By Jennifer Ridenour
Phoenix is one of the hottest cities for homebuyers.
A recent Zillow study suggests there is a shortage of in-demand homes in Phoenix. In fact, Phoenix Metro was named one of the top 10 cities. More buyers with less inventory means prices are on the rise, too. According to the study, Phoenix has seen an overall 9-percent increase in values.
The largest deficit is among bottom-tier homes. This is reflected in my experience with HomeSmart as well. Offers for homes below $300,000 are pouring in. There has been a 20-percent decrease in homes around this price range, according to the study. Mid- and top-tier homes have only decreased by 6.6 and 4.1 percent, respectively.
Sellers and buyers are both having a hard time finding their perfect home, which further reduces the available inventory. As the market stands, sellers want to find their new, trade-up home before selling their current one. Due to the lack of available homes, the market is becoming more competitive and prices are increasing.
The high-demand in low-tier homes is also due to a larger number of people who can now secure loans. Many owners who lost their homes in the downtown are out of their seven-year penalty box for conventional loans. The Federal Housing Administration (FHA) loan rules have also changed. Buyers can apply for loans with low interest rates within three years of losing their homes. Phoenicians can get up to $271,500 in FHA financing, which means mortgage payments as low as $1,500 to $1,800 per month.
Everyone is smarter when buying a home than they were a decade ago. Many people are downsizing and don’t want to pay more money per month to manage and maintain a property beyond their means.
Downsizing has been a blessing in disguise for my own neighborhood. I purchased a home for $250,000 in December 2014. My property value has increased to more than $300,000 since then. Why? My neighbors!
Older couples and empty nesters are downsizing, while Millennials are moving into these recently vacated homes to start families of their own. This reactivates neighborhoods and forms communities, which also raise home values.
For those who are worried about the demand outnumbering the supply in Phoenix for much longer, keep in mind that the market is self-correcting. New building permits for homes are up, which means the inventory will balance out.
Jennifer Ridenour is a consulting broker and agent development manager at HomeSmart International.