Phoenix is Hot, but a Bubble it’s Not
Multiple offer situations and homes selling for more than list price have been making home buyers nervous over the past month. Returning boomerang buyers, having already suffered a short sale or foreclosure during the recession, are especially sensitive to memories of the infamous 2005 “bubble” where multiple offers over list price were a common everyday occurrence. Flash sales, properties sold within a day or less on the MLS, saw the highest volume last March since August 2013. However, a measure of 210 does not come remotely close to the 1,032 flash sales measured in March 2005. There is a growing number of properties selling over list price as well. But again, April 2017 only saw 16% of sales fit this category while April 2005 saw 37%. So while our real estate environment is indeed competitive for buyers right now, thankfully it doesn’t resemble the same level of insanity experienced during the 2005 bubble.
Annual appreciation rates* have been consistently averaging close to 5% for nearly 2 years. Compare this to the two years between August 2003 and August 2005 where the annual appreciation rate rose from 5% to a ridiculous 45%. Between January and July 2005, unprecedented appreciation ranged between 4-7% PER MONTH compared to an average of 1% per month thus far in 2017. Current prices are the highest they’ve been since January 2008, over 9 years ago, and they’re comparable to April 2005, over 12 years ago. However at an average of $152 per square foot, sale prices would need to appreciate another 25% to compare to the highest peak achieved in May 2006. At the current rate, that could take another 4 years to reach.
*Comparing the average sales price per square foot for the most recent 12-month period to the prior 12-month period