See all 3 interactive graphs here.
The bottom line is the Phoenix real estate market remains strong but not crazy. The outlook for 2018 is for it to continue to be strong.
Looking at all homes sold, including condos and townhouses, the median home price was $242,000 in July, 8% above July 2016 and 14% above July 2015.
The number of homes that hit the market in July was down 1% compared to July 2016 and down 5% compared to July 2015.
This is a huge topic in the real estate world, not only in Phoenix but nationally, “Why aren’t there more homes for sale?”.
The lowish amount of new listings is a key to the low inventory of homes for sale and the strong price gains.
Homes for Sale
Looking at single-family detached homes (SFD), the number of homes for sale in July was down 9% (Yikes!) compared to July 2016.
That helps explain the strong (8%) price gains.
But the number of homes for sale this July was similar to the number 2 years ago in July 2015 so the change this year isn’t part of a longer term trend.
The number of homes that sold in July in metro Phoenix was 3% above last July and about the same as July 2 years ago.
Combine a higher number of home sales with a lower number of homes hitting the market and we get a tighter market for homes in Phoenix.
The stat “Months Supply” combines the number of homes for sale with how fast homes are selling.
- When homes are selling faster, the market is tighter than when homes are selling slower.
- When we have fewer homes for sale, the market is tighter than when we have more homes for sale.
“Months supply” combines the two.
I think 4 to 6 months supply is “normal.”
In July we had 2.8 months supply of homes for sale in metro Phoenix. That’s a REALLY tight supply of homes.
To get into the normal range of supply – and a more normal range of home price increases – we would need to see either, 1) homes start selling more slowly or, 2) more homes hitting the market.
Either or both would increase the months supply and ease the upward pressure on Phoenix home prices.
A year ago in July the months supply was 3.2 so the market is tighter this July (2.8) than last.
Despite that 1-year trend, the months supply 2 years ago in July 2015 was the same as this July, 2.8 months.
The national and local economies are doing good, unemployment, for example, is very low.
That means more people have more money to chase after homes and drive up home prices.
The only downside forecast for Phoenix home prices I can see right now is the eventual recession. We always get recessions. Let’s not pretend we don’t.
If we get a recession in 2018, 2019 or 2020, which isn’t unlikely, that would put downward pressure on home prices for sure. Phoenix home prices, however, are not crazy out of line so we might not see a big dip in prices.
Rates Can’t Go Lower. On the other hand, nationally, we’re kind of in new world here when it comes to recessions.
During the last 2 recessions, the Fed cut interest rates to spike the economy.
With interest rates as low as they are now, the Fed won’t be able to spike the economy like they did in the last 2 recession.
So will the next recession last a long time like the last one?
Nevertheless, we certainly will NOT see a home price bust like 10 years ago.
In fact, real inflation-adjusted home prices in Phoenix are still ~25% BELOW where they were 10 years ago.