There may be changes ahead for our market! In some ways, it’s pretty much business as usual, meaning a limited inventory of available homes continues to suppress the market, resulting lower than normal sales volume. “There are a few market segments where supply remains adequate, but for the most part Greater Phoenix remains woefully under supplied in both homes to rent and homes to purchase.” Michael Orr – Cromford Report. However, there are other events occurring that could result in what I call “a flash market.”
My definition of a “flash market” is an abrupt burst of sales activity (like a flash of light) that lasts a relatively short period of time. It’s a reaction to market forces.
Here in the Phoenix area, there are three market forces in particular that I believe are pushing us toward a “flash market.” First, mortgage rates are ticking upward, coaxing buyers to buy before their buying power diminishes too much. Secondly, rents continue to go up, making home ownership an even more attractive alternative. Lastly, appreciation is also up, now at a whopping 7%, also convincing buyers to jump in before the homes they want are out of their price range. These three factors will serve to reduce inventory even further than it already is, causing the laws of supply and demand to have their day
There is one large caveat that may restrict just how far these prices will rise – which is whether the Phoenix area or other similar can sustain higher values. Any increase in values must have a like-increase in buyers with the purchasing power necessary to buy those same higher priced homes. The reason why these price increases can be short lived, is for this very reason. If there are aren’t enough buyers willing to pay more, the pendulum will begin to swing back down to a place where buyers are ready to jump back in. As interest rates increase and affordability becomes difficult, price increases may naturally cap themselves.
Mike Bodeen was a co contributor to this press release.