Breaking Records Post 1

We are at a point in the Greater Phoenix housing market where many all-time records are being broken. These are significant enough that we will devote an observation to each one rather than group them all together.

First let us look at the monthly average sale price per square foot for all areas & types. This stands at $190.87 today, This is significant because it breaks the record of $190.61 set as long ago as May 5, 2006. The difference is that May 2006 represented the dying peak of a bubble which would see prices fall dramatically from June 2006 through March 2009.

The current reading does not look like a peak at all:

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Modest appreciation, at long term historical norms of around 5% per year is very palpable. 

The kind of accelerated appreciation we're experiencing now however, born of demand far outstripping supply makes us nervous. Our minds quite naturally harken back to the run up to the crash. Today there are significant differences we cited yesterday - those 5 (let's make it 6) rock solid talking points to manage people's fear. I repeat here for direct relevance to the chart above that suggest continued upward pressure on prices:

1. Demand exceeds supply: While we don't have a crystal ball, we can say with confidence that as long as a long term sustained demand outstrips a finite supply there will be more of same.
2. Low Interest rates: This is really a very different cycle from the liar loans that drove the hyper appreciation that preceded the crash. To the extent rates remain in the + /- 3% range it's almost like free money - potential buyers can't save fast enough to overcome the one-two punch of the future inevitability of higher rates and current appreciation.
3. Equity market: Unlike 2006 - 2009 (when there was a point half of Arizonans were under water) liar loans are gone and home equity has been restored. 
4. Housing shortage: The housing shortage that isn't going away any time soon, as millennials come of age.
5. Inmigration from coastal cities is a trend that has been accelerating, with no end in sight.
6. Shifting home priorities e.g. as more people will continue to work from home post pandemic.  As we've reported locally, a resurgence in the desire for more space.