Inventory Gains Could Transform Phoenix Housing Market by 2023
Recent reports and predictions for the Phoenix, Arizona real estate market suggest that a significant cooling trend could be on the horizon.
Inventory growth has no doubt influenced these predictions. The Phoenix-area housing market has experienced significant supply growth over the past year, a trend that could continue going forward.
This, combined with a general decline in buyer demand, could transform the Phoenix real estate market into 2023.
Huge Inventory Gains for Phoenix Housing Market
The latest numbers are in, and they bring good news for home buyers.
According to an August 2022 report from Realtor.com, the Phoenix-Mesa-Scottsdale metropolitan area experienced the most inventory growth among the nation’s 50 largest metros. This is based on the number of active real estate listings on the Realtor.com website.
And we’re talking about some serious inventory growth here. During the 12-month period from July 2021 to July 2022, active property listings increased by nearly 160% in the Phoenix area. That put it ahead of all other 49 metros included within this study.
To quote the August 2022 Realtor.com report:
“Relative to the national rate, active inventory grew at a faster annual pace (+41.0%) across the 50 largest US metros in July, on average. Forty-five markets posted active listings gains, led by Phoenix (+158.7%), Austin, Texas (+154.5%) and Raleigh, NC (+137.5%).”
Our forecast for the Phoenix real estate market stretching into 2023 suggests that a significant cooling trend is possible. If inventory continues to grow in this manner, which is possible, the housing market of 2023 could look very different from what we saw last year.
Among other things, home buyers in the Phoenix area could enjoy more leverage when it comes to negotiating the sale price and other terms. This is something that’s been lacking over the past couple of years.
Overall, the inventory situation still favors sellers over buyers. But that appears to be changing at a steady pace. Like many cities across the United States, the Phoenix area housing market is going through a kind of transition in 2022. The overall pace of sales has slowed. Inventory has increased. And there aren’t nearly as many bidding war type scenarios.
Is a Downturn on the Horizon?
In what turned out to be a surprise twist, the COVID pandemic actually sent the US real estate market into overdrive. Starting in late summer of 2020, housing markets across the country experienced a surge in home-buying activity.
Remote working had a lot to do with this trend, along with a general migration away from crowded cities and into suburban areas.
The Phoenix housing market, in particular, saw an influx of buyers through the second half of 2020 and throughout 2021. The national real estate brokerage Redfin listed Phoenix as one of the “pandemic homebuying hotspots” that experienced significant price growth due to a surge in demand.
But that same report also stated that Phoenix was one of the housing markets most susceptible to a downturn during an economic recession. And by some measurements, we’re in a recession right now.
To quote the July 2022 Redfin report:
“Additionally, Boise, Cape Coral, North Port, Las Vegas, Sacramento and Phoenix were all among the 20 fastest-cooling markets as of May, when mortgage rates approached 5.5%. That’s an indicator that prices are more likely to drop in many of those metros as the economy continues to contract.”
Only time will tell if we see a real estate market crash in places like Phoenix. Based on the current supply and demand situation, a full-blown market crash or collapse seems unlikely at this stage.
A more likely scenario is that home prices within the Phoenix housing market will begin to slow down through the end of 2022 and into 2023. They might even level off or decline slightly next year, especially if inventory levels continue to rise.
A Very Different Real Estate Market in 2023
It’s difficult to make an accurate forecast for the Phoenix real estate market — or for any other city in the US — due to the unprecedented events of the past two years. But one prediction seems almost certain. The Phoenix housing market of 2023 will look very different than it did during the past couple of years.
For one thing, multiple-offer scenarios and “bidding wars” will begin to fade away. In fact, bidding wars could become a thing of the past by 2023. This is true for the Phoenix real estate market and also for many other cities across the country.
Home buyers today are less likely to get caught up in a bidding “frenzy,” where they have to make offers above the asking price. While those strategies were common during 2021, they have since declined steadily.
Sellers seem to sense that change is in the air. As we reported on our MetroDepth blog, a significant number of sellers in the Phoenix metro area have been slashing their list prices to encourage offers from buyers.
Here’s another “safe” forecast for the Phoenix real estate market. In 2023, home buyers could have a lot more properties to choose from. We talked about the significant supply gains recorded over the past year. Inventory could continue to rise over the coming months, giving house hunters more options and leverage.
Disclaimer: This report includes predictions and forecasts for the Phoenix estate market extending into 2023. Those views are the equivalent of an informed opinion and should be treated as such. The Home Buying Institute makes no claims about future economic or real estate conditions.