Its a DRAMATIC change in the South East Valley...

This is substantial.  These are not cracks anymore.  Demand has fallen off a cliff.  The Fed has hinted at another 75 basis point hike in rates.  If that's the case I'm predicting a decrease in values.  If they flattened out and stayed at 6% we can survive that with no major decline 5-10% in values max.  If we get interest rates over 7-7.5% it could be rough.  The panic and emotion would have more of an impact than the rate, but it would happen, the why really won't matter at that point. 

Certain cities (obviously Phoenix) will be impacted most.  Real estate drives huge numbers of jobs, businesses, goods, and services.  If we go into a recession the snowball if we see increases in unemployment gets ugly quick.   

Couple of things to mention different than the last crash...

1) Equity - a huge number of people put down large down payments, paid cash, etc.  Those that didn't lock in ridiculous interest rates and have large amounts of equity.  It would be crazy to foreclose on a house you have equity in only to go rent an apartment at a higher payment.  

2) Investor Demand - The current crashing of demand is related to rates, not employment.  Because of this people still, qualify for a place to live.  This means they can't purchase but can afford rent.  This will hold rent prices stable and elevated.  When you have a stable elevated rental price the values for houses will have a floor value.  Once this is reached investors will scoop these up and bottom out the market naturally.  

3) Safety Net:  If you bought 18 + months ago you have more than enough equity to weather 3-4 years of a market downturn.  Even if you lost a job you could tap some of that equity to float your monthly expenses for a while.  

Buckle up...we are 2-3 months from finding out if this will have soft landing or a difficult few years.

  

Contract Ratio indicates how "hot" a market is. It specifically measures the number of completed sales contracts relative to the supply of active listings. It is defined as 100 x (Pending Listings + UCB Listings) / Active Listings Excluding UCB. The higher the number the greater the buying activity relative to supply. If this number rises then it is a sign of growing contract activity and a positive signal for sellers. Conversely a falling number is a sign of a weakening market - either supply of active listings is increasing or contract activity is slowing, or both. In a balanced market for normal market segments, the value of the Contract Ratio is usually between 30 and 60. When it lies below 20 the market can be considered "slow" or a "cold market". Above 60 can be considered a "hot market" and when it moves above 100 we regard this as evidence of a "buying frenzy". In high-end luxury market segments the normal level is lower, usually lying between 15 and 25.

Using this measure today's Cromford Daily Observation gives us the following 29 largest cities in the Valley, ranking from least to most affected by the downturn in the market:

Rank	City	Contract Ratio 4/7/22	Contract Ratio 7/7/22	Change %
1	Paradise Valley	82	42	-49%
2	Arizona City	509	188	-63%
3	Fountain Hills	188	59	-69%
4	Casa Grande	315	94	-70%
5	Apache Junction	219	60	-73%
6	Gold Canyon	223	59	-74%
7	Tolleson	359	91	-74%
8	Cave Creek	198	50	-75%
9	Maricopa	261	66	-75%
10	Buckeye	232	57	-75%
11	Sun City	248	59	-76%
12	Scottsdale	182	43	-77%
13	Goodyear	321	74	-77%
14	El Mirage	333	74	-78%
15	Tempe	208	46	-78%
16	Peoria	246	52	-79%
17	Surprise	273	58	-79%
18	Sun City West	286	61	-79%
19	Mesa	294	57	-81%
20	Laveen	356	69	-81%
21	Litchfield Park	231	44	-81%
22	Phoenix	272	48	-82%
23	Glendale	303	50	-84%
24	Chandler	293	48	-84%
25	Avondale	340	54	-84%
26	Queen Creek	334	50	-85%
27	Gilbert	354	51	-86%
28	Anthem	281	39	-86%
29	Sun Lakes	276	35	-87%

All 29 cities have seen their single-family markets cool down, but Paradise Valley has cooled much less than the others.

Casa Grande and Arizona City have also done better than average, perhaps supported by the new industry that has been established in their local area.

The Southeast Valley has fared particularly poorly, as has Phoenix, Glendale and Anthem.

We normally classify readings under 60 as corresponding to a balanced market. By this definition, 19 of the 29 cities are already in a balanced market while Sun Lakes and Anthem are most in danger of slipping into a buyer's market.