Assessing the Impact of High-Interest Rates on the Housing Market

In recent times, concerns have been raised about the potentially devastating effect of high-interest rates on the housing market. Skeptics have eagerly awaited the moment when these naysayers would be proven right. With interest rates remaining stubbornly high, it is essential to examine how this has influenced the market. In this blog post, we will focus on three key indicators: the number of homes sold, the dollar volume of homes sold, and the median home price.

Number of Homes Sold:

Last month, a total of 1,135 homes were sold. While this figure represents a 20% decline from the previous year, it marks a substantial 66% increase compared to the beginning of this year. This suggests a potential recovery in the housing market despite the persistently high-interest rates.

Dollar Volume of Homes Sold:

The dollar volume of homes sold provides a comprehensive measure of the market's overall value. In the previous month, this figure stood at $552 million. Although it indicates a 16% decrease in volume compared to the previous year, it reflects a significant 84% surge from January 2023. This indicates a growing market in terms of monetary value, albeit with some moderation.

Median Home Price:

Currently, the median home price sits at $395,000, marking a $15,000 increase from the previous year and a $38,000 increase since the beginning of this year. Despite the higher interest rates, home prices have remained stable. This stability can be attributed to current homeowners with favorable 3% mortgage rates choosing not to sell, coupled with a steady influx of people moving into Tucson from various parts of the country.

Supply and Demand Dynamics:

As economists often emphasize, the interplay between supply and demand is crucial. Although there are fewer buyers in the market compared to the previous year, the robust demand is ensuring that home prices hold strong. Current homeowners with favorable mortgage rates are refraining from selling, and the continuous migration of individuals to Tucson is contributing to the sustained demand.

Is it a Good Time to Buy a Home?

Last year, there were an astonishing 10 offers on every home sold. However, the present scenario, despite the higher interest rates, sees a more reasonable range of 1 to 3 offers per home. It becomes intriguing to imagine the potential effects of declining interest rates, especially if they were to fall into the 5% range. Such a decline could trigger increased buyer activity and further stimulate the housing market.

While high-interest rates have posed challenges to the housing market, the analysis of key indicators suggests that the market has shown resilience. Despite a decline in the number of homes sold and the dollar volume of sales compared to the previous year, both metrics have experienced substantial growth since the beginning of this year. The median home price has also demonstrated stability, primarily due to the favorable mortgage rates enjoyed by current homeowners and the consistent influx of individuals to Tucson. The balance between supply and demand remains vital, ensuring that home prices remain steady even with fewer buyers. As interest rates potentially decline, it could further invigorate the market. If you have any questions or require specific information about your neighborhood, feel free to reach out to us.

Watch our video on the Tucson AZ Housing Report | June 2023 and see the best of what this amazing city has to offer.