Window closing for good deals as home prices, mortgage rates rise in metro Phoenix

Window closing for good deals as home prices, mortgage rates rise in metro Phoenix

Window closing for good deals as home prices, mortgage rates rise in metro Phoenix

 Article originally posted on Phoenix Business Journal on February 8, 2021

It's no secret home prices are on the rise in metro Phoenix, but an upward tick in mortgage rates could close the window on a good deal for home shoppers.

Despite rising home costs in the Valley, homebuyers have been taking advantage of record low mortgage interest rates that have helped keep their monthly mortgage payments down.

But mortgage rates have risen about 25 basis points, or one-quarter of one percent, within the past 30 days, said Kevin Kosan, senior vice president of the Home Builder Finance Group for First International Bank & Trust in Scottsdale.

For now, he said, the window is still open.

"As you know, the big jump in resale prices due to a very constrained supply, has helped to push buyers to new homes, and new home subdivisions have multiple floor plans with a range of pricing," Kosan said. "With an uptick in pricing and/or interest rates, a new homebuyer can alter their expectations for some upgrades in a new home or even select a smaller new home at a lower price."

At today's average mortgage rate of $2.68% and typical home value of $382,359, the monthly payment is about $1,063, presuming a 30-year fixed mortgage and 20% down payment, according to a new analysis by Zillow Group Inc.

But if home values rise by 8% and interest rates climb to 3%, the monthly cost of that same house would be $1,196 a month. At 12% home value growth, the monthly payment would jump to $1,240, according to the Zillow research.

Keith Burton, a Realtor with The Rider Elite Team in Scottsdale, said rates could bump up to 3%.

"If the stimulus keeps going and no bad news, the rates should keep creeping up," he said.

Even so, Jim Belfiore, founder of Belfiore Real Estate Consulting, said the window is still good for homebuyers.

"I wouldn't expect demand to be significantly affected without a more substantial 75 basis points increase," Belfiore said.

Record low inventory continues to push prices higher while homes are selling even faster.

Nationwide, the number of homes for sale in January was down 42.6% year over year, a new low that translated into 443,000 fewer homes for sale, compared to the same time a year ago, according to a new study by

Phoenix was among metros across the country with the largest decline in active listings, with a 54.6% year over year decline in January, according to that report.

That report also showed the median listing price of $455,000 was up 13.8% year over year in January, with 42 median days on the market, representing a year over year decline of 21 median days on the market.

"The squeeze on supply, at a time when demand is higher than it has been in 15 years, has created immense pricing pressure," Belfiore said. "With a high percentage of the buyer population buying without a home to list, supply is not expected to increase. Home shoppers should expect near double-digit percentage increases into the unforeseeable future."

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