Arizona Housing Market Update - April 2020
Considering what is happening in our world right now, I am often getting asked about the status of the Arizona housing market, therefore, I thought it might be nice to give a quick update of what's happening.
As you can see from the chart above, we have seen a drop in demand over the last month. The 2020 numbers are towards the tail end of the chart, as it covers several years. While the tail end of the supply curve has ticked up, during the same period of time. However, our supply still continues to be well below normal.
So what does this mean for housing prices? People always reflect back on the housing crash in turbulent times but is this the same situation? During the housing crash, we had a ton of supply, due to people who were overextended financially and forced to liquidate their homes. Meanwhile, demand was also decreasing because people were losing their homes and not buying. This combination lead to the drop in home prices. It goes back to the old whole supply & demand curve; high supply and low demand will drive down prices.
Currently, we are still seeing people moving forward with purchase contracts but overall activity has slowed due to people sheltering in place. The uptick in supply is partly believed to be coming from homes used for VRBO or Air BnB that are not being rented and the owners are now needing to sell. Others can be from people who are on the verge of being overextended and trying to sell before they find themselves in a situation where they must sell. However, as long as supply remains lower than demand there will be no downward pressure on prices and home values will, therefore, be sustained (Michael Orr - Cromford Report). Remember, pricing is a trailing indicator so it's a delayed reaction to what is happening in the overall market for an extended period of time.
Please note, this situation will end at some point, and Maricopa County is growing by leaps and bounds. Because we are continuing to grow, as companies are moving to the valley, our demand will rebound as well. It will likely not rebound as quickly as it's fallen, partly because lenders are being cautious and individuals' finances will also need to rebound.