Phoenix Real Estate Market at a Glance

Phoenix home prices were up 7% in November over November 2017. That’s a great year for appreciation. Inflation-adjusted, that’s 5% real appreciation for metro Phoenix homes.

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The weird thing about September and October was that both the number of new listings for sale and the number of homes sold fell compared to a year earlier. If the market was peaking, I would have expected that the number of new listings would have increase and the number of sales would have decrease.

New Listings
(Year-Over-Year)
Home Sold
(Year-Over-Year)
Months Supply
September-6%-6%2.9
October-1%-1%2.8
November+1-9%3.3

That didn’t happen until November when the months supply of homes for sale increased sharply from 2.8 to 3.3 (although, probably half of that was a normal seasonal increase).

Now, 3.3 months supply is still very tight but if that trend continued for a few more months, we’d be back to 4 months supply which is in the range of normal supply and Phoenix home price increases would slow down to “normal” too, whatever that is.

We don’t have the sales numbers for December yet so we can’t calculate the months supply for December but the inventory of homes for sale in mid-December is up 2% compared to mid-November so it’s almost certain the months supply will increase in December, too.

Phoenix 2019 Forecast

The big question is what happens in 2019 to Phoenix home prices.

“Do prices continue to increase in 2019?” I think so.

“Will prices be increasing 12 months from now?” That’s where it gets iffy. If we go into a recession by next December, prices would likely stop increasing.

My working theory is that metro Phoenix home prices will go sideways after the next recession starts but prices would fall in some areas and for homes that are harder to sell (for example; small galley kitchen, poor condition, backs to a busy road, etc.).

Usually, home sales have to be down for a couple of years before the metro median sale price starts to fall.

Next Recession?

It’s true that Phoenix home prices didn’t fall during the DotCom recession but now real, inflation-adjusted home prices are 40% higher than they were then. So I think home prices are more sensitive to a recession now than they were in 2001.

A lot of people are comparing this small autumn slowdown to 2013. The talking point is that after slowing down from mid-2013 through 2014, Phoenix home prices started to increase strongly again.

My response is that real, inflation-adjusted home prices are 30% higher now than at the end of 2013 so I think Phoenix home prices are more sensitive to a recession or any bad news now.

If real Phoenix home prices were at 2013 (or 2001) levels, I don’t think there would be much downside potential.

Full-size, interactive version

What do you see? Love to hear your comment.

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