Phoenix Housing Market & Forecast – July 2019

Median Price – Up 4%

• That 4% increase (June 2018 – June 2019) is good – certainly above inflation (1.6%) – but it’s the lowest annual rate since 2 months in 2014. The previous year (June 2017 – June 2018), house prices had increased 9%. That year was HOT. Inflation-adjust appreciation June 2017 – June 2018 was more than double last year’s real appreciation (June 2018 – June 2019). Will house prices continue to lose their upward momentum? I think so.

Houses Sold – Up 3%

• From last December through March – for 4 months – homes sales were down around 10% which is huge but then sales turned around in April (+7%), May (+5%) and June (+3%) compared to those same months a year earlier. Cumulatively, total sales July 2018 – June 2019 were down 3% from the previous year (July 2017 – June 2018).

Homes for Sale – Up 7%

• The number of homes listed for sale was increasing strongly from last autumn into the spring but the surprisingly strong home sales in April, May and June tightened the supply again to very tight levels, only a 2.3 months supply. I think 4 to 6 months is the “normal” range.

New Listings – Down 10%

• A weird thing in June was that new listings (the number of homes hitting the market) were down 10% compared to June 2018. I don’t know what’s happening here but new listings were up 3% in April and up 4% in May (compared to year earlier) so the huge 10% decrease in June is probably an anomaly.

Forecast

• June was stronger than I expected and I now expect July and August to be strong. Last year, August was the first of 8 months in a row where sales were less than the previous year. Will that happen again? I’m still thinking the rest of 2019 will look more like 2017 or 2016 than 2018. Both those years, 2017 and 2016, were hot markets, just not as hot as 2018.
• Last decade, the real estate market tanked and the recession happened a couple years later. This time, it looks like the general economy and Phoenix real estate are in sync.

Watch Out For…

• If we start to see new listings increase significantly for a few months, that would be very bad for prices, assuming sales continue to slowly slow down.

Suggestion

• If you have any investment properties you don’t love and you don’t plan to own them for cash-flow reasons for another 10 years, you should very seriously consider selling them.

Recession Watch

Does the national economy slow? If and when it does, it will have a big impact on the Phoenix real estate market. Right now, I foresee it playing out more like the S&L Recession, not like the Great Recession.

Prices on the West Coast are already flat on an inflation-adjusted basis. Phoenix might be the hottest real estate market in the country right now but it’s feeling a little lonely.

The economy is super hot right now but growing more slowly. It may have stopped growing by this time next year (recession start) in which case the question is what happens to Phoenix home prices in the next recession? A year from now are Phoenix house prices flat or falling? Or does the market surprise me like it has the last few years and remain surprisingly strong?

There is no recession imminent. Q4 at the very earliest. Employment is still growing at a decent clip in recent months, around 1%.

Charts

Interactive versions of these charts, here.

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What are you seeing in your neighborhood? Let me know. Leave a comment.