There are a lot more homes for sale in the Phoenix Metro area now than at this time last year. Prices, though, do not appear to be coming down. And the data is leaving our next guest with some questions.
John Wake, real estate analyst and agent, joined The Show to discuss what he’s seeing in terms of the supply of homes in the Valley over the last few months.
Full conversation
JOHN WAKE: Yeah, that's the really interesting thing. Right now, the amount of homes for sale, the supply of homes for sale at this point is 40% more than last year at this time. So that's a big increase. We see this nationally where supply is going up, but Arizona or Phoenix is up towards the top of that list.
MARK BRODIE: Why are there so many more homes for sale now than in the not too distant past?
WAKE: Yeah, that's the big question. I looked into it — it's not because there are fewer homes selling. The number of homes that sold so far this year is almost identical to what it was last year and the year before, so the sales haven't gone down.
But there's more homes hitting the market, so that's what's causing this. So far this year there's like 19% more homes hitting the market than last year and 33% more homes hitting the market than two years ago. So for some reason — I'm not quite sure — more people are willing to sell now.
BRODIE: Do these tend to be existing homes or these new homes? What kinds of homes are these?
WAKE: The ones I'm looking at are almost all existing homes, not new homes.
BRODIE: OK, so it's interesting because this kind of goes against the narrative that we keep hearing about how the state needs so many more housing units and obviously, you know, this is not the the number that policy folks have said. But to say that supply is up 40%, that seems like a pretty big number.
WAKE: Yeah, it is. We're still in the normal range, like the number we have for sale right now is similar to like 2016, which is pretty much a normal year, but if we went up 40% more from here, that would be at the very high end of a normal kind of a market. So that's the issue.
Now the thing about supply is when I mentioned in 2021 and 2022, where there were so few homes for sale, where people are saying, “Oh, we need to build more homes. That's the problem. We need more supply.”
Well, that's not the problem. The problem was we had a huge number of investors buy in 2021. In 2021, when the prices skyrocketed the most of any year, the number of people who bought homes to live in actually was lower in 2021 than pre-pandemic in 2019. That wasn't driving the prices up. But the investors, the people who were buying rentals for more than double in 2021, that's what drove the prices up.
And that's because the interest rates have gone down so low that the investors are much more sensitive to interest rates than Joe first-time home buyer. It was driven by the investors, not by people who are going to live in their homes.
BRODIE: Sure. Do you see the fact that, the supply is so much bigger now than it was, is that more a reflection of the fact that the supply was so low before, or the fact that we're entering this new era of more homes coming on the market, be it either people looking to sell or new construction coming online?
WAKE: Yeah, I think it's mainly the idea that people — for some reason, I still don't know why — are more willing to sell than they were before. What happened? Home prices are about the same as they were two or three years ago. That's not it. The prices haven't changed much.
Interest rates haven't changed much. It could have been that people were thinking, “OK, I'll sell when interest rates come down.” Well, they never came down after they went up two-plus years ago. So that's maybe they just decided, “OK I can't wait anymore. I'm going to sell this house.” But I still can't figure it out, like what it was.
The one thing we do know about, the ones that are hitting the market are the normal-sized homes, like 1,000 or 2,000 square feet, just the normal homes. When you look like luxury homes, like in (Paradise Valley), actually the number of homes hit the market in PV is lower this year than last, and in Scottsdale's only up a little bit. But when you look at the whole metro, just the normal homes, those are the ones that are up like 40% or more.
BRODIE: So would that indicate that for some of those maybe first time homebuyers you mentioned, there might be hope for them in this market?
WAKE: Well, the bad part is the prices haven't gone down.
BRODIE: Right.
WAKE: But they just have a better selection. So they might have a better selection of homes to choose from. And in that market, for that size range, there's like 50% more homes for sale now than last year at this time.
So there's better selection, and maybe you can get a little more negotiating power to get the seller to pay your closing costs or something like that, but it's not a huge amount.
If, like I said, if we go up another 40%, then they could have a lot more negotiating power. But I think what they would really like to see is home prices to go down. But that's the dilemma we're in right now, Mark. What's worse: Prices go down or prices don't go down?
BRODIE: At what point might prices go down? At what point does this become a buyer's market, where there are enough properties that they can be looking at that they might be able to get some deals through negotiation?
WAKE: Well, right now we're, this is the high season for home sales in Phoenix, and it goes through May. So it'd be really unusual for prices to fall this time of year because this is the high season. But when they tend to fall is in the second half of the year, so in the autumn, prices often fall a little bit.
So … let's say this trend continues, where we get more and more homes for sale. Probably prices wouldn't change much this first half of the year, but in the second half of the year you could see a much larger than normal fall in prices in the second half. That's what my guess is at this point.
BRODIE: Do you expect there to continue to be more homes coming on the market? Like, do you expect these kinds of increases to continue into the future?
WAKE: I don't know, Mark. I can't figure it out. I can't figure out why it's happening now, so I don't know if it'll continue in the future. But it has been kind of a long-term trend over the last couple of years where we're getting more and more homes hitting the market. So I imagine for whatever's driving that will continue into the future.
BRODIE: Well, so given all the questions about what is happening and why it's happening, is it possible to gauge what kind of impact the numbers that you're seeing might be having on the housing market here in the Valley?
WAKE: Yeah, it's hard to tell what effect it would have on prices. There's a lot more downward price pressure than upward, like the upward momentum on prices has been gone for two, three years. Prices have been kind of flattish, going up slightly. So that's not driving up prices. So I think there's a ton more downside risks than upside risk on prices.
BRODIE: And in terms you mentioned sort of the 1,000 to 2,000 square-foot homes that are coming on the markets it pretty much other than, say like PV in Scottsdale, is it pretty much evenly distributed across the Valley? Are there places where the supply is increasing at faster rates than elsewhere?
WAKE: That's funny, Mark. I was looking into that. There's a couple of oddballs, like Apache Junction is way up and Anthem is way up, but I was thinking of looking at places on the periphery like Maricopa.
And Maricopa is fine, they're like maybe even tighter than Phoenix. It's so scattered. I couldn't get really a trend of what's happening, but it's not happening worse on the periphery than it is inside the metro.
