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The effect of rising interest rates in Phoenix, Scottsdale & Town of Paradise Valley real estate reported

Photo of Old Town Scottsdale
An overview of Old Town Scottsdale where home values continue to remain steady with slight declines — similar to those across other areas of the Valley of the Sun — as supply increases. (File Photos/DigitalFreePress.com)

Experts: The impact of Federal Reserve changes greatly exaggerated

By Terrance Thornton | Digital Free Press

Regulators at the Federal Reserve Wednesday, July 27, approved a 0.75% percentage point increase to federal interest rates, which to local real estate and financial experts was no surprise.

What was a surprise, however, was the amount, about 0.25% of a percentage point more than anticipated — and the veracity of fears surrounding what stock market aficionados call a “bear market” as headlines today say the American economy is in a recession.

A recession, economists opine, is a continued decrease of the nation’s gross domestic product, which has slid now for two consecutive fiscal quarters, according to published news reports. Last month, the Federal Reserve made the decision to make an identical increase — which, experts now say, both moves may not be enough to turn the tide of rising inflation.

Frank Aazami at Russ Lyon Sotheby’s International Realty says the consistent headlines speak to downtrodden perspectives more than anything else.


“Everything in moderation,” he told the Arizona Digital Free Press July 28. “In my experience, when changes take place in a row, changes that impact the metrics, the shock-waves can be damaging.”

Here in the Valley of the Sun, there is no marketplace more acute to the changing in macroeconomic trends than in luxury real estate.

Founded in 1976, Russ Lyon Sotheby’s International Realty provides independent brokerages like Mr. Aazami at Aazami Associates, which is based in Scottsdale, a marketing and referral partnership for luxury listings.

Mr. Aazami is a seasoned broker who has seen the cyclical nature of the Arizona marketplace before.

“It seems to me, interest rates are the only news item that is getting the spotlight and creating headlines,” he said.

As the number of listings continue to grow at the Arizona Multiple Listing Service, Mr. Aazami explains, much of the market corrections on the street and in the boardroom are consistent with expectations.

As more homes are built and fewer are leaving the ARMLS at record speeds, local real estate experts are predicting, for a time, a buyer’s market here in the Valley of the Sun. (Photo: Arianna Grainey/DigitalFreePress.com)

The good, the bad & the interest

As local Realtors take phone calls on the change at the Federal Reserve, one expert at Launch Real Estate says the industry was already behaving as if the change at the Federal Reserve had already occurred.

“Interest rates on home loans were pretty much unchanged yesterday,” said Robert Joffe of The Joffe Group at Launch Real Estate. “So far, I haven’t seen any changes in buyers or sellers. In general, the market is fairly slow right now with many buyers out of town.”

Across all industry sectors of the Phoenix metropolitan single-family, detached housing marketplace interest rates are having both positive and negative effects on consumers, Mr. Joffe explains.

A picturesque view of the Town of Paradise Valley. (File Photos/DigitalFreePress.com)

“The rise in interest rates are certainly affecting buyer borrowing power,” he said. “The good news for buyers is there are many more homes to choose from but with the higher rates, buyer payments are higher and they can’t qualify for as much. Lenders have slowed down quite a bit as the re-finance market has pretty much gone to zero. However, lenders are offering buy down on rates.”

Mr. Joffe also points out today interest rates continue to be at historic lows.

“Also, we have become pretty spoiled with such low interest rates,” he pointed out. “My first loan was at 11.5% and rates were as high at 20% in the past. Even at the current rates, we are historically very low.”

The real estate business is cyclical in nature and those periods of changes settle into new economic norms, Mr. Joffe explains.

“I think we’re are in an adjustment period and it will take some time for buyers to digest these higher rates,” he said.

“We have had a triple whammy in the past few months with higher rates, a slumping stock market and summer, which is normally slow. I expect there to be downward pressure on sellers and prices to be reduced although the world isn’t coming to an end. We live in one of the most sought after states in the country. Our jobs’ outlook is strong and people want to move here. Buyers and sellers will adjust to this recent shake up and things will settle down.”

“In the immediate future, buyers will have the upper hand, which hasn’t happened in several years.”

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