From soaring prices and limited inventory to an influx of cash buyers and an eye-watering numbers of offers coming in for each listing, the Phoenix home market has been grabbing headlines for its seemingly never-ending rally.
But as inflation rates rise, recession worries increase and interest rates inch upwards, we’re reaching interesting times. While the headlines shift and lead you to believe the market is nosediving into another housing meltdown, nothing could be further from the truth.
In reality, the market is rightsizing.
Supply and Demand
There is more inventory in the market than there has been in quite some time. Consider that a year ago, there were only 4,000 active listings available in the fifth-largest metro area in the nation. Today, that number sits at 19,000, nearly five times greater from earlier this year.
This inventory increase has decreased the chaotic nature of listings and allowed many new opportunities for buyers looking for their dream home. As well, REALTORS have more breathing room in terms of expanding their listings and having more options in showing homes that hit all the right notes.
The wild pricing of just a few months ago is settling down, too. By no means are prices plunging or remotely close to the dip felt during the Great Recession, but they are inching closer to more realistic ranges. Sellers will still be able to get excellent returns, though not at the overinflated rates we’ve seen.
The influx of iBuyers looking to scoop up inventory has also subsided. Tending to overpay for the sake of acquiring quantity, decreased iBuyer activity has left the field open for many homebuyers who intend to live in the state and occupy the dwellings they purchase.
As REALTORS, we’re often pressed to look into the proverbial crystal ball and make predictions about how the next 3, 6 or 12 months ahead of us will flesh out. Fortunately, relying on resources Phoenix REALTORS shares with our members, including monthly reporting resources that serve as a barometer for the market, we can make a few educated conclusions about the future.
- Despite the turbulence we’re experiencing, indicators point to a relatively soft landing. Home sales are projected to be down by 1%, but overall, prices will remain high, growing as much as 4%.
- Homes are being redefined. While the pandemic caused chaos and confusion, it has created a definite demand among homebuyers. The pre-pandemic open floor plans have now given way to dedicated rooms – bedrooms, home offices, playrooms – offering quiet, separate spaces for homeowners to enjoy.
- External economic headwinds will have a yet unknown impact on the real estate market. Though inflation, concern of a recession and rising interest rates linger, it’s important to note that the rate bumps we have seen are nowhere near the double-digit 18.45% interest rates we saw in the 1980s. Maintaining long-term perspective is critical, while understanding that homebuyers have been indulged with rates under 3% for quite a while.
- Although buyers and sellers aren’t moving and shaking as much as they did a year ago, people will still seek to move. Whether downsizing, upsizing or relocating for school or work, lifestyle factors will continue to drive real estate trends.
The Valley has been on a wild ride. And while some say the Phoenix metro home market is cooling off, it’s more accurate to say that it’s entering a new phase – one that’s steadier paced, more predictable and less hard-driving. Economic factors remain the wildcard, but even so, quality data, input from members who have decades of experience and what we know from historic trends point to much-needed balance coming back to the marketplace.
Andrea Crouch is President of Phoenix REALTORS, a modern, member-first organization that is the foremost expert industry resource serving more than 11,000 real estate sales professionals in the Valley. Phoenix REALTORS offers free concierge-level member services, responsive support and resources, and the latest industry information, making it both the best-valued and highest-quality option for Valley REALTORS.