2/7/2023 Phoenix Housing Market Update
Phoenix Housing Market Update
Hello and welcome to a new edition of Merrell's Monday Market Madness. I'm coming at you today with an update regarding the housing market in the Phoenix Metro Area. There are lots of kinds of negative headlines out there about the housing market and what we are seeing is kind of the opposite of that everything that we're seeing right now with the trends in the Phoenix area that the market is really starting to pick up and when you hear Realtors talk like that you probably think well, of course, they would say that, they're biased, right? They just want us to buy a house but I want to share with you some actual numbers and show you some of the signals that we're starting to see. I mean, ultimately what everyone wants to know is the future, right? I mean, if we knew for sure what was going to happen tomorrow then we would all be living on a beach somewhere, right? But I think I'm pretty good at using the numbers and the analytics and I look at it and study it every day and try to share it with you in a basic way to help you understand and make the best decisions for yourselves and your real estate journey if you're thinking about buying selling or investing I think this information could be really helpful for you.
So, first of all, right now in our MLS we have a total of 15,625 active listings. Now, let me just give that number some scale and some perspective in the heat of the market in early 2022 when things were just an absolute frenzy before rates had started going up we hit a low point of about 4,000 active listings so 15,000 is almost four times more active listings than we have right now than what we ever had at the low the lowest point. However, compared to the housing crash in 2008, there were more than 40 or 50 000 active listings at 1 so 15 000 is still pretty low but even more recently, back on let's see here. I had written it down well our high water mark happened in October. We hit 21,126 active listings. So, we actually have a 35 drop from the peak we're at 21,000 now we're down to 15 000. So pretty significant decrease in inventory that we're seeing right now. Definitely, a sign that inventory is falling and demand is also picking up.
How do you kind of measure demand? Well, that's difficult to say but one of the main things that we look at is how many pending contracts there are and how many homes are under contract. So, right now we have 8,534 pending contracts, the lowest that we ever had during the holidays right around December was 5 500. So there are 3,000 more homes under contract right now than what we saw in December. So inventory is down and demand is up over the last 30 days. We've seen 4,163 homes close, giving us a month's supply of inventory of 3.75 which is a relatively balanced market in terms of the month's supply of inventory number. A couple of other metrics the average sales price over the last 30 days for all the homes that sold in our MLS is currently sitting at $515,000. it did hit a low of 509. So you know, that could be a statistical anomaly. I don't necessarily think home prices have risen by $6,000 over the last couple of weeks but what I'm saying is it doesn't appear to be falling any further. We were as high as $602,000. That was the highest average sales price that we saw in a 30-day period. So all the way down to 509 home prices have fallen in the Phoenix Metro area on average by almost $100,000 but now it's bouncing off that line a little bit and we're back up to 5 15. nothing crazy but like I said the average price doesn't appear to be falling any further and has actually increased ever so slightly.
Now, if you've watched any of my shows before that I always start with this month's supply of inventory and talk about supply and demand and I've had some I've kind of come to a realization that a lot of people don't know why it matters or care why it matters. I guess and so I thought I don't know I'm no economics professor but I'm sure you've heard that It ultimately comes down to supply and demand right as supply is low that's why prices skyrocketed so much in 2020, 2021, and 2022 was that there were very few homes for sale and a ton of people who wanted to buy them. So very low supply, very high demand, and now over the last year we've seen prices fall because supply rose pretty dramatically and demand fell pretty dramatically. if you remember this if you ever took an economics class you'll definitely remember this you feel free to just tune this part out but I thought it'd be fun to just kind of draw a little chart and basically show you what it looks like from a graph point like price as the price over here is determined by the quantity on the bottom. So if there's more supply right so just pretend as the supply line comes over here right now. Now you'll notice that the price fell from here down to here right but if the supply is lower again, this is a quantity so the supply line comes over here and supply goes lower then the price goes up, right? And, then the same things basically apply for the demand line right as demand gets higher right then the price can come all the way up here. When you have really slow when you have really high demand and really low supply. Then, that's what happens the price goes straight up.
So what we're seeing right now is essentially demand is increasing and supply is decreasing. So we're definitely seeing some signs and I'm sorry if you hated My Graph and it actually doesn't look like it showed up very well in the video I'm sure most of you already know this so but I wanted to try to provide a better explanation of why I care like why I'm always looking at. I only share it with you guys once every couple of weeks but I literally look every single day at how many active listings we have how many pending contracts we have and at what our daily monthly supply of inventory number is because I think I'm able to spot trends faster than a lot of Agents because I know at any given moment whether inventory is increasing or decreasing and whether demand is increasing or decreasing.
Now, another thing that's been interesting lately is the rental market. Over the last 10 years, we've seen rental prices just like just skyrocketing the whole time. If you've been in a rental during this time period like pretty much every year, your rent is going up by another $200. Right now our rental market has 5,897 active listings quite a few active listings 2,237 that have closed in the past 30 days. So, the monthly supply of inventory is 2.64 now that's a lot lower than the sale market at 3.75 but that's significantly high for a rental market because if you just figured 2.64 that's almost three months. So every time a rental home comes up on the market, if it has to sit empty for almost three months that's a lot of lost revenue for the landlords. So, they're having to improve the price dramatically if they want to be able to compete with the other 6,000 active rental listings. Now, with that said there are 6,000 rental listings. There are not that many for a city with a population of whatever Phoenix five or six million people so It's relatively low but the average price is. So if I just look at the average price of all the homes that have been rented in our MLS in the past 30 days. It's 229 dollars if you compare that to January of 2022 so go back exactly a year ago the average price was two thousand two hundred and seven dollars in other words the average price year over year is nearly identical the average price is 22 dollars higher this January than it was in January of 22. but again if we look at like May as the peak of the market that's when we saw the peak of the highest average sales price.
So if we look at what was the rental what was the average rental price in May that was kind of our high water mark it was 2 333 dollars so the average rental price since May is basically let's call it 8 months the average rental price has actually declined by 104. So that's something to keep an eye on, it could also just be the time of year ultimately. What I really believe is that the rental Market's pretty flat right now prices aren't really increasing the reason that you're seeing that homes in May are rented for a hundred dollars a month more it's just the demand is way higher in May. It's easier to rent a homemade a lot more people want to move in May. So landlords can usually charge a little bit more money. I'll be more interested to see May to may like what happens on May of 23 as compared to May 22. but overall the rental market is not as competitive as we have seen over the last couple of years as well partially due to the fact that in 21 and early 22, we had an insane amount of investors and hedge funds and real estate investment trusts and companies like that buying up a ton of real estate in the Phoenix area and renting it out. So, as that has happened, a lot of these there's just a lot more homes available to rent right now than what we've seen historically like in 2019 and 2018 there were many times when we had rental properties that we were able to raise the rent you know significantly year over year right now it's for the most part relatively flat so any way we'll continue to keep an eye on it and I hope you found this information helpful if you have any questions please let me know.