Higher interest rates already having impact on hot Phoenix housing market
PHOENIX (3TV/CBS 5) — Homebuyers tired of getting shut out in the Valley’s red hot housing market could finally be getting some relief. HomeSmart Realtor Angie Koehle said the number of homes on the market significantly increased lately, giving buyers more options and creating more competition. “Every morning, I get up to check MLS (multiple listing service) to see how many homes are active and coming soon,” said Koele. “This morning, it was 8,800. Last year at this time, it was 3,500, so there is definitely a shift right now.”
The recent rise in mortgage interest rates has had a significant impact on the real estate market, which is expected to stabilize prices. According to the Arizona Regional Multiple Listing Service, the median home price in the Phoenix area was $392,500 in May 2021. The median home price in May 2022 is $480,000.
Tina Tamboer is a senior housing analyst with the Cromford Report, which provides daily insight into the real estate market. She expects home values to keep increasing in the months ahead but at a much slower rate. “After we’ve been going at full speed for two years, going back to a regular market is going to feel like we just passed a cop at 200 mph, and now we’re slamming on the brakes,” said Tamboer. “That’s kind of what it feels like.”
The higher interest rates have reduced the number of buyers bidding on homes, but Jeremy Schachter with Fairway Mortgage said it could price some first-time buyers out of the market. “For a person that might have been on the edge of being prequalified, say on a $400,000 purchase, their mortgage payment now would be about $500 more if they bought the house today.”
A loan on a $400,000 home six months ago at a 3.5% interest would result in a monthly mortgage payment of $1,796. A loan on the same priced house now, at 5.75%, would cost $2,334 a month. It’s a $538 a month increase. Real estate experts do not believe there will be a housing crash this year, insisting that home values remain strong.
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