Since 2013, our Phoenix Metro residential real estate market has suffered a continuous annual drop in available listing inventory. A number of blogs ago we discussed reasons why this lingering problem persists. A few possibilities were discussed, but an article that appeared in today’s Wall Street Journal (WSJ) about slow home sales nationally, also sheds light on what is perhaps the main reason why listing supply is shrinking: Existing homeowners aren’t moving on!
According to the WSJ article, discussing why sales have dropped off, states that the inventory of homes for sale, adjusted for population, is at a 37 year low which is how long record keeping for this has been tracked.
In 2010, according to Redfin’s chief economist, homeowners were staying in their homes an average of 8 years, five years longer than they are now, which is 13 years. Check out their article here.
Record low mortgage rate levels, record levels of home equity, and a strong jobs economy have not jump-started sales. Per the WSJ, the baby boomers are the main culprits for fewer sales, as many are staying healthier longer and choosing not to downsize.
And the problem could get worse! If mortgage rates rise, homeowners will be more inclined to stay with their lower mortgage rate home.
In Arizona, our inventory supply currently stands at 2 months, and could (will?) be further reduced by more folks relocating (now occurring) to our sunny and stable state. To provide perspective, in 2007, available inventory measured by months on the market, was over 20 months! (see chart below) At that time, there were over 58,000 homes for sale, compared with under 15,000 today, which is 74% fewer homes for sale then back then.
Mike’s takeaway? Unless you’re no longer going to be a homeowner, make sure you do a lateral move and stay in the market. This lack of inventory in Arizona, could be a scourge for years to come.