year mortgage rate at around 7%. Despite the impact of elevated mortgage rates on home sales and affordability, there are positive developments for frustrated homebuyers, including a gradual easing of the inventory shortage and an increase in starter homes on the market, slowing the median home price growth rate.

Sellers are also adapting to the higher rate environment, with a growing number listing their properties for sale. Economists predict a stable market due to a persistent housing deficit, tighter lending standards, and historically high levels of home equity.

The latest announcement from the Federal Reserve indicates that significant declines in mortgage rates and a rebound in the real estate market are further off than anticipated. Experts now speculate that the first benchmark rate cut may not occur until September, delaying hopes for cheaper mortgages. While mortgage rates are not expected to decline significantly in the near future, homebuyers are advised not to wait, as a potential drop in rates could lead to a spike in home prices due to pent-up demand.

Buyers facing challenges in finding the right property may find some relief, as more homeowners are putting their properties up for sale, presenting an opportunity to find a desirable property and potentially secure a better deal. A recent survey by Realtor.com indicates a growing number of owners are ready to sell, with a decline in the share of those feeling locked in by their current mortgage. Additionally, nearly one-third of these owners express the need to sell soon for personal reasons.

Delayed Relief: Mortgage Rate Reductions Slower Than Anticipated

rows of coins with an arrow showing interest rates going up

During its latest meeting on May 1, the Federal Reserve decided to maintain its overnight rate at a 23-year high due to the persistently high inflation numbers. This decision indicates that a consequential decrease in mortgage rates and a subsequent recovery in the real estate market may be further delayed than initially anticipated.

The housing market is particularly susceptible to interest rates, and the recent announcement by the Fed suggests that a meaningful decline in mortgage rates is not imminent. For many, the consensus is that the first decrease in rates may be postponed until September or beyond, meaning that prospective homebuyers who are sitting on the fence waiting for rates to drop will need to sit tight for a while longer.

It is suggested that rates are not expected to drop much below 6.5% by the end of the year. As a result, while mortgage rates will most likely not fall significantly in the near future, potential homebuyers should consider their options carefully, as a drop in rates could potentially lead to a surge in home prices if pent-up demand drives a rush of homebuyers back into the market.

Buyers' Choices Expand as More Sellers List Homes

A bit of good news has emerged for buyers who have struggled to find their dream home in a low inventory market: more sellers are entering the housing market. After years of record-low inventory levels, this influx presents an opportunity for buyers to expand their options with better choices.

Throughout 2023, inventory remained scarce as many homeowners chose to hold onto their existing mortgage rates rather than sell. However, a recent survey by Realtor.com indicates a growing number of these owners are now ready to list their properties.

Part of the low inventory situation is due to many homeowners enjoying very low rates from refinancing or purchasing their property when the going rates were in the 2-3% range. You'd think those more recently purchased homes wouldn't be put up for sale so quickly, but because prices increased dramatically during the crazy Seller's Market, these sellers have a good amount of equity.

But unless a homeowner has to sell, most are staying put. If it's not absolutely necessary, homeowners with low-interest-rate mortgages aren't planning on selling and moving anytime soon.

A lack of inventory at affordable prices with Scottsdale real estate

While the majority still feel stuck by their current low rate mortgages, the percentage has slightly decreased (79% now versus 82% in 2023). One-third of these "stuck" homeowners have personal reasons to put their homes up for sale in the near future, and some have been wanting to sell for over a year.

Fannie Mae Chief Economist Doug Duncan noted in an April statement, "Both our 'good time to buy' and 'good time to sell' measures continued their slow upward drift this month." With that sentiment, the reality is that the currently available housing stock still falls below pre-pandemic levels, according to economists at Realtor.com. "For the first four months of this year, the inventory of homes actively for sale was at its highest level since 2020. However, while inventory this April is much improved compared with the previous three years, it is still down 35.9% compared with typical 2017 to 2019 levels."

