After 26 years in her home, Kirsten Wesley and her family were looking to find a new place to live. Her old home was full of memories, including the line markings on the wall where she tracked the growth of her kids. And now, she was looking for the perfect home to make new memories in.
But after spending more than two decades in one home, Wesley said she had no idea what they were doing when the time came to sell their home. And little did she know they were walking into a housing market that many have never seen before.
“It’s the tightest market I have ever seen in my life,” Elliott Pollack said. “The current real estate market is unique.”
What is going on with the housing market?
Pollack is the CEO of Elliott D. Pollack & Co. and said the market is being driven by very little supply and tremendous demand. According to Pollack, we have about a week’s supply of housing when we usually need about a six-month supply to keep the market fluid.
Among those dealing with this demand are realtors Jera Banks and Adam Bailey. Wesley is one of their clients and said virtually every part of the Phoenix area is seeing the high demand.
“We’re seeing it hot everywhere, from the west Valley to the east Valley, in Casa Grande,” Banks said. “Everywhere. Flagstaff is wild, you name it. So I feel like initially, you know, Central Phoenix, it kind of starts there and webs out but no, it’s wild everywhere.”
So as Wesley began the selling process, it didn’t take long before she started seeing just how crazy the market was. On the first day of her home being on the market, Wesley said she had more than 30 groups of people look at the house. In just two days, they had more than 25 offers that were well over the asking price. In the end, Wesley said they ended up going with an offer that was $50,000 over their asking price.
“I think it’s amazing for sellers. I think that if you want to sell a home, now is the time,” Bailey said, talking about the current market. “You pretty much can set how you want it; how much money you want for the home, when you want to move, if you want to pay for repairs… I mean, it’s literally a seller’s market.”
Will this real estate market last?
Given the demographics, Pollack said we can expect this current real estate market to last a while.
“This thing has legs, it’s gonna last as long as affordability is still good,” he added. “Now, the housing prices have gone up a lot over the last several years. But interest rates have come down a lot. So payments really aren’t that bad.”
According to Pollack, the supply-demand situation is going to be tight for the next several years. He said the area would need around 25,000 excess houses built in Phoenix alone, just to get supply and demand in balance.
“I think until people are priced out of the market, there’s going to be demand for at least the next five to 10 years,” he explained. “There’s, you know, the millennials are the biggest age cohort around and they are entering peak homebuying years.”
Mark Stapp is the Director of Real Estate Programs at the W.P. Carey School of Business at ASU. He said the home inventory is incredibly low. In March 2021, he said the inventory of homes on the market today is less than one month, but ended up selling more than 9,800.
“It is demand that we’ve not seen before. And it is really rapid demand,” Stapp said. “It is an environment where demand is outpacing supply. And I think in a significant way.”
Is this going to lead to a housing bubble and, ultimately, a burst?
This demand is something we have never seen before, according to experts. But the Valley did see similar demand in the early 2000s. During that time, the price per square foot peaked in 2006 at $184.56 before falling to $86.79 in 2009, according to the Cromford Report.
“That’s completely different than the circumstances of the last bubble, where you way overbuilt, and then the economy crashed, Pollack said. Now you can’t possibly keep up, and the economy is going to be strong. So I don’t see this as a bubble.
Stapp agreed and added that this situation is due to a number of factors.
“This is being driven by real demand. The problem is a lack of supply in many ways, and that lack of supply is the result of a whole bunch of factors,” Stapp said. “It’s complicated to deal with this. But this is not an economic bubble. This is being driven by real actual economic demand.”
As far as when we’ll see an end to this current rush on housing, Pollack said it’s years away.
“Shortages lead to gluts and gluts lead to shortages,” Pollack proclaimed. “So at some point, this shortage will lead to a glut of housing, but it’s a decade away.”
In the meantime, buyers and sellers will continue to navigate this hectic housing market. And after selling her old home, Wesley became a home buyer herself and saw how life on the other side of the coin was like.
Wesley and her family eventually moved into a new home in the Anthem area. She said her family needed more space and the house they found was an ideal fit.
“We had a lot of boxes to check. And wouldn’t you know that when we found this house, it has an amazing view,” Wesley said. “It has a fun, flexible floor plan, and it’s going to be a great home for us for a lot of years to come.”