The Valley Real Estate Market – It’s a Dry Heat
The market in the last few weeks is in the midst of a slight cooling trend (a phrase that sounds like an oxymoron given the record heat the valley is enduring). This is evidenced by the slowly increasing inventory. The seller advantage in most areas and price points continues to hold – even if at a rather subdued level. Additionally, the luxury market goes quiet in the summer, as those with a choice flee the valley.
According to the Cromford Report, the active supply of homes for sale is down 27% compared to this time last year and down a whopping 38% from the peak of October 2022. Despite the slight cooling trend – these numbers confirm that prices will continue their gentle rise over the next 3-5 months.
Some interesting numbers to consider courtesy of the Cromford Report:
Once luxury sales over $1M are removed from the trend line, price appreciation from December through June goes from +7.7% to +4.9%. This means the average property has gone up in value 4.9% Dec-June.
Over 57% of resale sellers in Greater Phoenix have owned their homes for more than 3 years, property values have appreciated 40% or more over that time and are maintaining. This makes the point that real estate is typically a sound investment long term – if one even considers 3 years “long term”.
The whole of 2021 and the first 4 months of 2022 witnessed inventory levels of less than 1 month. This is extremely low and is what led to the rapidly increasing prices over this time-frame. The fast decline in demand during 2Q and 3Q 2022 led to inventory levels around 3.5 months by November. This is not a high level. In fact it would be considered normal. However prices dropped during the second half of 2022 because of panic among investors and iBuyers. Both feared a declining market and by being in a rush to sell, caused their concern to materialize as a self-fulfilling prophecy…
Over the last several weeks, supply has started to edge upward again, meaning that the market is slowly cooling down. This is obviously due to poor affordability brought about by interest rates going over 7% again. However inventory would need to double from its current level for us to get back to a normal balanced situation at 3.5 months. No reason for panic in 2023.
What a perfect ending. No reason for panic in 2023.
Russell & Wendy Shaw
(mostly Wendy)