Big Home Price Increases Baked into Phoenix Cake
So what happens if interest rates ever increase?
“Prices have accelerated due to the huge imbalance between supply and demand, but as yet we have only seen part of that reaction. Sales prices are a trailing indicator and lag behind the leading indicators by up to 15 months. We can therefore expect to see prices move even higher during the next 12 to 15 months with appreciation rates possibly rising over 20%. - Mike Orr, The Cromford Report
Phoenix Real Estate
“As we move into 2021, there is no more important metric than supply and how supply relates to demand. We begin 2021 with above normal demand and extremely low supply.” - Tom Ruff, The Information Market
The number of single-family houses for sale is the lowest since 2005. But since the population of Phoenix is about 40% higher now than in 2005, the market today is a LOT tighter than in 2005.
I’m sorry to say, but all the signs point to a huge increase in house prices in 2021. Mike Orr’s quote above of possible price increases of 20% or more, just reflects the numbers.
Of course, we could all be missing something. For example, in 2004 and 2005, I thought “pick a pay” mortgages were crazy but figured those lenders must know what they’re doing.
I was wrong. A lot of people making those mortgages were not betting with their own money, and the losses were not confined to mortgage companies.
Are we all missing something this time, too? What are the downside risks, we’re missing if prices increase 20% or more in 2021?
Newly Listed for Sale. Usually, a ton of houses hit the market in January. So far, however, it looks like new listings are running less than in 2020. Although running low right now, the number of new listings hitting the market should increase through February or March. But if they continue to run below 2020 levels, that would be bad.
Last week’s new listings were down 23% from the same week last year. I certainly hope it’s an anomaly and the number bounces back up next week. Maybe with prices increasing so fast, potential sellers are waiting to sell. Or maybe the market is so strong that agents are selling houses without listing them in the MLS.
For Sale. This is what’s driving the huge price increases – there’s not much for sale. The number of houses for sale is 59% less than this week last year!
Under Contract. One good trend is that the number of single-family houses under contract to buyers has been falling but it’s still running higher than last year.
Solds. Solds are still high but are likely to slow down a bit due to the lower number of houses under contract. If the low number of houses hitting the market becomes a constraint on home sales, that would suggest extremely large price increases.
I’m thinking about reformatting this viz. Put all 3 years on one graph instead of 3. Any suggestions?
This information can vary a lot in different parts of metro Phoenix. Your real estate agent can find the data for your specific city or zip code at The Cromford Report.