Phoenix Real Estate Market Outlook – August 2021
About a month ago I wrote about the market starting to show signs of change. That trend has continued, but the sky is NOT falling! We anticipate (and frankly I hope for) more balance as we finish out 2021. Although, we realistically will still find ourselves in a “Seller’s Market” for the foreseeable future, just not as frenzied of one.
While we hit our low point for Active Homes for Sale in March, it was May 29th that can be pinpointed for our overall supply shift beginning. We are seeing more market ‘resistance’ from buyers, although demand remains high, but as supply increases, we see the balancing. Sellers should be cautious not to be overly aggressive and then find themselves snowballing if demand weakens with the typical seasonal slowdown through year end.
Let’s take a look at some statistics:
- Phoenix Metro is the #1 market for Investors across the country… that means Wholesalers, Hedge Funds, REITs, Institutions and all the rest.
- Inflation is now hovering at 5.4%.
- Population is up 20% in the last 10-years, but new housing (homes, condos, apartments, etc.) are only up 11% over the same time.
- 1.8 million nationwide are in some stage of mortgage forbearance, but it’s hard to gauge exactly for Arizona, although we expect to be less than national average since our workforce didn’t shut down in 2020.
- Active Home inventory $400-800,000 has increased 87% since May.
- The last few weeks have shown 571, 501 & 479 price reductions in our market… a huge increase from the rare reduction over the past year.
- Median Price Reduction Amount has been $15,000.
- New Home Permits were up 39% in the 1st half of 2021, but still 33% under 2004 construction levels.
- Overall Inventory is only 30% of “normal” figures so 70% down from where we would prefer.
- Demand is 107% of normal.
Things to Watch:
- Affordability… mortgage interest rates have remained incredibly low (averaging under 3% for 30-year), but with pricing having risen so fast and inflation not lessening either, there comes a time where people have to pull back the strings.
- iBuyers… their purchase count was up significantly in June, but as the market levels out, they could be stuck holding inventory a while longer and not being able to unload at their projected prices.
What to expect over the next few months:
- Slower Appreciation… 3% per month is not sustainable forever! A more realistic figure would be 8% over the next year.
- For now, rather than homes selling in 2-days, we are seeing many more in the 8-10 day range.
- Rather than 30 offers, expect 4-6.
- Fewer Appraisal Waivers from Buyers.
- Less bidding well above the list price.
- A return to normal inspection procedures.
Three Markets where we are seeing the quickest re-balancing:
- Casa Grande
Three Markets that are still riding the highest for Sellers:
- Cave Creek
- Apache Junction
Real estate is an evolving subject so what we are seeing today could look different next week. If you have questions about your personal situation or goals, let’s have a conversation to determine the best course of action moving forward. Give us a call @ 623-203-2264.