Phoenix Real Estate is Hot, But a Bubble It’s Not
As has been the case for 2017, sellers remain in charge of the market in Phoenix. A lower than normal supply of homes for sale and increased buyer demand is creating conditions favoring sellers in most areas and price ranges. While we are seeing more multiple offer situations and homes selling above list price, buyers and sellers concerned about another bubble need to take a step back and look at the overall conditions in the Greater Phoenix market.
Flash sales, properties sold within a day or less on the MLS, saw the highest volume last March since August 2013. However, a measure of 210 does not come remotely close to the 1,032 flash sales measured in March 2005. There is a growing number of properties selling over list price as well. But again, April 2017 only saw 16% of sales fit this category while April 2005 saw 37%. So while our real estate environment is indeed competitive for buyers right now, thankfully it doesn’t resemble the same level of insanity experienced during the 2005 bubble.
For sellers and homeowners: Annual appreciation rates* have been consistently averaging close to 5% for nearly 2 years. Compare this to the two years between August 2003 and August 2005 where the annual appreciation rate rose from 5% to a ridiculous 45%. Between January and July 2005, unprecedented appreciation ranged between 4-7% PER MONTH compared to an average of 1% per month thus far in 2017.
Current prices are the highest they’ve been since January 2008, over 9 years ago, and they’re comparable to April 2005, over 12 years ago. However at an average of $152 per square foot, sale prices would need to appreciate another 25% to compare to the highest peak achieved in May 2006. At the current rate, that could take another 4 years to reach.
*Comparing the average sales price per square foot for the most recent 12-month period to the prior 12-month period
To really drive this idea home, below is a chart showings segments of the Greater Phoenix Real Estate Market that are closest to regaining their peak pricing before the housing crash.
Scottsdale 85251 is clearly a front-runner in this table and is still appreciating fast. Phoenix 85018 has also got closer to its peak than any other segment in the above list. However its quarterly average $/SF has actually declined in the last 12 months.
Phoenix condos and townhouses are a strong segment with very rapid appreciation in the past 12 months. Central Phoenix (all types) is also getting close to its peak, needing another 15.6% and achieving 6.8% in the past year.
The far Northeast Valley is having the hardest time regaining its peak, with Carefree 85377 and Scottsdale 85262 a long way below and going backwards in the past year.
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Commentary by Tina Tamboer with the Cromford Report.