The Greater Phoenix housing market continues strong and healthy and continues to heavily favor sellers over buyers. The supply shortage we have experienced for several years continues unabated but there are some changes in the segments of the market that are most affected.
At the low end of the market, the number of homes available continues to decline. Looking at the active single-family listings listed as available for sale with or without an existing contract we see the following numbers by price range:
|All the above||6,171||6,028||4,767||-23%||56||46|
Below $175,000 there are just over 1,000 single-family homes offered for sale. Yet just 6 years ago in September 2011 there were over 11,000. Those that are offered tend to sell very quickly. Inventory (measured against the annual sales rate) for the segment under $175,000 is now at 32 days. Since this number includes active homes that already have a contract (UCB and CCBS status), anyone trying to buy a single-family home under $175,000 is going to be faced with a very high level of competition from other buyers, which drives prices up and aggravates the supply problem still further.
Over the last month we have seen a little more supply available between $125,000 and $200,000, particularly in the inner West Valley and in a few parts of Northern Pinal County. In contrast, supply in the Southeast Valley, Northeast Valley and all areas that focus on people aged 55 or over has become scarcer still. The overall supply situation has worsened but changes mean that Phoenix, Avondale and Glendale are no longer as favorable for sellers, while most other areas have become even more difficult for buyers.
Once we reach $200,000 the situation eases and we actually have more active listings than in 2015, though fewer than last year. However the annual sales rate for homes between $200,000 and $250,000 has increased by 41% from 11,687 to 16,519 over the past 2 years. This means that the days of inventory measure has declined significantly despite the higher active listing count.
In the mid-range the situation looks like this:
|All the above||6,990||7,556||7,518||+8%||119||88|
The number of active listings is 8% higher than 2 years ago and a shade lower than in 2016, so at first sight the market looks well-supplied. However the annual sales rate has increased 46% from 21,430 to 31,248 over the last 2 years, so the extra supply is completely overwhelmed by the growth in demand. Inventory has declined from 119 to 88 days which means sellers have a strong advantage and continued appreciation is in the short-term forecast.
Above $500,000 the picture is rather different:
|All the above||3,89||4,396||4,350||+12%||259||211|
We have 12% more supply than 2 years ago, so there is still plenty of choice for buyers. However, the annual sales rate for homes over $500,000 has increased from 5,491 to 7,531, a rise of 37%. So here we can see that the growth in demand is much faster than the growth in supply and after a weak period since peaking in mid-summer 2015, prices in most luxury areas are starting to rise again, particularly for homes under $1.5 million. It is between $1.5 million and $3 million where the market starts to change for the worse.
Days of inventory has increased from 409 to 475 for homes priced between $1.5 million and $3 million, and here annual sales have risen from 547 to 596, an increase of only 11%, while supply is up from 526 to 679, a rise of 29%. Now we see a problem. When supply increases as a faster rate than demand, sellers are at a disadvantage. Pricing for homes between $1.5 million and $3 million will have a hard time making substantial upward progress until this condition changes.
The following trends are in effect:
Closed sales volume is higher than last year even though listings under contract are not
- New homes are still gaining market share growth over existing homes
- Attached homes are gaining market share over single-family homes
- Attached homes are rising in price more quickly than single-family homes
- The luxury market has much higher volume than 2016 but pricing is only slightly higher
Almost all areas that cater to 55+ active adults are looking very strong even though the summer is traditionally a quiet period for them. For example the annual sales rate in Sun City is up 13% compared to a year ago. With high numbers of retirees moving to Arizona, many locals aging in place and a slowing birth rate, the median age in Arizona is increasing rapidly and this will affect the housing market for many years to come.