PHOENIX — If one of the Federal Reserve’s goals was to cool the housing market with interest rates hikes they are certainly succeeding in Phoenix.
New data this week by the Mortgage Bankers Association shows the impact that rate increases have had on mortgage applications.
The average 30-year fixed rate for mortgages is now 6.94%.
Monetary policy from the Federal Reserve implemented during the COVID-19 pandemic dropped the rate to a floor of 2.66% in December of 2020. Today’s interest rates are the highest in 20 years.
The index used by the Mortgage Bankers Association to track applications typically responds to interest rates. Applications are up when rates are down. This week’s updated data shows the index falling to a number not recorded since 1997.
What does this mean for Phoenix?
Once one of the hottest real estate markets in the country, home sales are now down over 50% compared to the same time last year.
A steeper drop than the U.S. market which has seen a year-over-year drop of 28%.
The lack of mortgage applications means more housing inventory. Phoenix market inventory is up 70% since last year. U.S. inventory is up only 12%.
The shifts in the market are now reflected in the median sales price of homes in the valley.
Median sales prices hit a high of about $485,000 in May, according to data from the real estate company Redfin.
Since then, prices have dropped to a median of $450,000, a decline of 7%.
Interest rates and low mortgage applications mean that Phoenix is quickly heading toward a buyers’ market.
For years houses would go on the market and get what was asked, sometimes above that price. Now, it looks like most people selling their homes will have to make concessions to the buyer.
