Such an interesting and unprecedented time we are in. As of late March/early April ’21: inventory is down to 14 days worth, rates are still at historic lows, and demand is still very high. Many resale homes are getting multiple offers and thousands of dollars over asking price right now; and new home builders are doing lotteries for lots in their communities to keep up with demand. All of this being driven by a “perfect storm” of various factors, here is an housing market update for the Phoenix area.
Many major businesses are expanding and/or moving to the Phoenix metro area, bringing lots of job growth, as well as driving personal income growth up 8.4%, the fastest growing in the nation right now (announced by Governor Ducey on 3/30/21). Add in the fact, that many people are fleeing much more expensive states for the Phoenix metro area due to the weather, value/affordability and a lack of natural disasters. With today’s low rates, another factor is that people can afford more home, so many are looking to up size due to Covid bringing about more remote working situations. People want home offices again!
All and all, demand has dramatically increased since right after Covid hit. First it was the interest rates dropping into the sub 3% range, then some states having more harsh lockdowns prompting people and businesses to leave and come to AZ. Also add in the post Covid job growth mentioned above. For supply, it has continued to shrink since 2020. According to the data from the Cromford Report, in January 2020 we had around 11,000 listings in Maricopa County. Today we’re at barely over 4,000.
Now, some of you might be bummed out by all this, or scared about missing out in one way or another. I have some good news for you! As of this month, we are starting to see the housing market data correlate with Covid dying down/infection rates dropping off a cliff. What does that mean exactly? Well, for starters, the supply index data is showing that it’s starting to level out. I do not have a crystal ball, but I assume it will start creeping back up sometime this year.
There are many people that have sat on the sidelines waiting to sell once the dust settled and they have more certainty. Also, with most homeowners having a significant amount of equity, there will be folks that lost their jobs and went into forbearance that will most likely be listing their homes as well. Second, due to the craziness of the current market conditions, we are now starting to see demand index slowly & consistently decrease. It went down all of March and looks like it may level here soon!
More supply and lowering demand means the market should become more balanced and ease the crazy bidding wars, etc. Do not expect prices to go down anytime soon though until supply supersedes demand! *Supply & demand indexes mentioned are from the Cromford Report