Recent reports and forecasts for the Phoenix, Arizona real estate market suggest that a significant cooling trend may be on the horizon.
Inventory growth has undoubtedly influenced these forecasts. The Phoenix-area housing market has seen significant growth in supply over the past year, a trend that may continue.
This, combined with a general decline in buyer demand, could transform the Phoenix real estate market in 2023.
Huge Inventory Gains for Phoenix Housing Market
The latest numbers are in and bring good news to homebuyers.
According to an August 2022 report from Realtor.com, the Phoenix-Mesa-Scottsdale metro area had the strongest inventory growth among the nation’s 50 largest metros. This is based on the number of active real estate listings on the Realtor.com website.
And we’re talking about some serious inventory growth here. In the 12 month period from July 2021 to July 2022, active property listings have increased by nearly 160% in the Phoenix area. This puts it ahead of the other 49 metros included in this study.
To quote the August 2022 Realtor.com report:
“Relative to the national rate, active inventory grew at a faster annual rate (+41.0%) in the 50 largest U.S. metropolitan areas in July, on average. Forty-five markets posted gains in active listings, led by Phoenix (+158.7%), Austin, Texas (+154.5%) and Raleigh, NC (+137.5%).
Our forecast for the Phoenix real estate market through 2023 suggests that a significant cooling trend is possible. If stocks continue to grow this way, which is possible, the 2023 housing market could look very different from what we saw last year.
Among other things, home buyers in the Phoenix area could benefit from greater leverage when it comes to negotiating the sale price and other terms. This is something that has been missing for a few years.
Overall, the inventory situation still favors sellers over buyers. But that seems to be changing at a steady pace. Like many cities in the United States, the Phoenix-area housing market is going through something of a transition in 2022. The overall pace of sales has slowed. Inventory has increased. And there aren’t as many bidding war type scenarios.
Is a slowdown on the horizon?
In what turned out to be a surprise twist, the COVID pandemic actually sent the US housing market into overdrive. Starting in late summer 2020, housing markets across the country saw a surge in home buying activity.
Remote work has a lot to do with this trend, as well as a general migration away from crowded cities to suburban areas.
Phoenix’s housing market, in particular, has seen an influx of buyers in the second half of 2020 and throughout 2021. National real estate brokerage firm Redfin has listed Phoenix as one of the “hotspots of the ‘pandemic home buying’ which has seen significant price growth due to a price spike. request.
But that same report also indicated that Phoenix was one of the most sensitive housing markets to a slow-down during an economic recession. And by some measures, we are currently in a recession.
To quote the July 2022 Redfin report:
“Additionally, Boise, Cape Coral, North Port, Las Vegas, Sacramento and Phoenix were all among the 20 fastest-cooling markets in May, when mortgage rates approached 5.5%. It’s an indicator that prices are more likely to fall in many of these metros as the economy continues to contract.
Only time will tell if we see a housing market crash in places like Phoenix. Based on the current supply and demand situation, a widespread market crash or meltdown seems unlikely at this point.
A more likely scenario is that home prices in the Phoenix real estate market will begin to slow through the end of 2022 and into 2023. They may even stabilize or decline slightly next year, especially if inventory levels continue. to increase.
A very different real estate market in 2023
It is difficult to make an accurate forecast for the real estate market in Phoenix – or any other city in the United States – due to the unprecedented events of the past two years. But one prediction seems almost certain. Phoenix’s housing market in 2023 will look very different than it has for the past two years.
For one thing, multiple bid scenarios and “bidding wars” will start to fade. In fact, bidding wars could be a thing of the past by 2023. This is true for the Phoenix real estate market and also for many other cities across the country.
Today, homebuyers are less likely to get caught up in an auction “frenzy” where they have to bid above the asking price. While these strategies were common in 2021, they have since declined steadily.
Sellers seem to sense that change is in the air. As we reported on our MetroDepth blog, a significant number of sellers in the Phoenix metro area have reduced their list prices to encourage bids from buyers.
Here’s another “safe” forecast for the Phoenix real estate market. In 2023, homebuyers could have many more properties to choose from. We talked about the significant supply gains over the past year. Inventories could continue to rise over the next few months, giving house hunters more options and leverage.
Disclaimer: This report includes predictions and forecasts for the Phoenix real estate market through 2023. These opinions are the equivalent of informed opinion and should be treated as such. The Homebuying Institute makes no representations about future economic or housing conditions.