Phoenix Real Estate Inventory Doubles - Investors Nowhere To Be Found

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Phoenix Real Estate Inventory Doubles - Investors Nowhere To Be Found

Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
Why did you all stop buying  . . . ? 

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Valley metro cities top list of markets with largest home inventory increases

https://www.abc15.com/news/sta...



"A primary reason for rising inventories is a sharp decline in investor home purchases."

"There are 16,067 active home listings in the Phoenix metro, nearly double from December of 2021. It’s a common theme in most real estate markets, and elevated listings are pushing up inventory. In the Valley of the Sun, once one of the hottest real estate markets in the country, the trends are no different."

"The second largest city in the Valley, Mesa, tops the list with home inventories rising almost 90%. Phoenix makes the top five with a 66% increase. Tucson also made the list ranking 30 out of 50."

"The Valley’s midsize cities are also seeing rising inventories. Gilbert ranked seventh with inventory doubling since the same time last year. Chandler and Peoria are not far behind. Glendale and Scottsdale also made the list."

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Melanie Johnston
Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
3y

When looking at how Phoenix inventory has doubled since December 2021, it's important to note that those 2021 numbers were a historic low. While we have doubled inventory to 16,000, we are still below the 20,000 - 25,000 active listing count that is considered a balanced market. 

This chart from The Cromford Report (which creates its proprietary Cromford Market Index from Metro Phoenix MLS data) breaks down which cities are in buyer/balanced/seller markets. See their commentary below to learn more.

"Among the 17 largest cities we see 4 currently in a buyer's market below 90, 3 balanced between 90 and 110, and 10 in a seller's market over 110...

Overall, the market is more favorable to sellers than we expected in December and downward pressure on pricing has been largely eliminated, except in a few market segments.

The more favorable situation has started to bring more sellers into the market and new listings have been more plentiful over the last week. Overall supply remains well below normal and so does demand. Volume is low but it is increasing and market health is improving, not deteriorating as it was for much of 2022."

From Melanie:

We are seeing a tale of two markets, depending on the individual property. Buyers are negotiating price discounts and beneficial terms from sellers who have been on the market 90+ days. And some sellers are starting to receive multiple offers, which was rare even 30 days ago.

It's definitely a property-by-property situation in the Metro Phoenix market right now.

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  • Nathan Grabau
    Realtor · Longmont, CO · Member since 2021 · 577 posts · 631 votes
    3y

    I am not familiar with the specific numbers in the Phoenix metro area, but I can say that our inventory in Colorado "tripled" from the lows to half of what it was pre-pandemic. 

    That being said specifically with investors, I do not know why we are so eager to buy on the way up but not on the way down. It is rare to time the bottom perfectly, but historically, buying on the way down if you can defend your portfolio is an incredible time to buy. 

    3Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Nathan Grabau

    I agree but I also think the roller coaster just started heading down and people do not need to rush. The insane increase in values and interest rates I think many believe we are just starting our downward trend so if sellers won’t meet your number then there is no rush

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  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y

    Phoenix, Austin, San Diego, Vegas, and to a lesser degree Nashville will all feel this pain. 

    I'll get in the Phoenix ball game soon.

    2Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    3y

    San Francisco's largest landlord just defaulted on a half a BILLION dollar loan.

    That's a lot of money.

    They have 320 buildings and 7,500+ apartments in San Francisco and Los Angeles. 

    They are having trouble with the San Francisco properties.

    https://www.globest.com/2023/01/25/veritas-defaults-on-448m-cmbs-loan-for-san-francisco-portfolio/

    Maybe San Francisco will see a reduction in rent prices and people will not need to partner up to rent apartments (which is how it is in some cities).

    Demand seems to have fallen..probably all of those thousands of tech layoffs. 

    1Reply
  • Melanie Johnston
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
    3y

    When looking at how Phoenix inventory has doubled since December 2021, it's important to note that those 2021 numbers were a historic low. While we have doubled inventory to 16,000, we are still below the 20,000 - 25,000 active listing count that is considered a balanced market. 

    This chart from The Cromford Report (which creates its proprietary Cromford Market Index from Metro Phoenix MLS data) breaks down which cities are in buyer/balanced/seller markets. See their commentary below to learn more.

