Published October 21, 2022
Tucson Market Update - October 2022
Before we jump into this month's market update, I want to clarify a common misunderstanding around mortgage interest rates that many people have:
When the Fed raises rates to curb inflation, as they are doing now, they are not raising interest rates for mortgages. They are raising the federal funds rate, which is what directly impacts short-term rates on revolving loans like credit cards, auto loans and lines of credit. However, there is usually an indirect effect on mortgage rates as mortgage lenders are usually watching what the Fed is doing and anticipating rate increases or decreases, so often mortgage rates will increase prior to an expected fed rate increase. And Inflation typically impacts rates, as well. So, to summarize, just like the rising tide lifts all ships, the rising rates usually lift all rates, but don't always assume mortgage rates will increase in direct proportion to the federal funds rate.
Okay, now to the real estate market update. Well, as you may have guessed, the increase in mortgage rates has caused a decrease in the number of active buyers in the market. This has naturally put downward pressure on prices as sellers make adjustments to compete for buyers who ARE in the market.
Here are a few numbers that reflect that for the Tucson Single Family Market:
Closed sales for the month of September in Tucson were at 1,050, down from 1400 in September last year. The number of new listings on the market was down from 1,812 to 1,514, which is a 16% drop. That brings the number of available homes on the market up to 2,872, which is still very low historically, and creates a much healthier market for buyers and sellers versus the frenzied market of 2021. And while the median price is dropping month over month, we are still up 10.4% over 2021.
So, what does this mean for you?
Well, for sellers, it is more important than ever to price your home appropriately and hire a professional with a strategy tailored to the current market. There were over 1,000 buyers who purchased a home last month, so bidding wars are still possible, but you can’t set an unrealistic price to “test the market.” And you have to get creative with strategies to entice buyers, like offering a rate buy down. If you aren’t familiar with this program, click here.
For buyers, you will need to match your price range to today’s rates. If you were shopping for a home last year, this likely means you will need to adjust your price range down. The good news for you is that you won’t be battling as many buyers and sellers will be willing to offer more incentives. You can also take advantage of the rate buy down program I mentioned earlier to reduce your payment for the first one to three years. The idea is that once we get inflation under control, rates will drop back down and you can refinance into a lower long-term rate.
For current homeowners who don’t need to sell, this could be a great time to pick up an investment property. With prices adjusting and fewer buyers in the market, there will be opportunities that did not exist over the past two years.
And lastly, for those who are worried the market is going to crash or bubble is going to burst, I don’t see signs of that happening. We are still under built for the population growth across the country, and many homeowners who refinanced when rates were low are not likely going to be selling unless there is a life event that causes a sale, like a job transfer, divorce, downsizing or upsizing.
As always, if you have specific questions about your home, neighborhood, or real estate strategy, don’t hesitate to give us a call.
CONTACT US: Hello@ELLTucson.com, 520-777-6787 (text or call)
