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.
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
| 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
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
What do you see? Love to hear your comment.
4 Responses to Prices Up 7% – Phoenix Homes
First, thanks for these detailed market info posts, very insightful.
It seems the likelihood of a recession is high between now and December of next year. I’m capable of buying my first home now or within the next year, but considering that prices are very likely to fall, would you advise waiting to make a home purchase in the Phoenix area until the market hits a “bottom”?
Do you think it’s wise to try to time the market, especially when the writing is on the wall that a recession is coming up? Even Alan Greenspan recently said a big correction is coming up, and of course we know the stock market had a horrible month, and last recession it was very closely tied to the housing market.
That’s the big question, isn’t it? My oldest son is shopping for a home and I would be fine if he and his wife decide to put it off. They’ve seen a ton of homes and know the market well. The only thing holding them back is price. I warn them that I don’t know the future but if prices fall at all, it probably wouldn’t be for at least a year and probably two and they may not fall much. We may see an early-1990s market where prices are more or less flat for several years. It’s tough to put your life on hold waiting for the market to maybe change. Anyway, I tell him to make sure it’s a 10-year home, a home he could be happy living in for the next 10 years at least. They have a good rental situation which helps a lot. The whole thing of having to buy right now before prices go up even more is fading. I expect prices to increase in 2019, although we may be in a very different market next autumn. In my son’s case, if they have a kid, they’d really want to buy and settle down regardless of where we are in the cycle. But renting a single family home could work as well but doesn’t seem a stable. So I guess I should tell him to buy if he thinks it’s a 10-year house and if he would be okay with it if it didn’t appreciate much or at all over the next 10 years. Tough question, for sure.
Thanks for the reply John, all excellent points. I agree with your assessment, and I fell into some luck recently that I found an incredible rental situation, at a very nice place well below market. So I’m okay with sticking it out and looking at how the market shifts over the next year at minimum. Like you said the market may be looking very different next autumn.
I’ve talked to other realtors here and it seems that prices will be going up in 2019 due to demand from California and other coastal areas where Phoenix continues to look like a bargain. It does make me wonder, because of the huge price difference — if a recession did hit, that maybe the market here wouldn’t drop that much like you said, because although buyer demand from locals might drop, many more people simply wouldn’t be able to afford living on the west coast anymore.
It does depend on your situation. In my case I don’t have children so things are more flexible, and in your son’s case I agree that it’s hard to put your life on hold and that buying/fighting for a good deal is worth the effort to own a place for your family in any market, with the hope of a nice 10 year appreciation.
Agree with your 10-year outlook when considering buying a house and minimal appreciation, what I plan on doing is having the down payment ready to go if and when there is a market correction in the next year or two and then jump on an opportunity
That’s sounds like a good plan to me. Thanks for the comment!
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