So, what is going on in the Ahwatukee real estate market? Is the bubble going to burst?
Despite reports of a dip or a slowdown in the Ahwatukee market, the market is still performing at record levels.
There were only 31 properties listed on Aug. 1. On average in 2021, 160 properties are selling per month in Ahwatukee. The listing inventory of 31 properties on Aug. 1 would be depleted in about 6 days. As we have seen for many months, demand is outstripping supply in Ahwatukee, the entire metro area, and many real estate hot spot cities around the country.
Our Aug. 1 analysis of Ahwatukee real estate sales indicates that the 154 Ahwatukee properties sold in July 2021 at an average sale price of $539,490 with an average of 25 days on market.
The average sale price declined slightly from the average sale price of $541,140 in June, when 176 closed escrow.
From Jan. 1 to the end of July, 1,117 properties sold at an average price of $509,483. with an average of 27 days on the market.
The number of units sold and the average sale price is up dramatically compared to the same period in 2020, when 941 properties closed escrow at an average sale price of $401,717.
The average price of an Ahwatukee property is 26.8 percent higher in 2021 than in the same period last year.
There are rumblings of the market slowing and prices softening in parts of the country, but we have not seen any slowing in the Ahwatukee market.
The number of units sold in the three Ahwatukee zip codes is up 18.7 percent, compared to last year. The increase in the number of units sold and the dramatic increase in the average sale price in Ahwatukee is fueled by incredible demand coupled with the record low-interest rates.
The record low rates are allowing buyers to purchase homes that would be out of their reach if interest rates were even a few points higher. When we expand our search to include the Metro Phoenix area, we see very similar results to what our Ahwatukee analysis demonstrates.
Our quick analysis of the Metro Phoenix market shows approximately 51,700 closed residential transactions in Jan. 1-July 31. The average sale price for the period is hovering around $525,000. The average price a year earlier in the Metro Phoenix market was approaching $400,000.
This represents a 31 percent increase in the average price of a property in Metro Phoenix versus the same period in 2020. Despite the strong market we are seeing, locally and regionally, many remember the real estate debacle of 2007 and 2008. We are frequently asked if the bubble is about to burst.
As we said last month, the current situation, while looking similar to the events of 2008, is remarkably different. Demand remains incredibly high and the record low inventory levels are pushing prices steadily higher.
In many markets, including our own, we are seeing homebuyers making offers over the asking price to get a property. Bidding wars are common. Mortgage reforms have become laxer and the mortgage interest rates have remained at record lows.
This has allowed the bullish real estate market to continue to expand. Most experts believe that this market will continue until buyers are forced to the sidelines because they can no longer afford the escalating prices.
So, is any end in sight? Many are asking if we are about to see prices crash as we saw when the real estate bubble burst in 2008. In the days leading up to the 2008 crash, there was a lot of speculation going on in the real estate markets.
Speculators were building properties at a pace that outstripped the demand. The mortgage market in retrospect was unregulated in many ways and lenders were doing creative lending. There were nothing-down an little-down loans, interest-only loans and loans with no verification of assets or ability to pay the loan off.
It was the wild west of real estate and when it stopped it crashed. It brought down individuals and banks. It required a huge bailout by the government (really the taxpayers). Incredibly, nobody went to jail.
The current market is fueled by demand and low interest rates. In my opinion, as long as real estate interest rates remain relatively low, and demand remains high, the number of units sold and the average price of a property will continue to increase in the Ahwatukee and Metro Phoenix market.
When this market does slow down, it will be a result of prices surpassing the ability of buyers to afford to make the payments. A rise in interest rates, out-of-control inflation, and continuing increases in prices will be the most likely culprits in slowing or stopping the local, regional, and national real estate markets.
Most importantly and of the most concern to me is the increasing inflation rate.
If the rate of inflation is allowed to continue unabated, it will have the effect of pushing the cost of all consumer items, including properties, higher. Unchecked inflation can bring this market down in a hurry as dollars become less valuable and prices rise.
Treasury debt levels have never been higher as economic stimulus and massive infrastructure debt increases. These factors will increase taxes, create dramatic increases in consumer costs, reduce consumer spending and put downward pressure on home prices and the volume of homes sold if they continue.
It is still my opinion, that despite the boomimg real estate, inflation should be on the watchlist for all home-buyers and home sellers and those contemplating getting into or out of the real estate market.
Allen Henderson is an Ahwatukee resident and Realtor. If you have any comments or questions contact him at 480-392-2090.