The Phoenix housing market is what they call a seller’s market. Prices are climbing, demand is spiking and yet the number of closed escrows has declined. Experts lay the blame on low inventory in the Phoenix housing market. That means too few homes exist on the market to meet demand. This comes at a time when the Valley economy is steadily adding jobs, more people are moving to the area and we are welcoming the first Millennial homebuyers into the market, not to mention, an increasing number of baby boomers are moving here to retire.
How low can you go? (turns out, pretty low)
The low inventory of homes on the market is helping push up prices in the Phoenix area. Last year Realtor.com predicted Phoenix would rate as the hottest real estate market in the country. The numbers are proving that prediction correct. The average price per square foot for single family homes in Maricopa County gained 6.6 percent from July of 2016 to July of 2017. Realtor.com predicted an average increase of 6.5 percent. Not bad.
Closed escrows down
While home prices are increasing, the same cannot be said for the number of closing escrows and available inventory. Between September 2016 and September 2017, closed escrows decreased 3 percent. As we noted earlier, the lower inventory is pushing up prices. So, while it’s a sellers’ market, it’s not necessarily a buyers’ market. Many people, fresh from the sale of their homes, have had to press pause, because they can’t immediately buy their new house of choice, with its lofty price.
Maricopa county has just a 2.7-month supply of un-sold, single family, detached homes. A healthy balance, or conditions in which supply is close to meeting demand, would mean there was a 6-month supply of homes ready to be sold. This lack of inventory pushes the prices of homes up and the time homes for sale stay on the market, down. Compared to last year, the time a home in Maricopa remains for sale has fallen by seven percent.
Homes priced under $300,000 have seen the most appreciation. Mid-range homes ($200-$500,000 are showing strong growth, and the luxury market in places such as Arcadia and Old Town Scottsdale have seen huge increases. It’s not just single- family homes catching the wave. High-end condominiums are in short supply and high demand. However, the same cannot be said for large, luxury single family homes in more remote areas worth more than $2million.
Market predictions and avoiding bubbalicious
Predictions about the Phoenix real estate market vary, with some saying the increase in home sales prices will continue to rise. Others expect the upward trends to continue but with a steadier, slower pace, rather than a dramatic climb. Most agree; however, Phoenix will remain one of the hottest real estate markets in 2018 and beyond. The market is not a bubble. Phoenix’s relatively affordable cost of living, it’s growth of jobs and the ever-increasing population are long-term, economically healthy factors, fueling this market. Compare that to the pre-crash epidemic of ridiculously mortgage programs, over-building, over-valuing, over-speculating and a host of other bubbalicious ingredients, and today’s market does not merit the bubble talk.
The low inventory is not likely to improve any time soon, so potential home buyers need to start shopping AFTER they have gotten pre-qualified to buy a home. Competition for the homes available to buy requires quick action and sellers don’t have to wait on someone whose financing isn’t in order yet, so most of the time, they won’t.
At Landmark Title, we work with residential realtors and commercial brokers along with their clients to provide escrow and title services. If you have questions or need assistance, please contact our office at (602) 768-2800 or visit our website.