By Holly Henbest, Realtor

With the rising prices of homes, bidding wars and some homes selling in just a few hours, talk of supply and demand issues continue be the focus of many real estate discussions. When we talk about supply and demand, many people have been assuming the results are due to a situation that is equal parts supply and demand. We keep hearing about Arizona being the number one relocation destination, and so many Californians fleeing to Arizona. That is all true, but the reality is that the data shows that demand is only 10% above normal and the dominant issue right now is supply.

This current situation should be comforting news to anyone who is concerned about a market crash or bubble. Why? The answer lies in the fact that demand can change much more quickly than supply. As we recover from the pandemic and the country returns to a ‘new normal,’ we may find the relocation factor affecting the demand to slow a bit. Although we are seeing population growth and California buyers (as well as buyers from many other locations) come to Arizona, the effect of relocations isn’t so great that we will miss it if it slows down.

On the flip side, history and trends show that supply is slower to react or change. That is good news because the implication is that there won’t be a big drop or sudden change to our situation. One reason supply continues to be an issue is that homeowners may want to move, but they may be hesitant to move because they know it may be hard to find a home they desire. So their home isn’t listed for sale, and the home they may want to buy isn’t listed for sale because other homeowners are also worried about where they will go. Once we start to see less competition from out-of-state buyers, we foresee our next wave of buyers will be the locals who have been sitting on the sidelines and who will affect both supply and demand going forward.

Here is some recent data for March 2020 vs. March 2021, courtesy of The Cromford Report:

• Unit Sales Were Up 29.3%
• Sales to Primary Residence Buyers were up 12.7%
• Sales to Investors for Rental Properties were up 52.1%
• Sales to Investors for Vacation Homes were up 52.1%

As we can infer from this data, primary residence buyers and investors are both buying homes. Sales are up in all categories, but especially by investors capturing the greater percentage increase. This is also comforting news to the stability of our pricing because investors are often cash buyers or put a significant amount down. Although investors are buying homes at record-breaking prices, they immediately have tremendous equity in them. The situation now contrasts to the situation preceding the historical crash when homeowners had lesser equity partly as a result of having little if any equity when the home was purchased with little to nothing down.

The crash is part of our past and hard for a lot of us to forget, but the circumstances now are vastly different.

We hope this data and information is helpful. Do you have a real estate question? Give us a call at 480-266-8785.

Holly has been a Desert Ridge resident since 2000 and has been a realtor since 2006. She is the leader of The Henbest Team with Realty One Group. Holly is ranked in the top ½ of 1 percent of Realtors in Arizona and is a Certified Luxury Marketing Expert. She was also ranked #24 in 2019 by the Phoenix Business Journal and recognized by So Scottsdale! magazine as a Real Estate Superstar for 2019.