After a stretch of bidding wars, soaring prices and stiff competition, hopeful homebuyers in the Phoenix metro may finally be able to catch a break.
Housing markets are cooling across the country according to a recent Redfin report. The technology-powered real estate company ranked the 100 most populous U.S. metropolitan areas based on how quickly they cooled down between February to August 2022, and Phoenix places high on the list.
Redfin determined its ranking of cooling markets using a series of year-over-year data metrics, including price drops, supply changes and sale-to-list ratios.
Compared to other 100 metros, Phoenix ranked as the seventh fastest-cooling market in the U.S. One of the key factors that placed the Arizona capital so high on Redfin’s list was its change in price drops, which grew by 29.2 points annually. Phoenix’s change in inventory increased 73.2 points year-over-year, while its pending sales and change in price per square foot dropped 19.4 points and 14.5 points, respectively, over the same period.
Relocation hotspots see major market cooling
Phoenix is one of the top relocation destinations in the U.S. according to Redfin. Many of these relocation hotspots across the country are experiencing a market cooldown.
In its report, Redfin stated that rising mortgage rates are a major factor contributing to a quick cooldown in relocation cities that remote workers have flocked to over the course of the pandemic. Cities like Las Vegas, Sacramento and Phoenix welcomed remote workers from more expensive markets, causing local home prices to quickly increase. As a result, rising home prices combined with higher mortgage rates pushed more affordable markets into pricier territory, thus lowering demand and slowing the market.
For example, Las Vegas is the second-fastest cooling market on Redfin’s list, as the change in inventory increased 89.5 points year-over-year and the change in price per square foot dropped 14.5 points over the same annual period.
Las Vegas is the second-fastest cooling market in the U.S. as price per square foot and pending sales metrics drop. Chart via Redfin
Although higher interest rates and unpredictable economic conditions are making it more difficult for some buyers to purchase a property these days, such factors tend to balance out housing markets, meaning more negotiation power and lower prices.
“The housing market has changed very quickly in buyers’ favor,” said Las Vegas Redfin agent Tzahi Arbel in the report. “Not only have prices fallen in recent months, but sellers see the market cooling and they’re more open to negotiating prices, giving concessions and paying closing costs. They may accept an offer that’s $20,000 below asking price and pay for repairs the buyer found during an inspection.”
Seattle is the fastest-cooling market nationwide
Compared to other metros, the Seattle housing market is pumping the breaks the hardest.
The Seattle market is slowing faster than any other housing market in the country, according to Redfin. The metro’s change in inventory increased 114.1 points year-over-year, while the change in pending sales decreased 22.5 points. Approximately 34% fewer Seattle homes sold within two weeks in August than the previous year, Redfin stated, a meaningful change from the 7% increase reported in February.
Other high-priced West Coast metros such as San Jose, Oakland and San Diego placed within the top ten rankings on Redfin’s list.
“These are all places where homebuyers are feeling the sting of rising home prices, higher mortgage rates and inflation very sharply,” said Redfin Chief Economist Daryl Fairweather in the report.
“They’re slowing down partly because so many people have been priced out and partly because last year’s record-low rates made them unsustainably hot. The good news is that the slowdown is dampening competition and giving those who can still afford to buy more negotiating power,” he added.
