Buying a home in metro Phoenix may start to get a little less frustrating this summer.
Buyers beat down by bidding wars, rapidly rising prices, low appraisals, fewer and shorter open houses and reluctant sellers finally have a few more Valley houses to choose from.
The supply of Valley homes for sale is inching up for the first time since December.
The slight shift comes after several months of Phoenix-area homes selling for tens of thousands of dollars above asking prices, and buyers hustling to find houses making offers without stepping foot in them.
The pandemic didn’t slow the housing market. Instead, more people working remotely who want houses of their own or bigger ones with offices gave it a boost. Adding to demand for Valley homes is a steady flow of new residents from the West and East coasts and other pricier areas who can afford to pay more.
“I’ve been watching the Phoenix market very closely for almost two years now,” said Lynne Sherman, a fourth-generation Arizonan who has been working on her husband to move to the Valley for almost three decades. The couple sold a home in southern California earlier this year.
“Now, I can no longer afford the homes we theoretically could have purchased a year ago,” she said.
The crunch between a very low supply of homes for sale and rising demand from buyers has pushed prices up to new records nearly every month for the past year.
Metro Phoenix’s median price is expected to hit a record $386,500 in May, up $86,000 from a year ago. That’s a home price increase of more than $7,150 a month.
The median U.S. home prices is about $348,000, up about $19,000 from a year ago.
A funny text with a photo of a young couple asking their agent to show them a higher priced home is circulating among Realtors, buyers and sellers in the Phoenix area. “Okay, I can show you this house again tomorrow,” replies their agent.
A TikTok video comparing bidding up the price of an apple from $5 to $120 to buying a home has millions of views and comments from other TikTokers frustrated by the housing market and often worried they paid too much.
Besides the number of listings increasing, home sale cancellations are climbing as more buyers, particularly those who bid on a home without seeing it in person, pull out of deals.
Sellers are also canceling deals if they can’t find another home to buy.
“Our market has cooled over the past 30 days,” said metro Phoenix housing expert Tom Ruff with the Arizona Regional Multiple Listing Service’s Information Market. “In fireman terms, we moved from a 13-alarm fire to a 10-alarm fire.”
Lynne Sherman and her husband, Mike, want to move to Phoenix from the Los Angeles area to be near family, but the run-up in home prices is frustrating them.
The couple was selling their California house early this year to move to Phoenix when Mike Sherman’s parents, who lived in a Phoenix retirement community, died of COVID-19.
“I want to be five minutes from my mom and kids and be able to walk my dogs without having to drive,” Lynne Sherman said. “I’d love to find a place with a casita so I can send my husband off to work there in the morning.”
The couple recently canceled a deal to buy a home listed for $900,000 in central Phoenix’s historic Encanto neighborhood after the inspection found repairs were needed. They are currently staying with family in Phoenix.
“You don’t want to print the descriptive expletives that come to mind (for metro Phoenix’s housing market now),” Sherman said.
Christa Lawcock, a Phoenix agent with Realty Executives, estimates 25-30% of Valley home sales are getting canceled now due to problems found through inspections and other issues with prices.
“The market has been crazy for a year now. Buyers are mad,” she said. “They are tired of only getting 10 minutes in a house and some sellers’ attitudes.”
Lawcock said she's seeing more buyers opting to put their home search on hold now or pushing back in negotiations with sellers.
About 40% of people trying to buy homes in the Phoenix area during the first few months of 2021 were from out of state, according to real estate firm Redfin.
Los Angeles is the top spot they are leaving for the Valley. The median home price there is $905,000, which makes metro Phoenix homes look like a bargain.
Early census population estimates show Texas, Florida and Arizona drew the most new residents in 2020. New York, Illinois and California lost the most people.
Also, Arizona was also the fifth most popular state for one-way inbound moving trucks last year, according to U-Haul. It was only behind Tennessee, Texas, Florida and Ohio.
“We are definitely seeing more buyers from out of state,” said Aaron Carter of the CarterMosier Group at HomeSmart, who is currently working with people from Chicago, Seattle and Ohio to relocate and buy a home in metro Phoenix.
He said a Millennial couple from Chicago already in Phoenix and renting an Airbnb have tried to buy five times so far and keep getting priced out.
Zillow is predicting more price gains in metro Phoenix this year. The Valley will have the second hottest housing market in 2021, behind only Austin, Texas, according to the real estate firm.
Meanwhile, New York, San Francisco and Los Angeles are expected to fare the worst for home prices and sales gains.
“The new work-from-anywhere component of the economy is changing housing demand,” said Mark Stapp, real estate expert and director of the Master of Real Estate Development program at ASU's W.P. Carey School of Business. “But there are winners and losers with the current housing market. It’s a problem for Phoenix-area residents, who have only seen their wages go up around 15% during the past few years while home prices have gone up 65%.”
Housing analysts and economists say if metro Phoenix home prices rise too far beyond buyers' grasp, that will slow the market.
“The supply of homes for sale is finally climbing, not a lot, but it’s up,” said Tina Tamboer, senior housing analyst with Cromford. “But supply will have to increase a lot more to see a shift from a seller’s market.”
The number of homes listed for sale in the Phoenix area has been steadily ticking up after hitting a low in December. But the supply of houses for sale is still down 49% from last year.
Valley home sales dipped 3.4% in April and likely fell again in May, according to ARMLS.
But houses are still selling fast in the Phoenix area — an average of 32 days. That’s the fastest rate in a year and 19 days quicker than a year ago.
Low interest rates are helping many buyers afford the Valley’s higher prices. Average 30-year mortgage rates fell to a record low below 3% last summer, and the current average is 2.95%.
Timm Wright is about to list his three-bedroom, two-bath Gilbert home for almost $520,000. He expects to close on a midtown Phoenix condominium about the same time.
“I am doing it a bit backwards because I knew my home would sell fast and was concerned I wouldn’t have another place to buy,” he said. “It feels like Phoenix became a luxury-priced market in a year.”
Wright, who moved to Phoenix from California 18 years ago for the area’s more affordable housing prices, competed with several buyers for his condo. He bought his Gilbert home in 2017.
Carter said metro Phoenix’s hot housing market can be tough for both buyers and sellers.
“Sellers are starting to require buyers to see properties before submitting an offer, and buyers paying higher prices are getting more picky,” he said. “That’s why cancellations are climbing.”
Searches for the phrase “when is the housing market going to crash” jumped 2,450% in March and April, according to Google.
But buyers hoping for a bust after the Valley’s housing boom of the past few years will be disappointed.
Sellers counting on prices to keep rising as fast as they have during the past year also could be let down.
“Markets do not get hotter indefinitely,” said Cromford Report founder and housing expert Mike Orr. “All changes tend to start small and then grow. The current (metro Phoenix) market cooling is like that.”
“We now have supply increasing and demand falling. This will gradually release some of the steam from the over-heating engine, and the market can trend back towards normality,” he said
Orr said the market will see a cool down in prices, particularly as more buyers can’t afford the higher-priced homes.
But it won’t be a crash, he said.
Reach the reporter at [email protected] or 602-444-8040. Follow her on Twitter @Catherinereagor.
