The sky is falling!!  Phoenix Housing Market Update

Good morning everyone and welcome to a new episode of Merrill's Monday Market Madness! In today's episode, we are going to be looking at whether or not the sky is falling, there's a lot of concern over the real estate market and what is going on with inventory and interest rates and home values and hopefully giving you a glimpse at you know a what's happening right now and you know to be if this trend continues what do we expect? Well, what do we expect will happen in the future? So, as always I'm going to start with some key metrics.

So, right now active on the market we have 8,020 active listings in our MLS that covers the entire Phoenix metro area extended even like you know Casa Grande and Eloy and Wickenburg and you know the pretty extended area around the Phoenix metro area, there are 11,020 listings pending. So still significantly more pendings than there are actives 8,580 homes that have sold in the past 30 days which gives us a month's supply of inventory number of 0.93 which is the highest we have seen in a couple of years. So, the month's supply of inventory number is climbing pretty rapidly but keep in mind we've always said if you've watched any of my previous episodes I've always said to reach a balanced market we need a month's supply of inventory of probably about four or five months so 0.93 is certainly higher than we've been at we've you know over the past couple of years I would say we've averaged about 0.5 so without a doubt it is climbing and it's climbing pretty rapidly but it is still very far away from achieving a balanced market and you're going to see those numbers you're going to see what I mean when I talk to you about average sales prices in just a minute now.  

So, again 8,020 active listings on the market right now last Monday just one week ago there were 7,101 so, just in the past week about 900-ish homes have been you know more homes have been listed than what has gone under contract so homes are being listed at a significantly faster pace right now than they are selling if you go back the Monday before that there were only 6,600 the Monday before that they're only 6,100, the Monday before that which was April 18th five weeks ago there were 5,566 active listings. So, that is an increase in just five weeks that is an increase of 2,454 active listings that is an increase of 44% in just five weeks so that is the number that has everyone kind of been like holy cow inventory is climbing so fast and is it time to hit the panic button and certainly there is you know it's not going if you own a home and you want the value to continue to go up it's not going in the direction that we would want for us to continue to see an increase of 25% in value a year right but the reality is that's not sustainable and we probably you know the value of your house probably can't continue to go up by 25% a year forever right we all know that it's gotta balance out at some point.

So you know what is driving this huge increase in active inventory? Well, a couple of things number one, unless you're living under a rock– interest rates have climbed pretty significantly around December and January rates are were about 3%, and now average rates according to Freddie Mac's website our five on a 30-year fixed conventional mortgage are 5.3% however,  the total number of pending listings hasn't fallen that far so active inventory is up 44% as I mentioned but the total number of pending listings so as I mentioned today there's 11,020 pending listings if I go back the same five  weeks so five weeks ago today April 18th I think that's what I said yeah April 18th there were 11,882 pending listings so pendings have dropped by only 8% so the rising interest rates have really only caused the total number of homes that buyers are putting under contract have really only fallen by around 8% so you could almost it's not an exact you know the measure of demand but let's just call it that to make it easy demand has fallen by 8% supply has increased by 44% but here's what I think is going on this time of year May and June have historically been the busiest months for home closings in the Phoenix market it's when we typically see the highest amount of demand it's when we really hit our peak and so you're seeing a ton of homes come on the market.

Well, the reality is the total number of homes coming on the market right now is normal it's the normal amount of homes that would come on the market at this time of year in fact the number of homes coming on the market right now matches almost exactly to the number of homes that were coming on the market at this same time last year  the difference is that instead of seeing the increase in demand that we normally see in May and June because of the rising interest rates we've seen a slight drop in demand you know not catastrophic only an 8% drop in demand over the past five weeks but check out average prices so this is what I mean when I say okay inventory is still so low that we're still not in a balanced market so check out this number the average sales price for all the homes that sold in our MLS in the past 30 days was $595,042 if you compare that to the previous 30 days you know the previous 30 day period so I'm looking at the past 30 days and then between 60 and 30 days so what is that March 16th or through April 16th the average price of those homes was $575,000 so, even with dropping demand the skyrocketing supply and the rising interest rates average prices over the past 30 days have still increased by $19,500 or 3.4% so despite all of it inventory is still low enough that we're still seeing a fairly competitive market and buyers still paying you know over list price and multiple offers on some homes not all homes are getting multiple offers we're certainly seeing a slow down in the market the the parts of the market that we're seeing really continue to just be so compressed is the lower end you know homes that are affordable for first-time home buyers lower end is hard to define it depends on what market you're in right if you're in Scottsdale right lower end is  maybe $600,000 right but if you're in you know somewhere I don't know Coolidge then $600,000 would not be lower end right.

So we're just talking low end for your area right if you're on the lower end of home prices in that area most likely the home values are still very competitive and you know depending on the condition of your house and all that you could still have multiple offers and still exceeding your expectations on what the home could sell for so, in conclusion, right yes inventory is rising but the demand really hasn't fallen much despite the rising interest rates if anything we might even be seeing you know a lot of speculation is that rates are going to continue to rise the fed has made it pretty clear that they plan to continue to rise rates and raise rates until they're able to curb inflation right and so as long as that continues to happen mortgage rates are going to continue to climb so that's putting even more pressure on buyers to be like okay we if we're going to buy we we really need to do it soon because it's going to be even more unaffordable six months from now you know it's going to be even more difficult because home values is not expected that home values are going to fall anytime soon there are only eight that i'm think about it like this okay there's only 8,000 active listings on the market right and the Phoenix metro area has a population you know again we're talking extended so we're including Wickenburg and Casa Grande and and Coolidge and like really extended Phoenix metro area the population of five or six million people and there's only eight thousand pro that's condos manufactured homes townhomes single family homes lofts everything only 8,000 active listings for you know five or six million people I don't know what the exact number is but it's a lot and they're still very very low inventory for that many people.

And, by the way rents aren't any better rents are are skyrocketing as well and and so it's not like it's suddenly more favorable to rent rent prices are increasing as well so  you know buying a house is  still a really really good idea   and we do expect that you know inventory will probably continue to increase but pretty soon it'll level out because people will realize the market's not quite so hot anymore we'll end the kind of spring buying season when a ton of people are trying to put their homes on the market and you know in time to meet the spring demand which you know has slipped a little bit and it'll level out and inventory will still be too low because there's just not enough houses for to support the size of our population there's just builders aren't building fast enough and they're not going to start building fast enough they can't get the supplies or the labor or anything like that so there's not enough building happening to for us to be able to reach a balanced market anytime soon.

So do I think home values will continue to rise at a pace of 25? Absolutely not! Do I think home values are going to fall? Absolutely not! Home values worst-case scenario, in my opinion, will stabilize and in best case scenario we'll probably see home prices increase somewhere between 5% and 10% over the next year. So, if you found this information helpful if you would like an update regarding the value of your home or you want to talk more in-depth about what the market is doing in your area or in your neighborhood or you're thinking about selling or if you know anyone who's thinking about selling who would appreciate my analytical approach to the market would absolutely love an opportunity to meet with you so thank you very much for watching and I hope you have a great day!

What does this mean to you? If you're even a little bit interested in learning more about participating in the Phoenix housing market as a seller, buyer, or investor... you NEED to know this stuff! Or at least work with someone who is obsessed with the market stats. Reach out to me today so we can start working on making your real estate dreams a reality!