Today, our current MLS inventory in all of Maricopa County dipped below 3,000 single-family homes. As of 5 pm today, there were only 2,811 homes available for sale.
2,811.
Buyers are having a difficult time securing property. Prices climb each month while inventory shrinks to its lowest amount seen in decades. In 85258, days on market have decreased by 51% since last year with an average price per square foot gain of 13.4% during that time.
Sellers are calling the shots.
A normal, balanced market has 25,000 – 35,000 single-family homes available for sale. There is a scramble for products to match to buyers and I review multiple inventory requests from agents daily. As of today, the lowest-priced single-family home in Scottsdale is $370,000 (click to see what 370k gets you).Supply and demand in almost every product category and price point are more out of whack than I’ve seen in my 20 years in the business.
True story: My Sellers, while in a multiple offer situation, were offered free pediatric care for their children as a perk to accept a Pediatrician’s offer on their home. It can get that weird.
Events factoring into the current market cycle:
INTEREST RATES
For buyers, cheap money promotes buying enthusiasm, access to higher price points, and the incentive to act. Refinances are at an all-time high, keeping people in their homes longer, almost ensuring the flow of new inventory remains low given homeowners’ increasing equity + lower mortgage payments.
When rates increase, this will throttle down buying activity and price increases, but could still delay new inventory for fear of leaving a lower-rate mortgage for a new home with a higher-rate mortgage.
NET MIGRATION
Covid created urban flight and Metro Phoenix benefitted. Arizona’s 2020 buyer pool consisted of roughly 25% California, 9% other states, and 66% local. At one point in 2020, 222 Californians per day moved to Arizona. I recently posted on LinkedIn the latest costs to rent a 26’ Uhaul moving truck from different locations to Phoenix, showing how supply and demand in housing can be inferred by costs to move.
LOCAL MOVES / INVENTORY
Metro Phoenix homeowners historically bought a new home every 5-7 years. As we emerged from the Great Recession homeowners settled in for longer terms of ownership, creating this year over year squeeze on inventory.
The local movers I have seen in the past couple of years are moving for life events – they must upsize to account for growing families or multi-generational living, downsizing for empty-nesting or retirement, parallel moves for schools, or have other plans in place that require selling versus the desire to sell. The inventory, choices, and options simply are not there for casual “couch touring” homes online to result in actionable moves.
RIPPLE EFFECTS
Land and lots are selling to “reluctant homebuilders”. Reluctant homebuilders start out looking for homes in the resale market, either make offers and lose the homes, not finding what they need, or don’t see the value of renovating something that already costs so much. They move on to the land market and hire a homebuilder to build something for them. Vacant lots that have been on the market for a year, two years+ are now selling, leading to a tight land market as well.
Remodeling and renovating homes is at an all time high given the amount of existing home equity and low borrowing rates. Between new construction and remodeling, Metro Phoenix contractors, tradespeople, and suppliers are maxed out in terms of their ability to start new projects quickly and cannot offer discounted pricing on materials.
To give our inventory issue some perspective, we would need keep our current inventory plus add 500 homes per month, every month, for 4.5 years to reach a normal 30,000 resale home inventory.
WHAT WE’RE DOING TO HELP OUR BUYER CLIENTS
Launch Real Estate finished 2020 with $1.7B in sales with less than 220 agents. We own the #1 market share in Arcadia and Paradise Valley and are the #1 brokerage for homes over $1,000,000. We, as a company, have made a commitment to host weekly intra-office networking events in multiple formats to pitch off-market listings to each other so Launch clients have first dibs on our “Coming Soon” listings.
Many listings on Zillow, Redfin, etc are under contract. The off-market inventory mentioned above may never be listed at all – let me know what you are looking for. You can also search the actual MLS in real-time directly from my website here.
HOW YOU BENEFIT AS A SELLER IN THIS MARKET
Online views and foot traffic are at record highs. I use 3D tours, aerial videos, and detailed floorplans to assist Buyers to make informed, quick decisions for my Sellers’ properties. Aside from the obvious positives of selling your primary residence in this environment, the time has never been better to market the following types of property:
- Rental properties that have seen significant value gains
- Infill land for new construction
- Obsolete properties that may benefit from rezoning or redevelopment
- Acreage in the path of development
- Residential property with negative features (road noise, power line visuals, etc)
- Homes and land in North Scottsdale zip codes 85266, 85262 that take much longer to sell in normal markets
- Selling a primary residence and then moving into, and begin establishing 2-year residency of, an existing rental property that you own
- Given current conditions, you may not even need to place your home on the MLS
- Largest number of “wants” I’m seeing: Scottsdale condos, townhouses, and patio homes, land/lots everywhere, teardowns in Paradise Valley, move-in ready Central Scottsdale/McCormick Ranch up to $1.5M, move-in ready luxury $3M+.
In summary, this market is starving for inventory. Contact me for a custom report made for your home or condo/townhouse that details sales activity, supply and demand, percent of list to sale price, and more.
Let’s talk and come up with a creative strategy.
Thank you all for your continued support as I enter my 20th year(!) in Arizona real estate.
Gene
QUICK LINKS:
The shopping mall was dying anyway, Covid just accelerated it. This is a great article on the proliferation of the US shopping mall and its inevitable death:
The Ballad Of Victor Gruen
Did you purchase an Oculus Quest 2 for your kid this past Christmas or Hannukah? Visit OculusHomeTour.com on the device’s browser and enjoy an immersive 3D tour experience of one of my old listings. It’s awesome!
I’m honored to have been recognized by Phoenix Magazine in their Top Producer Profiles. Lots of great Realtors in here!