Low inventory, high interest rates leaves potential Phoenix homebuyers on the sideline

PHOENIX - Describing the current real estate market in Maricopa County is not as simple as saying it is a buyer's market or seller's market. It is a complicated market, especially in the Valley. Just since the Fall of 2022, a lot has changed.

"A healthy market is somewhere between 25,000 and 35,000 homes," Oleg Bortman with The Brokery said. "This morning, we're at 12,300 houses in the system. So, it’s half of where we should be."

Bortman is talking about inventory in the Valley. Right now it is low. At least compared to last Fall.

In October 2022, about 23,000 homes were listed for sale in the Phoenix area. That figure helped anyone looking to buy. Meanwhile, sellers were coming down in price, offering concessions, and the dreaded bidding war was not as common.

Now, agents with The Brokery are seeing multiple offers again, because supply cannot keep up with demand.

"We just had a home in the Biltmore that we listed at $1,495,000, and we had four cash offers from people all over the country," Tucker Blalock said.

Multiple offers, combined with high interest rates, are keeping people like Bassam Beydoun on the sidelines.

"Right now, in the presence of high interest rates, low inventory, high demand, increase of population, it makes you want to hold back to wait it out, to see what’s gonna happen," Beydoun said.

Realtor Kellie Parten with HomeSmart hears about rates all the time.

"I think there is a lot of focus on the interest rates, which is causing pause for buyers," Parten said.

To explain in simple terms what is happening, take the character Lucky from the popular kids show called Bluey. Lucky sees a house that he loves and he wants to buy it. But with current interest rates, he cannot afford it. A year ago, he could have. Meanwhile, Bluey and her family are in the house that Lucky wants. But the family does not want to sell because they cannot afford a bigger and better house with current interest rates.

On the positive side, however, a 2023 Goldman Sachs prediction of a massive crash in the Phoenix market has not come to fruition yet. This means property values are holding.

"We didn't see a 20% drop," Bortman said. "Maybe 1% or 2%, but now we're even higher than we were in January. You don't see [Goldman Sachs] coming out with a new report."

Bortman and Blalock, however, are not optimistic about a large inventory improvement, and with rates likely to remain around 6-7%, Beydoun may continue to watch the market instead of jumping in.

"I’m eager to see hopefully positive signs for people like me to get back in with lower risks," Beydoun said.