It’s no secret that the real estate market is showing a shortage in available homes. Mike Orr, who holds a master’s degree in Mathematics from the University of Oxford, and is the founder, chief analyst, and editor of the Cromford Report shares his thoughts on the greater Phoenix real estate market:
“The lack of supply can only be described as shocking. A 30 percent decline since this time last year to reach the lowest level since August 2005. This to satisfy a population that has grown more than 20 percent since 2005. Anyone who thinks this severe shortage will not result in a significant rise in prices is going to have another thought coming pretty soon. The median sales price is already up 11 percent over the last 12 months and the average price per square foot is up almost 9 percent and probably heading for a double-figure appreciation rate.
We note that December 2019 contained 21 working days and December 2018 contained 20, giving 2019 a 5 percent advantage. However, unit sales were up more than 20 percent so making an allowance for the advantage still gives 2019 a win by 15 percent. The listings under contract count is less impressive. While it is almost 20 percent up from last year, it had been almost 24 percent up at the start of December, so gave back a little of its lead. Only a little mind you. We are clutching at straws here to find something indicating a little cooling in the market.
Demand remains higher than normal but the Cromford® Demand Index has eased from around 107 to around 103 over the past four weeks. This will not make much of a difference while supply remains under half of what is needed for a balanced market.
The big hope for buyers must be for a surge in new listings arriving over the next 12 weeks. Perhaps sellers will be tempted by the higher pricing they can achieve. However, if they are staying around Phoenix, they will have to pay more for their new home too. Phoenix is currently the strongest large-city housing market in the USA, and this is fueled by inter-state population movements. Retirees are a big part of that, but so are people moving here from California and other Western states for work and the lower cost of living. Demand is likely to remain healthy despite the rising prices.
The primary question is whether we will see any change in the meager supply of homes for sale. If this is to take place, it is likely to be visible over the next few weeks. There has been no sign of an improvement in new listing flows in the last several weeks of 2019. But 2020 is a new year, so we will be watching closely for signs of change.”