After nearly two years of headlines and non-experts forecasting a crash, a recent headline reads, “Housing costs will be ‘permanently higher’ following pandemic: Study” I expect to see more headlines like this and hopefully, they will reduce the, “I’ll wait until prices go back down” comments. Waiting has proven to be incredibly expensive. In 2021 alone, Greater Phoenix saw a 28% appreciation rate, and the entire country increased by about 15%. Emotionally, the 2005 market felt a lot like the 2021 market, but the fundamentals of those markets were entirely different. Simply put the 2005 market was based on tremendous demand while the 2021 market was based on nearly non-existent supply.
“Buy land, they’re not making it anymore.” ~Mark Twain On June 19, 2020 I wrote, “Econ 101 taught us about supply and demand. To measure the health of the real estate market we look at new listings AKA supply, and new pendings AKA demand. When demand out paces supply, prices go up. This has beenContinue reading “Greater Phoenix Real Estate Update 1/7/2022”
Persistently low inventory combined with above normal demand has driven a 30% median sales price increase this year. Will inventory increase in January? If the market follows past trends then yes. If the market continues like it did in early 2021 then maybe not. We will know more very soon.
Remember at the beginning of the year we hoped for answers and less political strife? Whether or not those were accomplished remains to be seen but one thing is for sure, 2021 was a year of records. Nationally, median sales prices peaked, for sale inventory bottomed, average days on market bottomed, over-asking price sales peaked, mortgage rates hit all-time lows, and second home demand surged.
When you are asked, “How is the market?” what do you say? Is it a great time to buy? Is it a great time to sell? Is it a great time to be a homeowner? I would say yes to all of those. The data supports the continued growth, continued strength, and continued appreciation – just at a slower rate.
Yesterday I had lunch with three of Greater Phoenix’s premier real estate analysts. As the conversation moved from appreciation rates to price reductions to data quality to seasonality, the question kept coming up, “What do you think will happen in 2022?” It is forecast season after all. Time to reflect on the year that was and plan for the year ahead.
The relationship between supply and demand establishes pricing whether it is for toothpaste, a mani/pedi, Bitcoin, or a house. Demand moves based on consumer sentiment. This is true for Wall Street and Main Street and that is the extent of the similarities between the two.
While the company that we love to hate is struggling, we are all left on the sidelines guessing what will happen next. This is not the end of iBuying, nor is it the end of Zillow, and this certainly does not mean the market is crashing (the price reductions are only bringing the asking price down to market value). It may mean that Wall Street investors decided profitability is important and it is time to stop buying high and selling low.
Could it really be possible that we are overbuilding? But what about the extreme undersupply of housing stock? NAR said we have a national deficit of over 5 million units. Economist, Dr. Peter Linneman says have a 2-3 million unit shortage. Wall Street housing analyst, Ivy Zelman says the deficit is less than one million units. These are all credible sources so how do we make sense of this? Perspective is key, different data tells different stories.
Today is all about the AZ market. On Wednesday, Lawyers Title hosted a presentation with Tina Tamboer with the Cromford Report. She always shares pertinent and timely information. Below I have combined a lot of her information from her presentation, along with additional information from my research.