In the Phoenix market, our housing inventory fluctuates based on supply and demand. It will also fluctuate differently based on each different city within the Phoenix Metro Area (i.e., Chandler has a different inventory than Scottsdale, Gilbert from Tempe, and so on) and by price range within that as well.
The National Association of REALTORS® considers a “balanced” market to be around a six-month inventory of homes. If there is a larger supply, it is considered to be a buyer’s market, and if the supply is lower, it is considered a seller’s market. Housing inventory is calculated as the number of homes currently on the market within the last month, divided by the number of homes that sold within the last month.
The inventory of existing homes in the overall Phoenix Metro area has been reduced to approximately 3.15 month supply of homes. There were about 21,770 active homes for sale as of February 28, 2018, which is an increase of about 0.5% from January, but a drop of over 12% for the same time last year.
Housing inventory has a direct impact on price. When the number of people who need homes is constant, but the supply is reduced, prices tend to go up. This is because the same number of people are trying to buy a dwindling number of homes.
For the entire Phoenix Metro area, the average home sale price has increased over 7.9% since last year. That does compare a small condo selling with multiple offers and a luxurious mansion selling for below list price after being on the market for a long time in the same year, so for a more accurate feel of what the market is doing it’s better to use the median home sale price instead of the average. The median home sale price jumped 9.8% over that same period of time. That’s nearly a 1:1 relationship of a decrease in housing inventory to an increase in the price of homes! For someone looking to purchase a $275,000 home, that equates to an increase of $26,950 in one year of appreciation alone. If that person put off looking for a home for a year, they would have to increase their budget to $300,000 in order to afford the same home.
While I don’t have a crystal ball, it’s important to be able to tell my clients which direction prices will be moving. When not only prices, but mortgage rates are increasing, all buyers can be dramatically affected by either not being able to afford, or having to pay more for the same size of home they were looking at a few months ago.
If you’re considering selling and would like more specific local statistics on what the market is doing for your home, or if you need assistance navigating through these ever-changing markets, give me a call at 480-355-8645 or email me at [email protected] today!