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 industry website Construction Coverage analyzed housing markets both big and small, compiling a list of cities seeing the highest year-over-year inventory increases. 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.
A primary reason for rising inventories is a sharp decline in investor home purchases. The real estate data site Redfin shows year-over-year changes in investor purchases in the Phoenix market for every quarter going back to 2000. Just last year investor home purchases in Phoenix skyrocketed to their highest level of 128%. In the most recent quarter, investor home purchases fell nearly 50%, a drop not seen since COVID-19 or the year before the start of the Great Recession.
Another metric that explains the changing market is the relationship between new home construction and housing prices.
Existing home sales tend to follow new home prices, especially in high-volume markets such as Phoenix. Since 2010, the correlation between the two has been tighter than in the past. Last year, however, the two diverged. From January to October, home prices increased by almost 10%, but new home permits plummeted by over 33%. This suggests that if the decade-long trend holds, housing inventories should continue to increase until home prices start to fall.