    "Among the 17 largest cities we see 4 currently in a buyer's market below 90, 3 balanced between 90 and 110, and 10 in a seller's market over 110...

    Overall, the market is more favorable to sellers than we expected in December and downward pressure on pricing has been largely eliminated, except in a few market segments.

    The more favorable situation has started to bring more sellers into the market and new listings have been more plentiful over the last week. Overall supply remains well below normal and so does demand. Volume is low but it is increasing and market health is improving, not deteriorating as it was for much of 2022."

    From Melanie:

    We are seeing a tale of two markets, depending on the individual property. Buyers are negotiating price discounts and beneficial terms from sellers who have been on the market 90+ days. And some sellers are starting to receive multiple offers, which was rare even 30 days ago.

    It's definitely a property-by-property situation in the Metro Phoenix market right now.

    4Reply
  • Account Closed
    OP
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @Melanie Johnston:

    When looking at how Phoenix inventory has doubled since December 2021, it's important to note that those 2021 numbers were a historic low. While we have doubled inventory to 16,000, we are still below the 20,000 - 25,000 active listing count that is considered a balanced market. 

    This chart from The Cromford Report (which creates its proprietary Cromford Market Index from Metro Phoenix MLS data) breaks down which cities are in buyer/balanced/seller markets. See their commentary below to learn more.

    "Among the 17 largest cities we see 4 currently in a buyer's market below 90, 3 balanced between 90 and 110, and 10 in a seller's market over 110...

    Overall, the market is more favorable to sellers than we expected in December and downward pressure on pricing has been largely eliminated, except in a few market segments.

    The more favorable situation has started to bring more sellers into the market and new listings have been more plentiful over the last week. Overall supply remains well below normal and so does demand. Volume is low but it is increasing and market health is improving, not deteriorating as it was for much of 2022."

    From Melanie:

    We are seeing a tale of two markets, depending on the individual property. Buyers are negotiating price discounts and beneficial terms from sellers who have been on the market 90+ days. And some sellers are starting to receive multiple offers, which was rare even 30 days ago.

    It's definitely a property-by-property situation in the Metro Phoenix market right now.

    So, when is the "busy" season for the Phoenix/Mesa/Glendale market? Isn't it very different than most of the country?
    0Reply
  • Melanie Johnston
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
    3y
    Quote from @Account Closed:
    Typically Spring is our busiest season, from March through June. You have to go back on this chart to 2019 to see a typical year, since 2020 was influenced by COVID, 2021 was an unusual banner year and 2022 was influenced by rapidly rising interest rates.

    0Reply
  • Darius A.
    Member since 2021 · 25 posts · 25 votes
    3y

    GS thinks Phoenix and a few other cities are in for some pain.

    https://thehill.com/homenews/3832410-goldman-sachs-says-4-cities-likely-to-see-a-2008-style-housing-crash-report/amp/

    1Reply
  • Melanie Johnston
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
    3y
    Quote from @Darius A.:

    GS thinks Phoenix and a few other cities are in for some pain.

    https://thehill.com/homenews/3832410-goldman-sachs-says-4-cities-likely-to-see-a-2008-style-housing-crash-report/amp/

    There is a lot of discussion around here on that Goldman Sachs narrative. Since The Cromford Report directly addressed it, I'll share their response here:

    "Jan 25 - There is a story run by Fox Business News today that quotes Goldman Sachs making all kinds of weird and unlikely forecasts. Not quite sure how to deal with it because its description of the current Phoenix market bears little comparison with the real world.

    Some quotes are:

    • Goldman Sachs expects home values to worsen through 2023 amid continued skyrocketing interest rates and declining housing prices
    • four US cities will suffer the most catastrophic dips, drawing comparisons to the 2008 housing crash
    • Phoenix Arizona will likely see noticeable increase before drastic decreases of more than 25%

    My comments are:

    • We saw skyrocketing interest rates in 2Q and 4Q of last year. The idea that interest rates will skyrocket in 2023 seems more than a little far-fetched when the inflation rate is falling. It could happen, but to have this as your base case seems very irresponsible.
    • Is Goldman Sachs really saying Phoenix home prices will go up and then drastically down? Come on now, there is no data that supports that outlook. Just a wild-*** guess?
    • In the Great Recession, the median price in Phoenix declined from a peak of $265,000 in June 2006 to a low of $109,000 in May 2011. That is a fall of almost 60%.
    • Please let us not compare 60% with 25%. They are not similar.
    • Since the peak in May 2022 of $475,000, the median was down to $412,000 by December. This is a fall of 13% so far.

