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The things that make the Valley such a desirable place to live may also be driving up the cost of your next home.

What’s Behind the Extraordinary Rise in Valley Home Prices

The things that make the Valley such a desirable place to live may also be driving up the cost of your next home.

Over the past year, the Greater Phoenix area has consistently ranked in the Top 10 for people moving here from out of state. Data from the real estate site Redfin and the employment site LinkedIn show that nearly 40 percent of those looking at Valley real estate are from the West Coast, most often Los Angeles and Seattle. 

Steve Hensley, an adviser with the housing research and data firm Zonda, says those coming from the West Coast  have more money, live in higher cost states, and are used to paying high prices for housing.

“They’re not as price sensitive. They’re used to such high home values that they think they’re getting a bargain,” Hensley told the Maricopa Association of Governments Economic Development Committee (EDC) in May 2021.

Hensley told the EDC the median sales price of a new house was $410,000, while the median price of an existing home was $360,000-370,000.

“The out-of-town buyers aren’t afraid of the $500,000 house. They can do that all day long. But it really is becoming a concern long-term, especially for the lower-income earners who are local here in Arizona,” said Hensley.  “They’re going to have a difficult time purchasing homes going forward.”

Besides high demand, other reasons for the soaring price of homes include lack of supply. Hensley said the Valley is on track to build about 35,000 homes in 2021. Compare that to 60,000 homes built in the years 2004-2006.  Factor in lack of skilled labor and a shortage of materials and it’s a challenge.

“It’s just sort of like runaway prices at the moment and that’s because there's just so much demand and we do not have enough supply in the marketplace right now to meet all that. Builders are not going to be able to quickly build their way out of this,” Hensley said. “It’s going to be a pressing issue for at least the next few years.”

Housing supply is down 50 percent in the past year alone, and Hensley said builders have stopped construction of speculative homes (homes without a buyer or purchase contract) because of long waiting lists for those already being built.

Published June 8, 2021

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