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Despite softening housing demand, no slowing down Phoenix home price growth

Despite a bit of softening in housing demand and a small uptick in the housing supply, home price growth in metro Phoenix continues to top the nation, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.

Phoenix led the nation with a 25.9% year-over-year price gain in May, followed by San Diego at 24.7% and Seattle at 23.4% at a time when the national gain of 16.6% set a record high.

While homebuilders and developers have been busy buying land throughout the Valley, the housing supply is still very constrained, said Thomas Brophy, research director for Colliers International.

As of the end of June, the Arizona Regional Multiple Listing Service pegged current for-sale inventory at 1.05 months — maintaining below a 2 month supply since May 2020, Brophy said.

“Anything below three months indicates the market is experiencing inventory shortages,” he said. “Shortages, most likely will continue through the remainder of the year and into early next year as homebuilders continue to ramp up production.”

Steven Hensley, advisory manager for Zonda housing market research firm, said the median new home price sat at $440,000 through mid July, up 26% compared to a year earlier. The median resale home price sat at $400,000, up 29% compared with last July.

“Resale listings ticked up in July, up 11% from June levels, though inventory is still down considerably from last year and two years ago,” he said. “Demand has tapered some over the past month, which can be attributed to a seasonality slowdown, buyer fatigue and sticker shock.”

The move-up and second move-up market appear strong as buyers already with homes can use the increased equity to compete in the market, whereas the bottom third and first-time homebuyers are becoming less competitive, Hensley said.

“The frenzied and hectic environment has subdued to a more ‘normal’ market,” he said.

Price pressures continue to remain firm and appear to stay that way for months to come, said Matthew Speakman, an economist for Zillow.

“The housing market’s tight inventory conditions in Phoenix finally started to ease in May, up 1% for the month, but that did little to immediately tame the record-strong home price appreciation that the market has experienced in recent months,” Speakman said.

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