As we move into the busy season for Scottsdale, we are starting to get a glimpse of what the year may bring. The busy season for us runs from mid-January through June and we are seeing the usual trend so far for 2024.
When I look back to the prior 7 or 8 years, we are actually lining up closely with 2020 numbers. At the beginning of February, 2020 there were 69 homes on the market and 50 under contract. As of this writing, we have 60 homes listed and 40 under contract. That year was appearing to be a busy year with modest gains before the pandemic hit. But, as well all know, pricing and sales did not stay even remotely modest for the few years that followed.
Having 60 homes listed and 40 under contract shows us we have around 1.5 months of supply. This is still putting us in a seller's market.
Diving further into the numbers, we see that single family home continued to hit highs for the average price per square foot through the beginning of 2024. Patio homes and townhomes have waivered back and forth a bit and are sitting slightly below their highs. Condos are a few percent off as well.
In terms of pure pricing, single family is just a touch off the highs. All other categories are sitting lower. We are seeing fully renovated homes in McCormick Ranch sell for a huge premium right now with multiple homes eclipsing $2,000,000.
Why is this? I'm convinced it is partly due to our central location and the fact that AirBNBs are not allowed in our neighborhood. South Scottsdale was the hot spot five or six years ago. McCormick Ranch was seeing price increases but not at the same level as near Old Town. However, AirBNBs moved in and those that wanted to put down roots began to look in other parts of Scottsdale. We are still close to Old Town and other fantastic restaurants have continued to expand here. So, be thankful for our HOA!
The Days on Market for all homes here has followed a pretty similar track. It was insanely low in 2022 before hitting more regular numbers over the past 12 months. They are all sitting between 50 and 70 days right now. As a result, anything that is priced within a reasonable range moves quickly.
So, what happens from here on out? We are still very rate based. Any change in interest rates could create or kill demand and the Fed is being cautious. I am also closely watching the rest of the real estate market in Phoenix. Unlike McCormick Ranch, the entire Phoenix metro area has seen inventory creep up since the beginning of 2024. If inventory begins to rise here as well, it could soften the market and change the direction of prices.
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Yours in McCormick Ranch Real Estate,
Randy Arriola
The start of the year is a great time to have a look back and see what prior predictions came true or false. And, we have another excuse to bring out the crystal ball and (using data, of course), try and figure out what the next year will bring.
Last year, I expected a busier first half and flat second half. Rates rose in the latter part of the year and we had exactly that throughout the greater Phoenix metropolitan area. McCormick Ranch saw a bit of a boost, especially when looking at price per square foot. Keep in mind that this is a rolling 6 month average to smooth the data out, as a month by month basis would be extremely chopping for our small market. McCormick Ranch Single family homes have seen a huge increase over the past 24 months, more so than the rest of the Phoenix metropolitan market. Phoenix as a whole had an approximate 9.7% increase in price per square foot between January 2022 and now. As you can see below, McCormick Ranch was a staggering 24.3%. That is an amazing difference!
What's the cause? Desirability of Scottsdale is obviously one. In my opinion, a large factor is also that our HOA does NOT allow AirBNBs or short term rentals. We are still centrally located and close to major activities yet away from the party scene.
\When looking at pure home prices, we can see a similar 20.5% in the prior two years (or around 9.8% annualized). This also beats the regular Phoenix market. On the flip side, condos, patio homes, and townhomes were just slightly up. I generally mix patio home and townhomes as there is a lot of crossover in our MLS. They converge often and meeting in the middle is more representative of how they trend. Both of these were just up a handful of percent over the prior years.
Looking at Days on Market shows a different perspective. DOM has risen dramatically, which usually would show a decrease in prices. However, buyers are more knowledgeable and pickier than ever. There are more tools to know if a home is overpriced. Thus, well price homes are selling quickly and overpriced homes tend to sit before multiple price reductions.
So now, onto the crystal ball. We saw rates rise substantially over the prior 18 months. The Fed gave the first hint that they may start to decrease rates in December. Mortgage rates quickly responded and dropped by around 1%.
We also have a lot of build up of buyer demand and seller supply. Buyers put their decision on hold to see what was going to happen. Similar, sellers did not want to sell. Who want want to trade a 3% rate for an 8% rate unless it was 100% required due to work or life situations? This created gridlock and a lull in the market.
I'm expecting more inventory to come up this year from sellers who finally decide to move, especially if rates continue to trend downward. But, increase buyer activity should offset this. As such, I'm expecting a busy spring season with higher numbers than 2023 but still nothing like 2021. We are likely in more of a transitional season that should see a marginal increase in prices through May or June. But, this is still rate dependent. Time will tell!
Yours in McCormick Ranch Real Estate,
Randy Arriola
As we move through the summer, we have seen lots of growth and demand build up. The year started slowly. Then, just like the temperatures reaching record highs, home prices rose and inventory has fallen.
We see this happen most years. Historically, January is still relatively quiet. We are recovering from the holidays. February starts to see an uptick in interest. March through June have a lot of momentum and is our prime moving season. Then, the summer starts to slow. We have seen a lot of demand still in June and July, though, even with rates ticking up once again.
Looking at the details, we can see the large increase in pricing over 2022. 2023 appears to be down, but this chart is based off of a 6 month rolling average. This helps flatten out some of the extreme peaks and valleys from month to month as our market is relatively small. We will likely see both sales price and price per square foot rise over the next few months. We are currently down around 5-7% from the peak highs but the last 3 or 4 months have seen fireworks again. Thus, I expect we will be approaching the highs very shortly.
When looking at days on market we can see that the 2023 peak hit in the early Spring. It has leveled out and some are beginning to decrease once again.
The number of monthly sales is showing a relatively busy spring, as well. The pure numbers were lower than prior springs due to the rate situation. We have hit a bit of a stalemate where sellers are staying put due to high rates. Those who purchased or refinanced in 2020 or 2021 has such low rates compared to what is offered now. They are selling less and typically only moving due to necessity. But, buyers are still willing and ready.
So what happens from here? I think we will continue to see some increases over the next few months. Anything that is priced accordingly will sell quickly. We will likely see the usual holiday slowdown come December but there is a lot that can happen between now and then. Will rates stay where they are or will they increase or decrease? Are we going to have any economic shocks? Or, will Phoenix and Scottsdale turn into a giant fireball and we hit 127 degrees? Time will tell!
Yours in McCormick Ranch Real Estate,
Randy
