WHY THE GREATER PHOENIX MEDIAN HOME PRICE HAS ALREADY HIT BOTTOM
The inventory of Arizona homes for sale, although very high, has fallen significantly in the last several months and it has fallen during a time of year when inventory usually increases.
That movement against seasonal trend suggests we have already hit the bottom.
The inventory will fall to “normal” levels sometime in 2007 which will strengthen the median home price.
WHY THE GREATER PHOENIX MEDIAN HOME PRICE HAS NOT HIT BOTTOM
The inventory of Arizona homes for sale may have turned the corner but the median home price has not. The average days on market is still increasing and the longer a home is on the market, the more likely a seller will accept a lower price.
Therefore, the increasing average days on market will continue to put downward pressure on the median home price. That is, until the inventory falls far enough to begin lowering the average days on market.
Bubbleheads make the point that there are a lot of frustrated Arizona home sellers out there who will put their homes on the market at the first sign of an improving Arizona real estate market. There is some truth to that.
However, the falling inventory trend is so strong I don’t think the re-entry of frustrated sellers this winter can stop it, they can only slow down the fall in inventory.
FYI: We will see an increase in inventory in January, we do most Januarys. The question is, “Will the increase be unusually large or not?”.
Many buyers who can wait to buy, have been putting off buying a home. They don’t want to buy until they feel prices have bottomed out. This is causing some pent up demand.
When those potential buyers start to feel confident that the bottom has been reached, many will enter the market which will cause a bump in purchases of Arizona homes.
THE TWO BIG QUESTIONS FOR 2007
1) Will the inventory of homes for sale in Greater Phoenix continue to fall and when will it fall enough to strengthen prices?
2) Which will have the greater affect on the Greater Phoenix home market this winter and spring – frustrated sellers putting their homes back on the market, or waiting buyers who decide its time to buy?