The media have been full of stories for the last six months about the shortage of home buyers. They have devoted very little coverage to the shortage of home sellers over the same period, which is in fact far more extreme and is having a bigger effect on the market.
Between April and October last year, we had plenty of sellers because those who saw their properties as investments were keen to avoid the risk of a major drop in value. Those were joined by the iBuyers who realized too late that they had purchased far too many homes for the market conditions since April. This caused a short-term stampede for the exits. But from a longer-term perspective, this was of little significance.
In any case, this all started to reverse in November and we now have a real problem getting enough homes listed on the MLS. If your home has an existing mortgage, the odds are high that it has a much lower interest rate than anything available today. So unless you really have to move, it makes more financial sense to stay put and avoid redeeming that bargain mortgage only to replace it with a much more expensive one. Many are choosing to upgrade or expand their home in situ instead.
There have been 33,506 new listings added so far in 2023. At the same point in 2022, we had 42,048. In 2021 there were 41,210 and in 2020 40,744. To be down more than 20% from the prior year is very unusual and the flow of new listings is too low to compensate for the listings going under contract. This means the active listing count has been in decline for over six months now and is still trending down at a steep angle.
The total active count, excluding UCB and CCBS listings, has dropped from a peak of 19,679 across Greater Phoenix to 11,298 today. This fall of almost 43% has transformed the negotiating balance between buyers and sellers. 19,679 wasn’t even a high number, with 25,000 to 30,000 representing normal market conditions.
By price range, for the single-family segment, we see since November 1:
- homes listed under $225,000 are down 52%
- homes listed between $225,000 and $275,000 are down 64%
- homes listed between $275,000 and $350,000 are down 47%
- homes listed between $350,000 and $500,000 are down 55%
- homes listed between $500,000 and $600,000 are down 47%
- homes listed between $600,000 and $800,000 are down 38%
- homes listed between $800,000 and $1 million are down 35%
- homes listed between $1 million and $1.5 million are down 33%
- homes listed between $1.5 million and $2 million are down 18%
- homes listed between $2 million and $3 million are up 9%
- homes listed over $3 million are up 14%
The drop in available supply is most severe in the price ranges below $600,000. It is only slightly better between $600,000 and $1.5 million. Once you reach $2 million we have no real shortage – there is more choice available today than at the beginning of November. However, demand has held up quite well at these higher price ranges.
demand has held up quite well at these higher price ranges.
We hear that some people are choosing to rent because they think that home prices are likely to come down. This is not at all likely in the face of a supply shortage like we are experiencing. Wanting something to happen does not make it happen.