The inventory of homes listed for sale in metro Phoenix took off again in February after a significant falling off in late 2006. April’s increase in inventory was the largest since last June.
Looking at the first 3 months of 2007, it looks like total Phoenix area home sales in 2007 will certainly be less than in 2006. Sales will probably be closer to 2001 or 2002 sales.
Despite the rapidly increasing inventory of homes for sale, the median home price in March increased $4,500 to $252,500, the highest it’s been since last August.
I’ve heard that employment has more impact on home prices than the number of homes for sale and that certainly seems to be the case here. The economy is doing well, people have jobs and many sellers aren’t going to sell unless they get “their price”… and they aren’t going to get their price… so the inventory increases.
If the Arizona economy tanked and people lost their jobs, many sellers would get very motivated very quickly and prices might indeed fall. But as long as the economy stays decent, it doesn’t look like the median home price is going to fall much, if at all.
9 responses so far ↓
1 Cbass // Apr 20, 2007 at 6:38 am
It looks like the median was higher back in the begining of 05 as well John.
What happened to all the appreciation, for 2 years now nothing! AZ RE is a not the investment it used to be.
2 John L. Wake - Realtor // Apr 20, 2007 at 2:50 pm
Homes are for living in.
3 Ken44 // Apr 20, 2007 at 3:42 pm
–What happened to all the appreciation, for 2 years now nothing! AZ RE is a not the investment it used to be.–
During the first four/five months of 2005 the price ave. was still under $220,000 range. My friend bought in Chandler in April/2005 for $230,000 and the home is valued in the $280,000 range.
Prices are down no question doubt. Yet the great price crash I’ve been reading about in many housing blogs has yet to materialize.
On the other hand there’s not much right now that leads me to believe that next year will be any different than 2007 so who really knows what’ll happen.
4 the kid // Apr 20, 2007 at 6:58 pm
as night follows day, a shift outward in the supply curve mean lower prices. period. and the demand side of the equation has no greater impact on prices the supply side does, so your notion of employment affecting prices more than supply is total hooey.
the masses don’t have to sell. yet. wait until the trillions in arms reset and the new buyers on the bottom can’t get in. i dont care how many people are moving to arizona, this is going to get a lot uglier before it gets prettier.
5 sifta // Apr 24, 2007 at 10:35 pm
Kid.
I agree that the laws of supply and demand are more sensible in the long run vs. RE psych. However, the supply-demand arg is strictly only valid at an equilibrium and we are still in a transient.
The way that I interpret what John is saying is that the sellers have a self-imposed price floor based on RE psych. This price floor is obviously higher than the market clearing price and thus we are seeing a backlog of inventory on the market. I don’t think that this is sustainable. However, since the liquidity of the housing market is so much less than that of (say) the stock market, it is unclear how long it will take for prices to gravitate to the market clearing price.
Thus, either the growth is so explosive that we see a seesaw in the demand for homes to bring the market clearing price above the (self imposed) price floor, or this psychological price floor will evaporate. If the latter happens, expect prices to drop significantly.
6 Ken44 // Apr 24, 2007 at 10:50 pm
The Phoenix area is a magnet for people from the Golden State for two reasons: real estate prices and jobs.
http://www.latimes.com/news/local/la-me-maricopa24apr24,0,6596176.story?coll=la-home-local
7 John L. Wake - Realtor // Apr 24, 2007 at 11:30 pm
Ken44, Nice find!
sifta, That’s exactly what I’m saying. But you explained it better than I did.
8 the kid // Apr 27, 2007 at 8:22 am
sifta- agree with you with one exception- the laws of supply and demand are valid always. your point about the illiquidity of the real estate market however is absolutely true, combine that with the utility of a house (vs. a piece of paper for a stock- if that!) and houses aren’t moving. that, however, doesn’t mean that the huge supply of houses has not had an effect on prices- it has. it is not as apparent however given the unique nature of the market. good post in any event.
9 Ken44 // Apr 29, 2007 at 7:51 am
The inventory has reached a new high.
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