Q3 2023 Arizona Real Estate Market Update

The following analysis of select counties of the Arizona real estate market is provided by Windermere Real Estate. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Job growth in Arizona has levelled off. The addition of 57,000 new jobs over the past 12 months represents an annual growth rate of 1.8%, which matches the level in the second quarter of this year. That said, Arizona’s unemployment rate in August was 3.8%, down from 4% in the third quarter of 2022.

Looking at the metro markets contained in this report, over the past 12 months Phoenix saw its job base rise 1.9% or 40,200 positions. With the addition of only 400 new jobs, employment in Prescott rose .6%. Unemployment rates suggested that both markets remain close to full employment, with the Phoenix area showing a jobless rate of 3.5%, while the unemployment rate in Prescott was 3.8%. The jobless rate in Phoenix matched the level in the third quarter of 2022, while Prescott saw its rate rise from 3.5%.

Arizona Home Sales

❱ In the third quarter of 2023, 14,711 homes sold. This was down 7% from the third quarter of 2022 and down 21.3% compared to the second quarter of this year.

❱ The slowdown in sales from the second quarter came in concert with a modest .9% increase in listing activity. It appears that the impact of higher mortgage rates is starting to be felt.

❱ Sales fell in Maricopa and Yavapai counties from the same period of 2022. Sales were up almost 8% in Pinal County. Compared to the second quarter of this year, sales fell across the board.

❱ Pending sales fell in Pinal and Maricopa counties but rose in the smaller Prescott market compared to the second quarter of 2023. With Maricopa County accounting for 84% of the market, I think it’s safe to assume that sales in the fourth quarter may also be down.

A bar graph showing the annual change in home sales by County in Arizona from Q3 2022 to Q3 2023. From top to bottom, Pinal had a 7.8% increase, Yavapai had a 0.4% decrease, and Maricopa had a 9.4% decrease.

Arizona Home Prices

❱ Home sale prices rose a modest 1.9% compared to the third quarter of 2022 but were 2.2% lower than in the second quarter of the year. The average sale price was $596,465.

❱ Compared to the second quarter of this year, sale prices were 24.3% higher in Yavapai County but fell in the other two markets. Pinal County prices dropped .2% and Maricopa County prices were 2.3% lower.

❱ Lower sale prices are likely due to higher mortgage rates and decreasing affordability, as well as the fact that median list prices fell 1.7% between the second and third quarters of the year.

❱ With list prices lower and mortgage rates substantially higher, I doubt prices will see tangible increases for the remainder of the year.

A map showing the real estate home prices percentage changes for various counties in Arizona. Different colors correspond to different tiers of percentage change. Maricopa came in above 5% and represented in the corresponding navy color. Yavapai was in the 0-4.9% range and is represented by a light blue color. Pinal was in the -5 to -1% range and is in the lightest blue color.

A bar graph showing the annual change in home sale prices by county in Arizona from Q3 2022 to Q3 2023. From top to bottom, Maricopa had a 27.6% increase, Yavapai had a 2.9% increase and Pinal had a 4.5% decrease.

Mortgage Rates

Mortgage rates continued trending higher in the third quarter of 2023 and are now at levels we have not seen since the fall of 2000. Mortgage rates are tied to the interest rate (yield) on 10-year treasuries, and they move in the opposite direction of the economy. Unfortunately for mortgage rates, the economy remains relatively buoyant, and though inflation is down significantly from its high, it is still elevated. These major factors and many minor ones are pushing Treasury yields higher, which is pushing mortgage rates up. Given the current position of the Federal Reserve, which intends to keep rates “higher for longer,” it is unlikely that home buyers will get much reprieve when it comes to borrowing costs any time soon.

With such a persistently positive economy, I have had to revise my forecast yet again. I now believe rates will hold at current levels before starting to trend down in the spring of next year.

A bar graph showing the mortgage rates from Q3 2021 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q3 2024. In Q3 2023 Mortgage Rates hit 7.04% and Matthew Gardner predicts rates will decrease steadily over the next 4 quarters.

Arizona Days on Market

❱ It took an average of 54 days for a home to sell in the third quarter of 2023. This was 20 more days than in the same quarter of 2022, but 11 fewer days compared to the second quarter of this year.

❱ Maricopa County was the tightest market in the region, with homes taking an average of 41 days to sell. Homes in Pinal and Yavapai counties took the longest time to sell at 61 days.

❱ All counties contained in this report saw average days on market rise from the same period in 2022, but market time fell across the board compared to the second quarter of this year.

❱ The greatest drop in market time compared to the second quarter of this year was in Pinal County, where it took 15 fewer days for a home to sell.

A bar graph showing the days on market by county for homes in Arizona in Q3 2023. From top to bottom, Maricopa had the least at 41, Pinal and Yavapai both had 61.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Lower pending and closed sales, in concert with falling list and sale prices, suggest that the market has shifted away from home sellers.

Although supply levels rose modestly from the previous quarter, they were down 42% from the same period in 2022, so the market cannot be described as oversupplied. This will function as some protection when it comes to home values, but prices likely won’t move much until mortgage rates start to drop, which won’t happen until early next year.

Home sales will still occur because there will always be households who have to move, but many buyers will be sidelined until rates come down, which means the housing market will remain somewhat static for the balance of the year.

A speedometer graph indicating the market in Arizona for Q3 2023. The needle points directly in the middle of “balanced market.”

Given these factors, the needle has been moved back into the balanced quadrant, with neither buyers nor sellers having the upper hand.