Phoenix tops Kiplinger list of cities where home prices have risen the most
According to a recent Kiplinger article, Phoenix leads the nation with a 26.2% increase in home prices. The author doesn’t draw many conclusions, but implies the market will slow down as distressed inventory levels fall and more sellers jump into the market.
While I agree that Phoenix real estate can’t sustain a 26.2% annual appreciation rate for the long term, I don’t see any indications at the moment of any real market slowdown, based both on anecdotal evidence and cold, hard facts.
- Greater Phoenix Real Estate Supply: As of this minute, there are 15,340 Active properties for sale in the Arizona Regional MLS (covering greater Phoenix). That includes all property types: homes, condos, manufacturing, land, etc. Only about 12,000 of those are single family homes.
- Greater Phoenix Real Estate Demand: If we think of closed sales as a representation of demand, we see some impressive numbers. In May 2013, there were 9386 reported closings. About 8,000 of those were single family homes. So 12,000 homes available for sale with 8,000 closings per month implies a 1.5 month supply. That’s a robust housing market!
- Greater Phoenix Economy: The Valley’s unemployment rate is 6.8%, which is lower than the national average of 7.5%. As the construction market surges and retail/commercial segments rebound, I expect the local unemployment rate to fall further.
- Anecdotal Evidence: Recently, I’ve received several fair market value offers on listings from investor groups. They promise all cash offers with no repairs and quick closings. In short, ideal terms for any seller. In the 2005-2007 market, investor offers were common, but always well below market value. Investors’ profit motives haven’t changed, so the implication is that many investors still believe the market is undervalued.
In my opinion, the greatest threat to the continued robust recovery of the housing market, not just in AZ, but across the US, is an uptick in mortgage interest rates and/or changes to lending guidelines. Of course, a whole host of tangential factors also come into play, from the state of the economy to international monetary policies. Nobody possesses a real estate crystal ball, but for now, anyway, all signs are positive.
What are your thoughts on the short/mid/long term state of the housing market?