What is the best Phoenix suburb to invest in real estate? Phoenix Housing Market Update 8/13/2021
Hello everyone and welcome to a new edition of Merrill's Market Madness I usually do this on Mondays but obviously today is not a Monday but I missed the show or this week so I decided I needed to get one in because there's a lot of interesting things happening in the market right now and I really wanted to get everyone updated with the trends and what we're seeing and what's happening so if you've watched any of my previous episodes I always start by looking at a metric called months supply of inventory it's kind of a saturation rate if no new homes were to come on the market how long would it take for everything that's currently for sale to be gone based on the pace at which homes are currently selling.
So today right before recording this video I look these numbers up we have 7,233 active listings in our MLS 12, 000 homes are currently pending so we still have significantly more pendings than we do have active listings 8,988 homes have closed in the past 30 days and that gives us a month's supply of inventory number of 0.8 which is the highest month supply of inventory we've had in quite a while
We have been at one point as low as 0.4 on our month's supply of inventory so we've doubled but it is still desperately low so if you're waiting for the market to shift he pace at which we're currently gaining homes it will take a couple of years before we transition into a buyer's market I think i believe what is still happening is you know it's somewhat seasonal right there are a lot of people who had already planned on moving heading into the summer you know have already bought so the the absolute buying frenzy has calmed down a little bit but we're still selling you know we're still probably gonna sell somewhere around somewhere between eight and nine thousand ohms in the month of August which is a very high number so they're still you know unless not called a very high number it's a typical number we're selling about the same number of homes in this August as we do a typical august 2020 was a little funky because of covid the the the normal annual sales cycle got a little bit messed up but you know if you look back at 2019 and 2018 you know selling 8,500 homes is probably pretty typical for in August so demand seems to be about normal but supply is still really really low i am going to go ahead and share my screen with you because i want to show you a piece of data put out by the national association of realtors hopefully you guys can all see this but this actually measures the month supply of inventory nationally okay so according to their metric a neutral market would have six to seven months supply you know i think it could maybe be as little as a five-month supply as little as a five-month supply might be a balanced market then you see in you know 2008 2010 you know basically from 2006 to 2012 or so nationally we had over a six-month supply of inventory or over a seven month supply of inventory essentially creating a buyer's market and driving home prices down and ever since then we have been in this situation where inventory kept falling and falling and falling and now we're finally at this point where it has started to move up a little tiny bit but keep in mind if you look at this graph this has us nationally at a month's supply of inventory of what two and a half well you know i just shared with you our numbers here in phoenix are still 0.8 so we have a very very long way to go and as you can see it's not abnormal to have an annual sales cycle where you know every year right the inventory drops and then it goes up again drops then it goes up again draw so this could just be a hump on the camel's back so not necessarily something that i'm expecting you know home values to absolutely switch i think that home values are going to continue to rise we've seen something somewhere around in the Phoenix metro area average sales prices have increased year over year by around 40 and with inventory finally starting to rise a little bit i don't think we're going to see another increase of 40 over the next year but i do think that home values are going to continue to rise based on how low inventory is i wouldn't even be remotely surprised to see inventory you know average sales prices increase somewhere in the 10 to 15 percent for the next year so if you're one of those people who's been waiting for the market to crash please know my opinion is that is not going to be happening anytime soon the inventory situation is still so incredibly dire now the other thing that i wanted to share really quickly is freddie mac i share this a lot of the times they have kind of an average interest rate chart and you see average rates are lower than they have been if you missed the vote on refinancing and you thought rates were still up here in the the mid threes right now 2.87 on a 30-year fix so average rates are super super low they were 2.7 la 2.77 last week 2.87 this week of course there's a little bit of normal fluctuation that happens now on to our main topic for this week's episode i wanted to look at let me explain this chart for you because probably not very easy to read but you know i've been working with more and more investors and and i wanted to talk about the numbers in terms of you know a lot of times people come to me and want to know where is the best place to invest and i've looked at these numbers before but it's been probably a year since i ran them so i decided to do an update in this week's episode i'm only looking at east valley cities next week i'll take a look at west valley cities and i'll incorporate them into this chart so we can compare all pretty much the whole phoenix metro area but but basically what i'm doing here is i'm looking at the average sales price for a very typical investment type property three bedroom two bath single story two car garage no pool 1200 to 1800 square feet not furnished not in a 55 plus community okay so take all those parameters and said okay what was the average sales price of that home over the last 30 days in chandler and it was 428 102. well,what was the average rent for the same parameters over the past 30 days and in chandler was 2 127 so if you bought that home and rented it out you would basically be receiving one half of one percent of the purchase price back in rent every single month okay and i did this for it for every single city and you know so we've got Gilbert in the east valley well i probably missed i didn't do gold canyon i didn't do apache junction but i'm sorry i tried to hit some of the bigger ones so if there's a city that i didn't do and you really want me to see it let me know i'm i'd love to run the numbers for you but Gilbert is at 0.52 Queen Creek 0.53 San Tan Valley 0.52 and then Florence and Coolidge the clear winners at 0.65 and so if you own if you bought one of those homes and rented it out in other words the rent is higher on average compared to the sales price and that's typically what we see is where homes are less expensive the rents are lower as well right so if you take Coolidge the average rent is only 1500 compared to Chandler and Gilbert it's 21 2200. but the sales price is so much lower that the ratio is better in florence and Coolidge you're getting a much better rent to sales price ratio you would make your if the market was flat right and home values weren't going to go up and you were never going to sell the house
You would make your money back faster in Florence and Coolidge than you would in Chandler and Gilbert based on these current numbers and then you can see the rest of the numbers Mesa casagram is doing quite well as well as 0.61 and then Maricopa, Tempe, Phoenix and then the worst place to invest currently in this type of home would be Scottsdale with an average sales price of 588 000 average rent only 2500 so the home is significantly more expensive not receiving significantly more rent so if you're thinking about investing you know maybe you have a ton of equity in your house and you'd like to put that to work for you start building some wealth. i would love to share some ideas and some opportunities with you i've been helping a lot of investors recently to buy properties in Casa Grande and Coolidge where they're getting really really nice cash flow on even brand new houses you know so i'd love to have that conversation with you and see if it might be a good fit and you know let me know if you have any questions. I hope you found this information helpful and hope you all 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!