The Fed Started the Fire – Phoenix House Prices Outrun Interest Rates

Prices up 16% after adjusting for lower rates.

John Wake here with the latest on the metro Phoenix real estate market. You can send me questions, comments and suggestions by replying to this email.


The Fed started the fire by dramatically lowering interest rates but now it’s out of control and people are paying more just because they’re extrapolating the past price increases out into the future.

The Fed is very willing to destabilize house prices because stabilizing house prices is not their job.

Kiwi Mandate. The Fed needs a third mandate – stable house prices.

Right now the Fed has 2 mandates – full employment and stable consumer prices. They could also stabilize house prices if they wanted to (and were given the authority).


  • Phoenix median single-family house price up 22% in March 2021 versus a year earlier.

  • 30-year fixed-rate mortgage rates back to where they were last June-July.

  • Mortgage principal & interest median price up 16% in March 2021 versus a year earlier.

  • House prices continue to increase fast.

Metro Phoenix Single-Family Houses

March 2020
Median Price = $320,000
U.S. Average 30-Year Fixed-Rate Mortgage Rate = 3.45%
Monthly Principal & Interest Mortgage Payment on $320,000 = $1,430 per month

March 2021
Median Price = $390,000
U.S. Average 30-Year Fixed-Rate Mortgage Rate = 3.08%
Monthly Principal & Interest Mortgage Payment on $390,000 = $1,660 per month


Click on the graph to go to the full-size, interactive version.

Phoenix Real Estate Market

Just Listed For Sale

I still can’t figure out why more houses aren’t hitting the market. Is it just because older people move less often and the U.S. is getting older? Or is it partly because prices are increasing so fast, sellers are in no hurry to sell?

For Sale

Two months ago, I thought it was leveling off but nope.

Part of it is that more and more real estate agents are NOT putting houses into the MLS until they’re already under contract to buyers. When things slow down, some day, sellers’ agents will start to put more houses into the MLS before they have offers which would increase the number of houses for sale in the MLS a lot. Next autumn? End of year?

Under Contract

The number of houses under contract to buyers is high compared to last year because house sales really slowed down last April and May before bouncing back.

Solds

Ditto. Running high compared to last year because last April sales were unusually low due to the pandemic.


This information can vary a lot in different parts of metro Phoenix. Your real estate agent can find the data for your specific city or zip code at The Cromford Report.

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