For buyers, this means that if you've struggled to find a suitable home in the past, it may be worth taking another look. An increase in inventory, coupled with relatively lower buyer competition, could make this an ideal time to pursue your next move.

For sellers, acting now may be advantageous. As inventory levels grow, the competition will be much tougher. We can develop a strategy to get you a quick sale at top dollar.

Taming the Surge: Home Price Growth Settles Into a More Balanced Path

Supply and prices still competing with Scottsdale real estate

Homebuyers grappling with elevated borrowing costs can find solace in a positive development. List prices of homes have become more stable, unlike the huge increases we have seen in the past.

However, buyers shouldn't expect steep discounts. According to Realtor.com's April Housing Market Trends Report, "On an adjusted per-square-foot basis, the median list price grew by 3.8%, as homes continue to retain their value despite increased inventory compared with last year." Remember, these are national figures and that amount would change for different areas.

CoreLogic's chief economist, Dr. Selma Hepp, states that home prices will continue to rise at a gradual pace throughout the remainder of 2024. "Spring home price gains are already off to a strong start despite continued mortgage rate volatility. That said, more inventory finally coming to market will likely translate to more options for buyers and fewer bidding wars, which typically keeps outsized price growth in check."

For home buyers, this is encouraging news, especially for first-time buyers. Some potential buyers were predicting a huge drop in prices, which sellers were afraid of happening. With prices predicted to continue rising, buying a home today can help maximize wealth accumulation by increasing equity year-over-year.

Homeownership Dreams Endure, Yet Affordability Hurdles Persist

In spite of financial hurdles, the American dream of homeownership remains resilient. A recent poll by Realtor.com found that 55% of Millennial and 40% of Gen Z survey participants believe now is an opportune time to make a home purchase.

Homeownership dreams of Scottsdale real estate by Judy Orr

Fannie Mae Chief Economist Doug Duncan feels that home buyers are adapting to the new economic landscape. "With the historically low rates of the pandemic era now firmly behind us, some households appear to be moving past the hurdle of last year's sharp jump in rates, an adjustment that we think could help further invigorate the housing market. We noted in our latest monthly forecast that we expect to see a gradual increase in home listings and sales transactions in the coming year."

The Realtor.com study disclosed that even a modest drop in mortgage rates could significantly boost buyer demand along with cost-effectiveness. It was stated that 40% of the buyers surveyed felt they could buy if rates fall below 6%, and 32% would consider buying a place if rates went below 5%. Those 32% might have to wait a very long time for that to happen.

However, waiting around for rates to decline isn't the only strategy potential home buyers are employing to be able to afford a home. A poll given by U.S. News & World Report deducted that strong-willed homebuyers are utilizing various tactics, including comparing multiple lenders (52%), utilizing discount points to help achieve lower rates (36%), and some are choosing adjustable-rate mortgages (36%). More than 75% of buyers are planning to refinance to a lower rate in the future. This sparked a saying with the more recent interest in Adjustable Rate Mortgages: "Date the rate and marry the house."

Even with these stumbling blocks, the survey participants continue moving toward buying a home for multiple reasons such as building equity, getting anchored to a desirable area, and having more room to grow (or for downsizers, less unneeded space). Renters want to own their own place so they can decorate how they desire, keep pets without paying pet fees or having weight limits, enjoy a larger place, own land and have a yard, and stop throwing their money away to their landlords.

Experienced Advisors for Your Home Journey

If you're dreaming of a new home, let's discuss your options. We can help you evaluate potential strategies and connect you with a mortgage professional to explore ways to make your monthly payments more manageable. And remember, in many cases, you can refinance if rates drop in the future.

If you have plans to sell, it will be crucial to enlist the help of a skilled agent who knows how to maximize your profit margins and attract qualified buyers. Reach out to learn about our extensive marketing plan.

Call Judy at 480-906-1500.

Posted by Judy Orr on
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