Has Valley’s housing market already peaked for 2021?
Slowing demand in recent weeks seen as start of a trend
Metro Phoenix’s housing market has likely peaked for 2021, but don’t count on prices to drop this year.
Home sales climbed in September as the Valley’s median price hit a record $410,000, due partly to rising demand from big corporate buyers.
Pending sales from last month are expected to push up the median to $415,000 in October.
Demand for Phoenix-area homes has started to wane a bit during the past few weeks though, and housing analysts think that trend could continue.
“Demand looked strong all the way through September, but not so much at the beginning of October,” said housing analyst Michael Orr of the Cromford Report in his recent market summary. “With supply rising and demand appearing to plateau, we could possibly be in for some cooling during the fourth quarter, but do not expect prices to fall.”
Signs of cooling in Valley housing market?
Home sales across metro Phoenix climbed about 4% in September, according to the Arizona Regional Multiple Listing Service. But sales are down 4% for the year, compared to 2020.
The number of Valley homes for sale climbed 1.2% in September from August.
The average time it took a Phoenix home to sell was 30 days in September, up a day from August, according to ARMLS.
Almost 14% of Valley houses sold for less than their listing price, according to real estate listing and data firm Zillow. That’s up from 12% in August.
Metro Phoenix new home prices rose by 1.6% in August, compared to an average of 3.5% a month in March through June of this year, according Zonda’s Belfiore Real Estate Consulting.
“Metro Phoenix Area housing conditions stabilized in recent months, and the environment is much more normal than during January through May,” said Zonda senior analyst Steven Hensley.
Corporate buyer surge in homebuying
As metro Phoenix’s housing market started to cool a bit, demand from buyers who don’t plan to live in the homes climbed.
Big investors, often called institutional buyers, are purchasing Valley houses like they did during the crash of 2011-12. Back then, investors paid cash for tens of thousands of bargain foreclosure homes and turned them into rentals.
So-called iBuyers, also known as instant buyers because they do cash deals quickly and mostly online, have also been on a Valley buying spree this year. IBuyer home purchases mostly by Opendoor, Offerpad and Zillow have almost
tripled in metro Phoenix during 2021.
IBuyers make money by flipping the homes for a profit, but those resales have slowed. That concerns housing analysts.
Zillow announced earlier this month it is backing off on IBuyer home purchases nationwide because until it sells more of the backlog of houses it has already bought.
“iBuyers have been a driving force in our market over the past five months,”
housing analyst Tom Ruff with ARMLS’ Information Market group, told me.
He said the rule for real estate investing has always been to buy undervalued assets.
With a median home price poised to hit $415,000, up 25% from a year ago, metro Phoenix houses definitely aren’t undervalued.