Millennials and Residential Real Estate in the Phoenix Valley
Let’s face it. The Phoenix Valley single family home market is nearly flat. For the last year list prices of single family homes (as measured per square foot) seemed to be steady, though you may note that there has been a slight decline since March 2014.
In conjunction with the flat pricing there is a reduction in the number of overall sales and a corresponding increase in inventory. The recent Cromford Report data for annual sales on a rolling basis is shown in the chart to the right.
Depending on the source of your information, the causes for these market conditions include:
- a still weak economy
- fewer people able to qualify for financing due to student loans and stricter financing guidelines
- a mismatch in inventory vs. the desired home design – the trend is toward smaller homes with smaller yards.
- fewer people desiring home ownership because of their lifestyle or life stage – in particular, the Millennials. Millennials are generally defined as those born from the early 1980s to the early 2000s.
The Millennial demographic group has been a hot topic in the Toma Partners lunchroom and in the national headlines as a powerful force in the residential market. Among the many articles on the subject, I find one by Jed Kolko, Chief Economist of Trulia, to be the most comprehensive. Last week he posted this report on trends in both millennial and middle-aged home owner groups. To me, the take away is that the economy overall is still a main driver to help in both the short haul and the long run.
The implications for people currently considering a move?
Listing a home
Be prepared to have your home on the market longer as the average days on market (DOM) is up to 118 days. That is an increase from a low of 101 days last October. If your home has a popular floor plan, is in good condition and has great marketing, you may expect to get offers sooner.
Buying a home
Right now inventory, the amount of homes listed, is significantly higher than a year ago. Inventory is measured by days or months of supply available if people purchased homes at a steady rate. The current inventory is 132 days vs 83 days a year ago. Yet even with the increase in inventory, finding your dream home may still be difficult. Older styles of homes may not meet today’s buyers requirements, for example. However, when you do find the right home and it has been on the market for a while, you may have more options to negotiate. An experienced Realtor can be very valuable in those negotiations.
Many people who are not buying homes are either living with other family members or they are renting. There is an expectation for tremendous growth in multi-family construction, for example, as shown in this chart.
Need more data?
If you’d like to access market data in real time, take advantage of Toma Partners’ access to the Cromford Report with this link: Raw Market Data.