Cash buyers are increasingly purchasing luxury homes in Metro Phoenix, even as home price growth declined by 4.5% in March and negative growth was observed for the first time since the Great Recession in February. Real estate professionals, such as Steven Hensley of Zonda housing research firm, observe a certain resilience in the market. Despite lower sales volumes compared to the previous year, home prices have seen a modest rise due to tight inventory and the exit of discretionary buyers, creating a challenging scenario for those who need to buy homes for lifestyle reasons.
Andrew Turley, the founder of Phoenix Valuations and a luxury developer, anticipates a mild market reset rather than a severe crash due to more stringent lending practices. He also notes that market corrections or recessions are typically short-lived. As such, while the market's dynamics are shifting, there is optimism about its long-term prospects.
Moreover, supply and demand are currently below normal levels, slowing transaction volumes compared to previous years. While sellers have seen market improvement for several weeks, the rate of improvement has started to slow, which is typical for this time of the year. Despite weaker sales volumes, competition among buyers is intense, leading to increasing home prices and lesser leverage for buyers.
The slowdown in construction due to high interest rates is causing a drop in the supply of existing homes. Single-family homebuilder permits have also seen a dramatic reduction. Still, there's optimism among homebuilders, with big players like Lennar Corp., Taylor Morrison Home Corp., and PulteGroup Inc. planning to build thousands of new homes. Lennar is also aiming to offer affordable options for first-time buyers.
The luxury market, particularly for homes priced above $1 million, is performing strongly. Turley notes that 30-40% of luxury home purchases in Metro Phoenix are made in cash. This trend, coupled with an influx of buyers from high-tax states, assures a continued strong demand for luxury homes in the area. Despite worries about a potential market downturn, many believe the long-term outlook remains bullish due to robust economic output and sound mortgage underwriting.
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