Full Contact Housing: Phoenix’s Competitive Real Estate Market
Andrew Dehan7-Minute Read
November 06, 2020
- Homes in metro Phoenix are selling an average 14 days faster in 2020 than in 2019
- The number of homes selling above asking price is up 165% since September 2019
- Homes in Avondale spent 30% less time on the market in 2020 compared to 2019
No doubt 2020 has been a strange year in many ways. Several factors have converged, causing big changes in real estate markets across the country. With COVID-19, we’ve seen all-time-low interest rates on mortgages, coupled with a greater number of us staying home. Since more people are working and going about life within the confines of their homes, interest in living elsewhere has increased.
This is where Phoenix comes in. Before COVID-19, Phoenix’s popularity was rising. In 2019, U.S. News & World Report listed Arizona as #3 in the top 10 growing states, just behind Nevada and Idaho. In 2018, the U.S. Census declared Maricopa county, where Phoenix is located, the fastest growing county in the country.
The housing market was competitive before 2020, but this year has taken it to another level. Even with the Phoenix metro having the third-highest amount of housing starts in the U.S. this year, demand is not being met. We’ll look at what’s causing the population growth and the factors contributing to the competitive real estate market.
What’s Causing The Rise?
Phoenix is appealing for many reasons. Temperate weather, a thriving nightlife and affordable cost of living when compared to other western cities make Phoenix a magnet for many.
In 2019, Meyer’s Research found that Phoenix was the fourth most popular city for millennials. They cited job opportunity as a major factor in relocating to Phoenix.
We spoke with Jake Sorensen, a 23-year-old first-time home buyer to see what his take was. “A lot of people from California, Oregon and Washington have been migrating here since housing is more affordable,” Sorensen said.
He’s not wrong. Seattle, Los Angeles and San Francisco all top lists of cities people are leaving due to exorbitant housing costs. Many leaving these areas are heading to Phoenix (or Boise).
Not only that, but many finance and tech companies are setting up shop in the Phoenix area. Arizona has low taxes and an educated workforce, and with these companies located there, attracts people leaving the large tech and finance hub cities.
This trend started before COVID-19, and with many of these professionals working from home, they’re realizing they can do their jobs remotely. This creates more opportunity for growth in cities like Phoenix.
Breaking Down The Data
Looking at the data, it’s easy to see the increase in competition in the metro Phoenix market. While home prices are rising because demand is growing, there are two key indicators of competition true across the Phoenix area. These are the amount of days a home spends on the market and the percentage of homes selling for over asking price.
Let’s look at the data for these and see what conclusions we can draw.
Days On Market
When compared to 2019, homes in metro Phoenix in 2020 are spending around 23% less time on the market. That translates to homes selling 2 weeks faster on average this year than they were last year.
There are some exceptions to the trend, with houses staying on the market longer in places like Fountain Hills and Cave Creek. But then you have the other extreme, with homes in Arizona City selling over twice as fast as they did last year.
With a decrease in days on the market, buyers must act decisively to have a chance at a winning bid. Even if you’ve got the fastest bid in the West, you’ll have to have more than a quick draw.
Percentage Over Asking
How competitive the market is becomes apparent when you pair the shorter time on the market with how many homes sell over asking price. In fact, several places in metro Phoenix didn’t have homes selling above asking last year. There are no exceptions in this category. All the places we surveyed have more homes selling over asking than last year.
As of September this year, 27% of homes sell over asking price in metro Phoenix. The amount of homes selling over asking price is up 165% since September 2019. When you look at a place like Arizona City, September 2019 saw 0% of homes sell over asking. One year later, and it’s up over 40%.
This market is a seller’s dream. Sellers likely have their choice of bids, with many buyers trying to shove the competition out with bids over asking. Let’s take a closer look at some key metro cities to get a more complete picture.
Key Area Cities
The homes in the Phoenix city limits are exhibiting many of the same trends as those in the surrounding areas. However, Phoenix itself is just a part of the greater Phoenix metro. Here are some trends happening in the surrounding areas.
1. Avondale – A Rising Stand-Out
Located west of downtown Phoenix, Avondale has become one of the most competitive real estate markets in the area. When compared to last year, over 229% more homes have sold over asking price.
Avondale homes exhibit some of the shortest days on market – on average, 25 days in September 2020. This is nearly a 30% drop from the same time last year.
Avondale has one of the lowest Market Absorption Rates in Phoenix as well. Put simply, Market Absorption Rate is the number of months it would take to sell the home if no other homes were listed in the area.
