Given the unprecedented strength of last year’s real estate market in Phoenix, a slowdown feels long overdue. But thanks to supply remaining stubbornly low (2022 began with the lowest number recorded), the expected cooling off is not showing up just yet. We saw some early weakening of the market in mid 2021, yet the low level of homes coming to market in the 4th quarter could not exceed a demand that still remains a bit above normal. Most concerning is the volume of investors in the marketplace vs. traditional home buyers. Without them, we believe demand would be in fact below normal. Despite our misgivings about the buyer mix, for now prices will continue to rise.
For more market insight, Tina Tamboer of the Cromford Report shares these sobering thoughts:
“It’s an accepted opinion among local analysts that income levels in Greater Phoenix cannot sustain another year of 28% annual appreciation, especially if interest rates continue to increase. However, seeing there is little relief from home builders adding more supply to the equation, it’s reasonable to expect the market to respond with a softening of demand. This trend started to reveal itself in the 2nd Quarter of 2021 in a subtle manner.
Since 2014, buyers purchasing their primary residence have made up 70%-76% of total residential purchases in Maricopa and Pinal County. In Q2 2021, that percentage dipped to 67%, and declined to 63% by October. While traditional buyers retreated, competing buyers for 2nd homes and institutional buyers made up of Wall Street-backed iBuyers, hedge funds and other investment groups stepped in. Price appreciation slowed from an average of 3.3% per month to 1.1%.
While 2022 is coming out of the gate strong, and the Spring is typically the strongest season for buyers, it remains to be seen how much control investors and 2nd home buyers will take if traditional home buyers retreat. The last time they ignored affordability issues within the community, everyone lost in the end.”
Questions about selling in this market? Contact us, we are always here to help.
Russell & Wendy Shaw