Skyrocketing prices, bidding wars and low inventory propelled a turbulent housing market into chaos throughout 2020 and much of 2021. That chaos was strongly felt here in the Phoenix metro, along with other sprawling cities across the nation. To make matters worse, lumber shortages slowed construction and remodels, and the pandemic-fueled work from anywhere initiative created means, motive, and opportunity for people to leave overpriced cities and cross state lines to places like Arizona.
A storm can only intensify for so long before the skies clear again. We’re not completely out of the storm, but there’s more calm than there was before. You may have read or heard recent reports of the cooling housing market. Let’s walk you through what this nationwide trend means at the local level and what you can expect.
National Cooldown Trickling into Arizona
Recent data from CoreLogic HPI™ shows home prices nationwide increased year-over-year (YOY) by over 17% in June 2021 compared to the same time a year ago. Corelogic noted Phoenix had the highest home price change during this period: a 27% YOY price increase compared to the rest of the top ten metro areas across the country.
Looking ahead, Corelogic expects home prices to increase by only 3% from June 2021 to July 2022 – a welcome relief from the 17% mentioned above. Why the drastic change?
Across America, demand is decreasing and single-home inventory is on the rise – and that’s only partly true for Phoenix.
How Inventory affects Phoenix Home Prices
*Disclaimer: The rest of this blog post cites data from the Cromford® Report. Their team of Phoenix-based real estate analysts provide daily updates. The data used may have slightly changed by the time you read this post.
While the housing market is cooling off in other areas of the nation, the Phoenix metro is somewhere between simmer and boil. Although more inventory is finding its way onto the market, the Phoenix real estate market is still heavily weighted to Seller’s. Much more inventory would have to hit the market before a shift to a Buyer’s market takes place.
According to the Cromford Report, as of August 18, 2021, there are 11,022 homes available for sale in the Phoenix metro. That’s 2% lower than July but nearly 18% higher than last quarter. However, the inventory was considerably higher before the pandemic. For example, in August of 2019, housing inventory was 60% higher than it is now.
Cromford states new listings are coming online for homes priced between $400,000 and $1 million, with housing supply up over 40%. However, as supply is growing in the vast majority of locations in the Phoenix metro, demand is also increasing again, especially over the last several weeks, thus counteracting any movement on the supply side.
Although more choices and less competition typically correlate to depreciating or stagnant prices for single-family homes, Cromford expects inventory may decrease as more buyers flood the market, causing prices to rise again.
The Players Shifting the Local Real Estate Market
According to Cromford, the monthly median sales price is $400,000 versus $315,000 last year. Since May, the median price of a home has dropped $14,000. There are still properties closing over the asking price, but the percentage of those sales dipped 5% over the past two months. During July, the average buyer paid 1.4% over the asking price.
Cromford says it continues to see a rise in second-home buyers, especially those from out of state. Most new residents are coming from California in droves. Between 2019-2020, nearly 60,000 new Arizona residents left the Golden State in their rear-view mirror.
Investors and iBuyers are still active, snatching up fix-and-flip and buy-to-rent homes. Cromford states many of these buy-to-rent operators are purchasing from each other and some are building complexes entirely for rent.
Navigating Phoenix Real Estate with Halpern Residential
Whether you’re a buyer or a seller, you can breathe a little easier knowing the housing market is working on finding its balance. But as we learned during the pandemic, anything can change and we’re monitoring how returning restrictions with the Delta variant could affect current housing trends. Please call us if you have questions about buying or selling a home. We can help simplify all the complications that come with it – that’s what we’re here for!