Last month I had a new listing in Scottsdale, 85259 for $797.900. That home went under contract in 7 days. The first Sunday had an open house with 25 or more groups of buyers and a contract was in place by Tuesday. Witnessing that you could feel another bubble is upon us.
Here’s why this most likely isn’t a bubble.
In the last 6 months there were 1,741 all cash deals in Scottsdale. In 2006 there were only 1,004 all cash deals all year. There is no easy money still.
Median sales price for Scottsdale in April 2013 was $365,000. A rise of 14.2% compared to April 2012. That is a big jump this year but median sales price was $357,950 in October 2004. Price levels today are still similar to 9 years ago.
Here’s the statistic we are studying most closely. Absorption Rate. This measures the balance of supply and demand, calculates how many months of supply exist at current demand levels. From October 2005 to October 2006 the absorption rate went from 3.42 to 8.6 that’s a 151% rise! From April 2012 to April 2013 the absorption rate increased from 3.8 to 3.96 only a 4.2% rise. If absorption rate stays below 6 there is no real chance of prices falling.
That’s the statistics but now to fundamentals and the number one reason we are most likely not in a house price bubble market currently. “The U.S. Census Bureau estimates that by 2030 the population of Phoenix will grow to 2.2 million and that the population of the metro area will reach 6.3 million.”