Are you looking for a home in Phoenix? Get ready for a challenge. RE/MAX released its National Housing Report for August, and the news out of Arizona may shock potential buyers.
Out of 50 metro areas surveyed, Phoenix led in two categories: The city saw a 36.6 percent drop in year-over-year new listings, and its months’ supply of inventory plummeted by almost 52 percent.
Livabl spoke to Christy Walkers, broker and owner of RE/MAX Signature in Phoenix, to find out more about what’s going on in Phoenix.
Phoenix is leading this report with a 36.6 percent drop in year-over-year new listings. Can you provide some insight into what’s going on?
Following COVID, Phoenix experienced one of the largest booms in our history with record-setting migration. Added to the influx of new residents, we experienced historically low-interest rates, so we are experiencing what we term ‘golden handcuffs.’
Because homeowners are typically in their homes for an average of 7-plus years, many are not planning a move for several more years. Still, they’re also acknowledging higher prices and higher interest rates. These have become a deterrent to most who would traditionally think about making another move.
We will likely see a continuation of low inventory for a few years to come if there is an incentive for people to stay where they are.
How did the summer drought (and subsequent pause on new home construction) affect these numbers?
It certainly had a small effect, but overall, building permits are up, and still not able to keep pace with the number of people relocating into our state. Add to the permitting challenges, the issues with the supply chain, and finding quality local trades, the new home builders are taking longer to finish construction.
Are you seeking more listings in particular areas of Phoenix?
I haven’t seen a specific area, and based on the heat map, I’m seeing an even spread of listings with low inventory in almost every city.
Where in Phoenix would you find the lowest amount of inventory?
The East Valley currently has a very low inventory in Gilbert, Chandler, and Mesa. I’m unsure I could accurately explain why since the West Valley tends to be more affordable and attractive to people in higher interest rate environments. My best guess as to why these cities have significantly lower inventory is that the East Valley has better job growth right now and tends to rank highly for families consistently, likely attracting most of those immigrating into our state.
Phoenix is also leading in the year-over-year decrease in monthly inventory with a 51.1 percent drop. Do you expect this trend to continue?
At this time, I am expecting inventory to hold steady, although we could experience another small drop before a rebound. While low interest rates have a lot of homeowners locked into an affordable payment, preventing them from making their next move, inevitably, there will be people who must move because of life circumstances such as death, divorce, job, relocation, and family formation.
We are expecting interest rates to go down next year, which will incentivize people who have feared interest rates will continue rising to reconsider making a move and hopefully increase some of the available inventory. We also expect supply chain issues to continue to ease, allowing homebuilders to produce homes faster.
Give us a crystal ball forecast — do you foresee more availability in Phoenix for 2024?
I expect slightly higher listing counts for 2024 in the Phoenix metro area. Not only will we continue to see new home builds accommodate the demand, but we will also start to see those who have put off moving reconsider when interest rates move back.
Unfortunately, those who have not been of a home-buying age for more than ten years are unaccustomed to rates as we have now, and the shock of seeing rates climb quickly meant they put the decision to move on hold. Now, we are seeing many consumers adjust to this new reality and recognize that these interest rates are quite normal historically. While the rates do affect affordability, they do not have the same emotional impact that we saw over the last two years, which prevented many buyers from being able to consider a move. I think some pent-up demand to make a move will start to open the inventory next year. Listing inventory is up over last month but only slightly in line with the seasonal adjustments we experience.
