Highlights from this report:
- A recent report showed that the Phoenix housing market has very low supply.
- Among the nation’s largest metros, it’s one of the “tightest” real estate markets.
- Home buyers in the Phoenix area are competing for limited inventory.
- Steady population growth is part of the reason why.
Phoenix One of the ‘Tightest’ Housing Markets in 2019
According to a recent report from the national real estate company RE/MAX, the Phoenix housing market has one of the lowest levels of supply in 2019. At least among the 53 metropolitan areas analyzed in their study.
On September 17, the company published its latest “National Housing Report” with data through August 2019. That report is based on Multiple Listing Service (MLS) data in approximately 53 metropolitan areas nationwide, and includes all residential property types.
According to the authors:
“A six months supply indicates a market balanced equally between buyers and sellers. In August 2019 … [t]he markets with the lowest Months Supply of Inventory were Phoenix, AZ and Manchester, NH, both at 1.5.”
The Phoenix housing market has suffered from low supply for several years now. That’s true for many other major cities in the U.S., as well. But Phoenix, in particular, has a severe shortage of homes for sale relative to demand. And that is making things more challenging for buyers.
Population Growth Has Increased Demand for Homes
Population growth has a lot to do with Phoenix’s housing market inventory shortage. New residents have moved into the area — often from more expensive real estate markets — and that increases the demand for homes on both the rental and purchase side.
According to the Urban Land Institute’s “Emerging Trends in Real Estate” report for 2019, the local economy is getting a boost from an influx of new residents.
To quote that report:
“The 2019 population growth rate is projected to be well above the national rate in Boise, Phoenix, Las Vegas, Salt Lake City, Denver, and Spokane, WA/Coeur d’Alene, ID. Net migration into these markets is particularly strong in Phoenix, Denver, and Las Vegas.”
Much of this population growth can be attributed to people who have fled higher-cost cities for the relative affordability of housing markets like Las Vegas and Phoenix. The median home prices in both of those cities is still below $300,000, as of September 2019.
Median home prices are much higher on the West Coast, and especially within the San Francisco Bay Area. So there is a kind of “exodus” taking place. A study published last year by the real estate information company Trulia showed that Phoenix was one of the top destinations for Californians leaving the Golden State.
All of this migration has led to significant population growth in the area. According to the U.S. Census Bureau, the population of Maricopa County (the central county of the Phoenix-Mesa-Glendale metro area) rose by more than 15% from 2010 to 2018. For comparison: the population for the nation as a whole rose by 6% during that same period.
A Real Estate ‘Crash’ Seems Unlikely, for Now
Judging by the emails we receive from readers, it seems that a lot of people (and home buyers in particular) are worried about a housing market crash. The good news is that these concerns are mostly unwarranted.
Barring some unforeseen economic calamity, the nation’s real estate market will likely continue to rise for the foreseeable future.
With that being said, we are seeing home-price declines in some cities across the country. Silicon Valley is a good example. House values in that part of California are currently dropping at a steady pace.
But Phoenix is a different story. Give the lopsided supply-and-demand situation mentioned above, home prices in that area will likely continue to climb through the end of 2019 and into 2020. A housing market crash in Phoenix is highly unlikely at this stage. The fundamentals needed to create such a scenario simply aren’t there, at present.
What’s more likely is that home prices in the area will rise more slowly in 2020 than they did during the past few years. Affordability issues will begin to creep into the mix, and that in turn could decrease demand among buyers. That’s a pattern we are seeing in many U.S. cities right now.
What Phoenix Buyers Need to Know in 2019 – 2020
Buying a home can be a complicated process at the best of times. But when properties are in short supply, buyers have another obstacle to contend with.
While the real estate scene in Phoenix has shifted more toward buyers over the last year, it’s still a seller’s market overall. And the inventory situation is the number-one reason why. Those trends could carry through 2019 and into 2020.
Here’s what buyers can do to increase their chance for success:
- Start shopping early. In a housing market with less than a two-month supply of homes, finding a suitable property can be a challenge. Home buyers should give themselves plenty of time. It’s never too early to start researching the local market and viewing homes.
- Don’t over-haggle. In a seller’s market (or at least one with limited inventory), it’s rarely a good idea to “low-ball” the seller or sweat the small stuff. Keep the big picture in mind. Make a strong first offer based on comparable sales, and be willing to negotiate. The market is in the seller’s favor.
- Capitalize on today’s low rates. While mortgage rates have edged a bit in September, they are still hovering at historic lows. This is a great opportunity for home buyers who need to use a mortgage loan. But we don’t know how long it will last.
Disclaimer: This article includes forecasts and outlooks relating to the housing market in Phoenix, Arizona. Such views are the equivalent of an educated guess and should be treated as such.