    The lack of coherent thinking in the text of the article contrasts with the interview with Ara Hovnanian that appears on the same web page. I went away with the impression that Ara Hovnanian has his head screwed on tight and that the Goldman Sachs housing analyst has lost the plot. Maybe Sky Business garbled the message that Goldman Sachs put out?

    Also confusing are Goldman Sachs recent forecasts of interest rates:

    • November - mortgage rates will drop to 5% by March and property values will rise 1.8%
    • December - 6.2% average rate for 2023
    • January - 6.5% by 2023 year end (not sure how skyrocketing takes place in this context)

    No-one has ever been very good at forecasting mortgage interest rates more than a couple of weeks in advance. This includes the Mortgage Bankers Association and it especially includes Goldman Sachs whose track-record on interest rate forecasts is extremely poor. This is not saying much because there is no-one who gets them right more than by random chance.

    Any time spent listening to people making interest rate forecasts is time you could have spent more productively."


    2Reply
  • Darius A.
    Member since 2021 · 25 posts · 25 votes
    3y

    @Melanie Johnston

    Agreed, tough at this point to gauge where the dust will settle after housing peaked in the spring/summer of 2022. Patience and dry powder 😊

    1Reply
  • Melanie Johnston
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
    3y
    Quote from @Darius A.:

    @Melanie Johnston

    Agreed, tough at this point to gauge where the dust will settle after housing peaked in the spring/summer of 2022. Patience and dry powder 😊

    Dry powder for sure!
    0Reply
  • Account Closed
    OP
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @Melanie Johnston:
    Quote from @Darius A.:

    GS thinks Phoenix and a few other cities are in for some pain.

     Keep in mind that Goldman Sachs, Blackrock, Bank of America etc are in it to make money.

    One way they make a lot of money is to give misleading information and short the trade. 
    Moral of story, listen to Cromford Report not Goldman Sachs.

    2Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    3y

    Hey @Account Closed hope things are going well for you.  Remember that size matters.  Market conditions are important for the overall market, however, depending on the individual deal, the structure, and the strategy, if you are small and are only buying a dozen or less properties a year and you can fully vet the properties, then it may not matter as much what the whole overall market is doing in the short term. Currently, we have put a hold on purchasing properties and we are focused on stabilizing what we currently own.  We are also currently under contract to sell 20 properties and we'll be selling another 10 this year.  I think that we will start buying again in the next 3-6 months.  But they will need to be really good deal, with preferred bank financing or seller financing, or subject to the existing financing.  Now is not the time to get marginal deals.  And because we don't need deals right now, we can be choosey.  

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    1Reply
  • Matt Greer
    Real Estate Agent · Mesa, AZ · Member since 2017 · 231 posts · 169 votes
    3y

    @Melanie Johnston I absolutely love how every time you post you include hard statistics and analysis. I agree with what you have to say. I'm also very upset with the Goldman Sachs projections. I feel like they were very misleading and not completely founded in facts or logic.

    1Reply
  • Melanie Johnston
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
    3y
    Quote from @Matt Greer:

    @Melanie Johnston I absolutely love how every time you post you include hard statistics and analysis. I agree with what you have to say. I'm also very upset with the Goldman Sachs projections. I feel like they were very misleading and not completely founded in facts or logic.


     Thank you, Matt. I think GS is getting a LOT of feedback these days.

    1Reply
  • Jason Mendoza
    Specialist · Gilbert, AZ · Member since 2017 · 31 posts · 12 votes
    3y

    Seems to be a simple reason...sellers haven't gotten "REAL" with what the values should be.  Real projections and good numbers are lower then what sellers are currently willing to sell for...it's starting to change.

    0Reply
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