By Holly Henbest, Realtor
As we look in the rearview mirror at 2022 we will remember it as the year of increased interest rates and price reductions. The year started off with bidding wars and quick sales and January was one of the strongest Januarys in history. The year then transitioned to interest rate sticker shock and ended with price reductions, seller concessions, and lagging days on market.
While we’ll mostly remember it for how it ended, it’s important to realize that the first half of the year was a booming market. It really started to shift in June and that was mostly because we started to see interest rates increase. We should also keep in mind that June is when we start to see our market decline in terms of seasonal activity “normally,” so it’s probable that some seasonality shift coupled with interest rates shifted us more quickly.
We haven’t experienced a “seasonal” market since 2019 or pre-pandemic. Prior to the pandemic, we typically saw the height of our market in the spring. We usually saw an increase in buyer activity and listings in mid-late January, then the buying season would begin and pick-up momentum in February, with March typically one of the biggest months of the year (if not the biggest month) for home sales. The pace would continue through May, and we’d see a decrease in closings starting in June.
In years past I would say the height of the season was between New Year’s and when we hit 100 degrees, which is typically around Cinco de Mayo. We didn’t see any seasonality patterns during the pandemic, but 2023 will be our first full post-pandemic year, and therefore it will be interesting to see if seasonality returns to its regular pattern.
So far, 2023 is feeling like another shift is starting. While I wish I had a crystal ball to predict what the year will look like, I’m happy to report that 2023 is already looking nothing like the last quarter of 2022.
To start, we’ve seen a nice softening of interest rates and buyers have a better comfort level with mortgages that take advantage of rate buy downs. January has seen a surge in buyer activity compared to the previous three months, and that buyer activity had led to more contracts. As a matter of fact, more contracts were accepted the second week of January than any other week since mid-August 2022.
As of this writing (Jan. 19), we have seen interest rates drop significantly since Jan. 1, 2023.
• The 30-year fixed rate has fallen from 6.54% to 6.09%
• The 15-year fixed rate has dropped from 5.87% to 5.27%
You may also be interested to know that the 30-year JUMBO fixed rate has remained consistent, and it is currently at 5.70%.
I wouldn’t say that we’re in a seller’s market yet, but if interest rates remain level or further drop (which is expected to happen incrementally this year), we may see a return to a seller’s market in the not-too-distant future. Inventory of homes remains low, yet buyer interest is increasing, so a seller’s market may be coming soon to a neighborhood near you. The primary reason buyer activity is increasing is due to interest rate reductions, but it’s also because there is pent-up demand.
Buyers have been waiting on the sidelines and once rates started to drop, they pounced. We will likely continue to see a hypersensitive reaction to rates, so if they stabilize or reduce, buyers will remain confident. However, if we continue to see signs of inflation and increased mortgages rates, we’ll likely see a softening of buyer confidence.
In 12 months, we’ll be looking back at 2023 and although I’m not sure what word will best describe the year ahead, my prediction is that it will be a year of normalization and stabilization.
Holly has been a Desert Ridge resident since 2000 and has been a Realtor since 2006. She is the leader of The Henbest Team with Realty One Group. Holly is ranked in the top ½ of 1 percent of Realtors in Arizona and is a certified luxury marketing expert. She has been ranked #24 in the Top 50 Realtors by the “Phoenix Business Journal” for the past several years and recognized by “So Scottsdale!” magazine as a Real Estate Superstar for 2019, 2020 and 2021. She’s also been the #1 ranked realtor at Realty One Group/North Scottsdale for the past several years. Learn more at henbest.com.