By Mike Bodeen · 20 March 2023
Questions? Will the Phoenix Metro listing inventory pick up the pace to provide our buyers with more buying options? Will mortgage rates ever return to their historic low levels of sub 4% or sub 5%?
I don’t know the answer to the last question, but the first one is becoming more clear that we might not be adding homes-to-buy inventory anytime soon and that our current level of homes for sale may last until???
This week’s chart is interesting, nay, it’s concerning. It’s showing the number of residential listings available to purchase at any given time over the past 5 years PLUS the bottom of our market (price-wise) back in 2011 and 2008 where the number of listings peaked.
Available Listings Rounded to Nearest 100
2008: 56,000 (Peak – Great Recession)
2011: 39,000 (Bottom of the Market Price-Wise)
2020: 11,000 (Beginning of Pandemic)
2021: 4,800 (Pandemic Era)
2022: 5,000 (Pandemic Era)
2023: 14,500 (Current)
All these years are aberrations. Over all these, the average number of listings for sale in the Phoenix Metro market has been 15,000 to 25,000, which really is not that far off the current number. And to be fair, we’ve had a number of years where listings were between 30,000 and 40,000, just not the same amount as the 15k-25k range.
The question however is what we have now, or less, a new normal. I’m going to jump out on a limb and say, yes. And there are reasons.
First of all, 88% of current homeowners in Arizona have a mortgage rate of less than 5%. The national average is 85%. See the linked article as of 6 months ago.
I think we’re finding out that these current homeowners are not too willing to trade in their 3% mortgage for a 6% to 7% one. This results in fewer homes hitting the market. Now this could change – somewhat. After all, life happens. Deaths. Divorce. Health. Family size. All these are reasons to sell a home. But the discretionary reasons are what homeowners must wrestle with before making such an important decision.
Another reason supply may stay lower is that builders are building many homes for renters. There are estimates as high as 240,000 needed homes in Arizona and people will need to live somewhere and their options are increasingly to rent because of high home prices.
And finally, though there are more reasons than I’ve listed here, inbound migration will continue to increase Arizona’s population as businesses continue to find our state to be biz-friendly, and other nearby states populace finds it increasingly undesirable to live there.
Therefore, lower supply may very well be our new norm, which will have a profound impact on keeping prices higher.