By Catherine Reagor| November 10th, 2019
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Metro Phoenix home prices are poised to hit a new record this month as lower interest rates continue to entice more home buyers, while the number of houses for sale shrinks.

The area's median home price is expected to climb from $280,000 to $285,000 in November, based on pending sales. 

Bidding wars for homes priced below $350,000, particularly by investors paying cash, are common.

A growing number of first-time buyers are getting beat out by those investors, who are driving up prices.

In September, housing analysts called metro Phoenix’s housing market “a bit frothy” and compared it to the 2004 market.  

A big question is how long Valley home prices can keep climbing if first-time buyers can’t afford them.

Home prices, listings and sales

Steps to take before buying a house

Phoenix-area homes listed for sale are down 12% from last year, according to the Arizona Regional Multiple Listing Service.

Home sales are up 14% from last year.

The increase in demand and drop in supply is leading to the higher prices.

Housing expert Tom Ruff with the Information Market, owned by ARMLS, said home prices and sales moderated as expected with higher interest rates early this year. But when mortgage rates dropped, “the market took off,” he said.

No repeat of boom and bust, please

People trying to buy homes now would like to see prices dip.

But a repeat of the boom that pushed prices up 60% in 2005-06 and the bust of 2008-11 that led prices to plummet by more than half isn't expected.

Home prices have been steadily climbing 6 to 9% annually during the past few years.

Tina Tamboer, senior housing analyst with the Cromford Report, compared the current housing market to 2004 but lists these differences between the subsequent boom and now.

  • Home buyers: Demand from people wanting to buy is about 6% above normal. In 2004, speculators wanting to buy and flip fast in the Valley, pushed up demand by 24%.
  • Investors: In early 2005, investors were behind more than 30% of all home sales. Now, it’s about 8%.
  • New homes: Spurred by investors, home builders constructed a record 50,000 to 60,000 homes during both the 2005-06 boom years. Many sat empty during the crash. Forecasts call for only about 22,000 new homes to go up in the Valley this year.
  • Home prices: Appreciation per square foot for metro Phoenix homes is now about 6% versus 11.3% in 2004. Breaking down prices by square foot helps to take into account a home’s size and can give a more precise price for an area.

Warnings signs

The number of investors buying homes mainly to rent them out is climbing. Some home builders are seeing more investors in the new home market too.

That’s a concern.

But the biggest issue for the local housing market is incomes not keeping pace with home prices and rents.

If people can’t afford to a buy a home or lease a decent one, fewer will move here or stay to fill the growing supply of jobs.

Reach the reporter at [email protected] or 602-444-8040. Follow her on Twitter @Catherinereagor.

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