Valley home prices continue to rise due to supply shortage, economist says

Jun 26, 2024, 4:35 AM

Home prices up in the Valley by 2.5% year over year, expert says...

The rising housing costs are putting a lot of pressure on people trying to get a new home. (Maricopa County photo)

(Maricopa County photo)

PHOENIX — The shortage of homes in the Valley is keeping home prices up, according to one local economist.

“If you’re looking month over month, so our last month of May, we’re up about 2.5% year over year,” Danny Court, senior economist with Scottsdale-based Elliot D. Pollack & Company, told KTAR News 92.3 FM on Tuesday. “But year to date, we’re up nearly 5%.”

The Valley is still experiencing a shortage of homes, he said.

“It is the lower level of listings, the low inventory available, versus how many buyers are out there,” Court said. “So because we’re not seeing any real big boom in in housing construction, no big supply coming online, these prices are are stable and increasing.”

Why are home prices up in the Phoenix metro?

Currently, it’s harder for people who make the median household income to buy a home. Rising prices combined with high interest rates are exacerbating the issue, Court said.

“Five years ago, if you made $65,000 as a household, you were a homeowner,” he said.

That’s no longer the case. Now, people in that salary range are more likely to be renters. Yet since rent prices are going up, people need to be making more than $100,000 to find a home to purchase, he said.

“When interest rates do decline — and we do expect them to decline — perhaps to retreat down to the 5% level, that will do a lot to increase affordability,” he said.

Housing market analysts are expecting a mild rate decrease by the end of the year, Court added.

However, the consensus is that substantial declines will come in 2025, he said.

Housing listings are up, Valley economist says

On the bright side, Court said he’s anticipating a substantial increase in new home construction.

“We’re approaching what we would consider a healthy market for new home construction,” he said.

In fact, listings are up.

“Listings are up about 50% year over year,” Court said. “So we had a really low level this time last year — about 11,000 listings — and we’re up to about 18,000 listings.”

That’s good news for pricing stability.

“But that’s still below average in terms of the total number of listings that we usually have,” he said.

Furthermore, there is no risk of any sort of crash in housing prices, Court added.

“We have nearly no distress in the market,” he said. “We’ve got a good employment market, a good labor market right now.”

KTAR News 92.3 FM’s Jim Cross contributed to this report.

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Valley home prices continue to rise due to supply shortage, economist says