Phoenix Market Conditions
It is no secret the Phoenix Real Estate Market is as hot as its summers right now. Houses and land are selling in hours, not days, and often several thousand dollars over asking. But how and why did this happen in the wake of a pandemic?
What we have on our hands is a perfect storm of conditions to create demand.
First, the world as we knew it abruptly closed down and limited the avenues of consumers spending their disposable income. People started to put more money into their homes, including upsizing, hence more buyers flooding the market.
Second, interest rates continue to stay at historic lows, making housing more affordable than it has ever been.
Third, lack of inventory. You might ask “how is there suddenly a shortage of homes, when people buy a new house, they have to move out of their old one right?” This has been caused by a few factors, with the biggest being the shear volume of people moving to the Phoenix market from out of state. Zillow Home Reports estimated this at approximately 1000 people per week. The other major factor in play is the shortage of new homes being built since the crash in 2008. In 2008 home builders lost an astronomical amount of money. This tremendous shortage in capitol created halted, or greatly reduced production in new homes over the last 13 years. Phoenix area alone has been 3000 homes per year under average production consistently for the last 10 year. That alone has created a 30,000 home shortage.
I hear from my clients frequently that they think they are going to “wait it out” until prices drop, or they are in fear that we will see another crash like in 2008. Yes, prices are remarkably high right now. Materials are inflated, land costs have skyrocketed, but that does not mean prices are going to drop. Basic economics tells us a particularly important factor. When there is short supply, demand will be high, and until they reach an equilibrium, prices will not have any substantial decrease.
If you are looking for a house in the Phoenix Market, you are in for a substantial challenge to compete with several cash offers, waived appraisals and inspections and bidding wars. That does not mean you should be scared; it means you need an experienced Realtor that knows how to navigate these challenges and get your offer accepted. If you are looking to sell a house, you need that same experience to get you the most out of your home and negotiate favorable conditions in your contract. I say it to people all the time, you cannot afford to have a bad agent.
