Housing inventories -- the number of homes on the market for sale -- have fallen dramatically across the Valley since the beginning of the year. In Phoenix, it would take a mere 3.4 months to deplete the current inventory at current levels of demand. A 6-12 month supply is considered typical in a healthy market. All of the Valley cities now fall within that range except for Scottsdale, where there are 14.3 months of supply on the market (though even Scottsdale's inventory fell 26% since January).
Fall in Valley Housing Inventories
Source: Cromford Report, real-estate analyst Mike Orr
The drop in the number of homes on the market in the Phoenix area is due in part to the drop in foreclosures. According to the Arizona Republic, "Of the active listings of homes for sale on the Arizona Regional Multiple Listing Service, only about 17 percent are bank-owned foreclosure homes. In January, the rate was nearly double."
That also explains why the inventory in Scottsdale is still relatively high compared to other Valley cities -- the higher-end real estate market has yet to show signs of recovery; many analysts think that we'll soon see a peak in foreclosures in the luxury home market.
What does a falling inventory mean for you?
Decreasing supplies mean that the market is equalizing -- supply is coming closer to being in line with demand. Once that happens, prices will start rising. So if you're thinking about buying a home, falling inventories mean that now might be a great time to do it. If you're thinking about selling your home, prospects are bright for a relatively quick sale, at a higher price than you would have gotten five months ago.
Monthly Supply of Houses in Valley Cities
Source: Cromford Report, real-estate analyst Mike Orr
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