Whether you are new to the area or grew up here, chances are your top three conversations include something about the weather and how its unseasonably cold or already too hot, a debate over what is going in on that busy corner down the street and crossing your fingers that it is a good local restaurant or new place to take the kiddos, and of course, how the market is doing because everyone is just as impacted by the real estate market as they are often confused by it. So, let’s work backwards …
Seasonality would dictate that our real estate market would peak in May and June, with the highest number of transactions occurring between March and June, but having gotten a bit of a slow start this year, we could see pent-up demand adding to the movement in the traditionally sleepy third quarter. Unlike the seller's market of the last couple of years, where the gap between supply and demand felt as deep and wide as the Grand Canyon, the more modest fissure between the two will promote healthy negotiations for any transactions without multiple offers, as is indicative of a more normal seller's market.
The expectation that prices will fall again this year is unfounded based on our current supply levels, and those with ample equity in their home will likely look to upgrade in 2023. Increasing prices, low inventory, healthy negotiations, improved access for traditional buyers, and continued growth in the job market will likely bring more development of single and multi-family housing projects and discourse on apartments, affordable housing, and the biggest elephant in the room — water. But how did we get here?
Chandler has been in a seller’s market since 2011, which means that, for more than a decade, there have been fewer homes available than those who have wanted to buy them. Meanwhile, the population in Chandler has increased by nearly 20% in that timeframe, with many moving to the area for its proximity to major employers, others for the more than 60 parks and outdoor recreation areas within our city limits, and still others for the affordable housing despite the increase in prices in recent years.
Chandler is ranked #7 on SmartAsset’s list of the “best cities to buy an affordable family home”—which takes into consideration homeownership rates, housing options, affordability, and livability based on crime rates and graduation rates—meaning that while our average sales price has nearly tripled in the last decade, our city remains highly accessible from a pricing perspective when compared to its peers nationally. In fact, of that increase in home values over the last decade, nearly half of the appreciation came in the last three years, when travel and relocation were wrought with challenges due to the global pandemic.
In reality, it’s hard to talk about where the real estate market is headed without acknowledging the havoc that the global pandemic has wreaked on it locally. Much of the impact has been on consumer sentiment and the whiplash that many feel from an unusually tumultuous market over the last 36 months. The real estate market in Arizona, and Chandler in particular, is typically unremarkable, with steady and predictable appreciation with the exception of the global financial crisis of the early 2000s, which of course impacted the country as a whole.
As more of main street became operated by wall street, and as investors flocked to our affordable city while the government attempted to avoid another financial crisis by artificially reducing interest rates through the buying of mortgage-backed securities, we saw rapid fluctuation in the key indicators of a healthy market, including supply AND demand, which resulted in bottoming out our inventory at just 129 available homes in Chandler for a population of more than 275,000 people in February of 2021.
While new construction has often helped to infuse new inventory into the Chandler market—with recent developments including Asher Pointe by Lennar, Echelon at Ocotillo and Pinelake Place by Lennar, Mariposa by the New Home Company, Canopy by Tri Pointe Homes, and Windemere Ranch by Maracay Homes, among others—the global pandemic brought challenges to the supply chain, shed light on the underbuilding we had been doing in relation to our population growth, and at one point, several of these builders had waitlists of hundreds of consumers ready, willing, and able to buy but with nothing to sell them.
The compounding effect of historically low-interest rates and anemic inventory levels was so incredibly evident in the pace of the market that one could only describe the rapid downshift out of that market last year as jarring. With interest rates on the rise and at one point 65% of the available inventory to purchase having been bought and sold in the last two years alone, the locomotive that was our real estate market came to a screeching halt as demand froze and a flood of new listings relative to the deficient levels we had experienced for the previous two years came to the market.
Almost overnight, we swapped appraisal waivers and shortened inspection periods for contingencies and sellers' concessions in an effort to grease the wheels of an apparently halted real estate market. The summer months were spent navigating the emotions of those selling their homes, getting the wind knocked out of their sales as offers dried up and expecting the stalemate that would come for those buying homes by fall when interest rates would peak at just over 7%.
Seasonality set in and brought cooler weather, holiday activities, and increased inflation concerns, leaving the market feeling like a deflated balloon despite never having actually popped like it did in 2008. While there are many differences between the market crash 14 years ago and our return to balance in 2022, the primary factor in our ability to maintain pricing and so quickly shift back into a seller's market as we have over the last couple of months has been again, our deficient inventory.
To put it in perspective, we currently have nearly 60% less inventory than we had after the market crashed in 2008 for a population that has grown more than 20% in the same time period. While the last couple of years have been challenging—albeit profitable—for those looking to participate in the Chandler real estate market due to an influx of cash buyers and real estate investors banking on enormous returns on their investments, the traditional buyers are back in the driver's seat for 2023.
The Chandler real estate market is nothing short of remarkable these days, with an annual average sales price of more than $630,000 (which equates to an average dollar per square foot of about $288 per square foot). With nearly $2 billion dollars of residential real estate exchanged in our city alone and awards under our belt for everything from being the best place to find a job to being one of the most recession-proof cities, expect continued headlines about our thriving market in 2023 and beyond.
Mindy Jones is an associate broker and owner of the Amy Jones Group brokered by eXp Realty, and the founder of the nonprofit Community on Purpose serving youth and families in the Southeast Valley. AmyJonesGroup.com l CommunityOnPurpose.com