PHOENIX — As the fed continues to raise interest rates, local experts say it's cooling off the red-hot Phoenix real estate market.
Christopher Martinez moved from Seattle to Phoenix back in May.
After renting for a time, he purchased his very first home in a market where sellers were getting 10% above the list price.
"The minimum offer was basically that high!" Martinez said.
The competition for a home was so crazy at the time, he says his realtor submitted six offers in a single day, running simultaneously. If you got a hit he says you couldn't afford to hesitate or the house would be gone.
"When I got a callback basically, I needed to respond within a day," Martinez said.
Sindy Ready is treasurer on the board of the Arizona Association of Realtors and has been in Valley real estate for 22 years.
"We're definitely not in a bubble we're not going to crash," she said.
But, Ready says the fed raising interest rates has changed the market drastically over the past three months.
"About three months ago interest rates were in the high threes, and now they're in the mid-fives up to six, and rumors of them going up even higher," she said. "That has slowed the market, and where that has caused a change is in our inventory."
"Three months ago, we were at an inventory level of about 3,500 to 4,000 homes total in the market for the whole Valley, and that's condos houses mansions, everything," she added. "We are up to as of this morning 18,700 homes on the market for the Valley."
Ready says that's still way low compared to normal inventory levels.
"In a normal market, we would be seeing around 35,000 homes every day. We're still at a shortage. We still don't have enough houses for the number of people that want to buy in the area." she added.
Ready says the slight increase in inventory has however caused sellers to level off their prices.
"This is not a situation where it's going to drastically drop in price, they'll be small corrections," she said.
The price adjustment she says will give buyers more options.
"We're back into a situation where there may be some room to negotiate a little bit." Ready said, "In the old market a couple of months ago, every time a house sold the next one would sell another $10,000 higher, and then another $10,000 higher and it was going crazy."
"So, it’s not that the market is crashing, it’s correcting itself. We're at a more normalized market where it’s still good for the sellers, but the reality is the buyers have a more normalized scenario. Somebody who's not a cash buyer may actually be able to buy a house. Before it was like, okay, I’ll pay whatever price you want, and I won't ask for any repairs. Whatever the seller wanted, the seller got. Now it’s a situation where the buyers have a little bit more say in the matter of what they're doing with their sell," Ready said.
Instead of dropping prices drastically, she says sellers will find other ways to close.
"The buyers are having a hard time, because of the higher interest rates they can't buy as much house. So, if the seller, rather than dropping the pricing, offers to help cover some of the cost of purchasing a lower interest rate through a lender, then that helps them, and for a seller it’s all about what they net," Ready said.
Ready says the tremendous growth in Phoenix is still outpacing supply, so recent buyers like Martinez shouldn't worry about their value tanking.
"We are becoming known as a tech destination. Up in the north end of town with the Taiwan chip plant going in at the 303 and I-17, that's affecting the whole north end of town. We're very lucky to live in this area and it’s still a great opportunity to own real estate," she said.
Despite prices dropping since he purchased, Martinez says he's happy to be a Phoenix homeowner.
"I feel very comfortable that Phoenix as a market, or just as a growing city, is going to be a very secure place to own real estate," Martinez said.
Ready is confident the market will remain strong.
"It used to be back in the day, we would be thrilled to see a 6% appreciation on our homes as opposed to the past several years where we've seen like 29% every year or 31%," she said.
"Don't be afraid to be in the market right now. I think it’s a good opportunity and there's a lot of choices out there from a buyer's perspective. From a seller perspective, just know you're not going to push the market, but you're still gonna get a great return on your investment," she added.