One of the most exclusive neighborhoods in metro Phoenix, located in north Scottsdale, experienced a significant increase in home prices during the final quarter of 2023. Surprisingly, half of the top Valley ZIP codes that witnessed price gains during the same period were luxury areas. However, it is worth noting that some affordable ZIP codes faced steep price declines throughout 2023, partly due to higher mortgage rates affecting houses priced below $500,000. On the other hand, pricier ZIP codes seemed to be more immune to the impact of expensive mortgages, as a larger number of buyers in these areas preferred to pay in cash.
Overall, Metro Phoenix's median home price increased by more than 3% in the fourth quarter of 2023 compared to the same period in 2022. This positive trend indicates that most neighborhoods in the area managed to recover from the significant price drops experienced in 2022, as evidenced by data from the Arizona Regional Multiple Listing Service.
While the median home price declined in approximately 35 ZIP codes in Maricopa County during the fourth quarter of 2023 compared to the previous year, the number of ZIP codes with lower medians was even higher during the summer and the third quarter of that year. Nevertheless, the increase in median home prices during the fourth quarter of 2023 defied the drop in sales experienced in most Valley ZIP codes.
Phoenix-area real estate agent Christa Lawcock of Realty Executives commented on this trend, stating, "Mortgage rates are dropping, and the housing market is starting to pick up again. Higher rates were a market killer."
Where Were the Biggest Price Gains?
85262, home to the Desert Mountain in north Scottsdale, boasted the highest increase in its median home price, surpassing 40%. This remarkable surge occurred despite a more than 13% decline in sales during the fourth quarter of 2023 compared to the same period in 2022. The 85018 ZIP code in East Phoenix, where half of the Arcadia neighborhood is located, secured the second spot with an almost 37% price jump. Notably, both areas have medians well above $1 million. Other luxury ZIP codes in central and northeast Scottsdale, as well as north Phoenix, also witnessed substantial increases in home prices, all with median prices surpassing $500,000. Additionally, areas in central Mesa, Youngtown, Surprise, and south Phoenix, characterized by more affordable homes, were also among the top spots for rising prices.
Where Were the Biggest Price Drops?
The central Apache Junction ZIP code 85120, which experienced a staggering 125% increase in home prices during the second quarter of 2023, saw its median plummet by almost 69% in the fourth quarter. This affordable area, with a median price of $70,750, is home to many manufactured homes. Real estate market experts attribute the recent price drop in this neighborhood to a significant decline in sales. During the final quarter of 2023, only ten houses were sold in 85120, roughly half the number from the second quarter. Furthermore, several other parts of metro Phoenix, including central Phoenix, Mesa, Wickenburg, Tempe, Waddell, and Wittman, also experienced considerable price drops.
Number of Home Sales Expected to Climb
Housing market experts predict that home sales will likely start climbing again in the coming months due to the decline in mortgage rates, subsequently causing an upward pressure on prices. According to Freddie Mac, the average 30-year mortgage rate is currently hovering around 6.7%, having peaked at 8% in late 2023. The housing market experienced a rapid slowdown starting in May 2022, when mortgage rates began to rise rapidly. Tom Ruff, a veteran housing analyst with ARMLS' Information Market, remarked, "The impact of the changes in mortgage rates we are seeing will become apparent in late March to early June's closings."
As we move forward, the Metro Phoenix housing market is expected to witness further changes, influenced by various factors such as mortgage rates, consumer demand, and economic conditions. Stay informed and consult local real estate professionals to navigate these shifts successfully.
Contact Catherine Reagor, the reporter, at catherine.reagor@arizonarepublic.com or 602-444-8040. You can also follow her on X, formerly Twitter: @CatherineReagor.