By Mike Bodeen · 20 July 2024
A Quarter Century of Data Suggests We’re Due For Change
In most summers that I’ve been selling Arizona residential real estate (30 years), we expect business to slow… Gee, I wonder why?
Well, this year is no different except for one exception; the slowness didn’t start in the summer. It comes on the heels of a dropping sales market that began exactly three years ago.
In July of 2021 home sales peaked at a record annual rate of 108,000. It then began dropping for the next three years, landing where we are now at 65,000 – a 40% drop.
For the past year, however, sales have continued to drop, though at a slower rate. Considering the mega sales slide we had previously, it’s currently stable, balanced even.
The above chart is an interesting near quarter century look at our sales market defined by radical ups and downs that sandwiched the worst sales market for us, and the country – ever. From 2008 to 2016, we suffered through really bad sales years, with a lingering residue that was just awful. The brown and light blue represent REO’s (foreclosures) and short sales.
Will our present calm stability remain? If your prognostication sees it as the historian, you’d have to say we’re due to head further down or make a radical turnaround and head north. Which is it?
One thing you’d be hard pressed to do is to bet on a continued calm market. Phoenix Metro just doesn’t run that way.
For the hundreds of you who faithfully read our weekly Snapshot, you probably know the answer. For months we’ve been preaching that Phoenix and the nation is currently in a window of time enabling buyers to get back on the ownership court. It’s a time to take advantage of lower rates, albeit not like 4 years ago, but now under 7%.
The average monthly sales price per square foot two years ago was $306 PSF. It dropped briefly down to $268 in December of 2022, but is now back up to $304, so fairly stable. Greater inventory with low competition has likewise, been a boon for buyers.
As we wrote last week, and as inflation lowers, we’ll continue to see the lowering of mortgage rates, perhaps down into the 5% range during this next year. That’s the good news.
The bad news is that as the rates drop, buyers increase, sales increase, inventory drops and prices rise.
Could values drop? Certainly. But in order for that to happen, we would need to vastly increase our inventory, greatly exceeding buyer demand, but that’s not the storm direction I’m wagering on.
Mike Bodeen