For example, a neutral Market Absorption Rate would be around 5. Avondale’s is 1.86. This makes it firmly a seller’s market with high demand for housing.
Read the Avondale Trend Report.
2. Tempe And Scottsdale – Interest Is Slowing But Prices Are Rising
Scottsdale and Tempe have long been standout cities in the Phoenix area. Recent trends are showing they’re still desirable to live in, but their rising home prices are pushing people out.
For example, Scottsdale’s median sale price in September 2020 was $600,000, up over 25% from last year. Tempe’s similar, with a sale price over $357,000, an increase of over 21% from last year.
According to our first-time home buyer, Jake Sorensen, younger people are looking outside of these markets.
“Most younger couples who are looking at getting house are being priced out of the Scottsdale market and have been moving out to places like Buckeye, Ahwatukee, Gilbert and Glendale,” Sorensen says. He adds, “I also don’t see a lot of growth potential for my home value in Scottsdale. As these other areas are growing and developing, I anticipate seeing a much larger ROI on my house over the next 10 – 15 years.”
Tempe’s proximity to Scottsdale, along with its affordability, has long made it a desirable place to live. Interest is slowing, however. When compared to last year, sales have dropped in Tempe, when the rest of the area is on the rise.
Both areas have more listings and rising prices, but time will tell if their appeal sticks, especially with other areas growing.
Read the Tempe Trend Report.
Read the Scottsdale Trend Report.
3. Queen Creek – Rapid Growth In The East Valley
To the southeast of Phoenix lies Queen Creek, one of the most competitive markets in the area. A 7% drop in listings has led to the market contracting. With demand rising, 32% of homes in Queen Creek are selling over asking price. That’s around a 330% increase from last year.
This has translated to a near 40% drop in the market absorption rate, putting it at 1.98. The area has a great school district and is nearby other growing communities, like Chandler and Gilbert.
Read the Queen Creek Trend Report.
4. Maricopa, Florence And Casa Grande – Gems In The Desert
Traveling further to the south and southeast, the communities of Maricopa, Florence and Casa Grande have all seen a significant uptick in the housing market. Maricopa, for instance, has 40% of its homes selling over asking price. Casa Grande has seen its homes go from spending 74 days on market in 2019 to just 40 days the same time this year.
While these communities may be an hour or more commute to downtown Phoenix, that’s becoming less of a concern. Sorensen says, “With the changes COVID has brought to the work environment, it's less surprising as these people have found commuting less important.”
More people are working from home. More families are leaving the more populated areas, looking for a quiet spot surrounded by natural beauty. Quiet and beauty are things these towns have in spades.
Read the Maricopa Trend Report
Read the Florence Trend Report
Read the Casa Grande Trend Report
East Valley Vs. West Valley
One trend that has arisen in this competitive environment is a shift between neighboring areas. Phoenix has two valleys, one to the west and another to the east. East Valley comprises towns like Scottsdale, Gilbert and Chandler. West Valley has Avondale, Buckeye and Goodyear, among others.
For a while, East Valley was the clear favorite of the two. But this year, that appears to be changing. Home prices in the East Valley have gone up more than 10% since last year, putting the median sale price over $426,000. Meanwhile, the same size home in the West Valley could go for $100,000 less than that.
Jason Mitchell, a Rocket HomesSM Verified Partner Agent and president of the Jason Mitchell Group, put it this way: “The East Valley is getting pricey, so consumers are looking west for their next property, in many cases. Places such as Chandler, Scottsdale and Gilbert are being priced out for many buyers, especially in family communities.”
He goes on to say, “West Valley has seen a surge in new home building because land prices are very reasonable. These areas provide a great lifestyle, the schools are good and they’re near major highways.” He sees this growth continuing into the foreseeable future.
Moving To Phoenix? Be Prepared
Before 2020, the Phoenix market was tough. Now it’s even tougher. The amount of people moving to the area is outpacing the amount of homes being built. Maybe you’re one of many wanting to relocate the Grand Canyon State’s largest city. Be ready to put a lot of effort into buying your new home.
Expect to pay over asking and move fast to have a chance. Research how to get your offer accepted in a seller’s market. Have your financing lined up so when the time comes to bid, you can bid confidently. If working from home is a possibility for you, consider looking for homes a little further outside of the city.
Ready to start the buying process? Check out our Home Buyer’s Guide on the Rocket HomesSM blog.
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