Source: Phoenix Business Journal | Angela Gonzales

Valley home prices dropped in July, leaving many homebuyers wondering if a buyer's market is imminent, even in the midst of higher mortgage interest rates.

The monthly average home sales price in July dropped 9.6% compared to the previous month, from $602,586 to $546,403, according to The Cromford Report. The median sale price in July fell 4.8%, from $475,000 to $452,000.

Greg Hague, president of Scottsdale-based 72Sold, blames the Federal Reserve's aggressive interest rate increases on the unexpectedly large drop in July home prices.

"Interest rates have almost doubled, making homes significantly less affordable to buyers who need financing, which is most buyers," Hague said.

"It's a shame that in its effort to ameliorate overall inflation in the economy, the Federal Reserve's interest rate increases impacted the housing market so severely," he said. "They should have seen it coming because interest rate fluctuations have a greater impact on the housing market than any other segment of the economy."

More houses on the market

Pointing to The Cromford Report, the Valley has 12,656 single-family homes available on the market, said Keith Burton, Realtor with The Rider Elite Team in Scottsdale.

Mortgage interest rates are sitting below 5%, while inventory levels of both existing and new homes are rising, creating a more balanced market, said Steven Hensley, advisory manager for Zonda housing research firm.

While buyers have more options and are gaining more bargaining power, it's still a seller's market today, Hensley said.

"That could continue to change in the coming months if inventory keeps rising," he said.

Despite lower sales prices, sellers generally have much more equity than they did just a few years ago, Hensley said.

It's also still a seller's market in the luxury sector, said Frank Aazami of Russ Lyon Sotheby's International Realty.

"Sellers control the transaction," he said. "They can — and have — declined to entertain great offers. In adjusting declining markets, if sellers pass on entertaining fair offers, they'll end up selling/netting less. Those who are carrying a huge cost can hurt their net sheet. That's how short sales became so popular — they held on too long."

But the luxury market is a bit different, where buyers are much more savvy, Aazami said.

"They like and will pay for the trendiest and best-in-design homes," he said. "You can name your price when it's extraordinary and refined."