The million-dollar question asked most frequently regarding real estate as of late is, “Will homes continue to sell at these prices and at this pace for much longer?”
Although the answer is complex due to many factors the short answer is “yes,” barring a world war or unforeseen natural disaster. There are several metrics that support this response and yet the most simple contributor is demand outpacing supply. Throughout Northern Arizona we have more buyers than homes available. As of today, the number of single-family homes available for sale in Flagstaff is only 45 homes. This is the lowest inventory we have seen over the last 12 months.
A normal or balanced market would have a four-to-six-month supply of active homes which in Flagstaff would be 400 to 600 homes. Considering the anemic supply, we are also faced with home prices continuously pushing higher and now we are at yet another record-breaking price of $984,502 for an average single-family home in Flagstaff as of February 2022.
It is difficult to say if February real estate statistics were an anomaly – with the average home sold just shy of a million dollars – or if this will be a trend consisting of multiple months or more. In February 2022 the average price per square foot for a single-family home was $379 per square foot. This is a 28% or $83 increase in price per square foot over February 2021 which was $296 per square foot.
The average price per square foot for a single-family home in March 2022 has crept up to $383 per square foot. In April 2021 the average price per square foot of a single-family home crossed the threshold into the $300s to $307 per square foot for the first time ever. Now it appears we are on the precipice of crossing into the $400s per square foot in 2022. Just to provide a frame of reference, we were in the $200s per square foot for a little over two years from February 2019 until March 2021. This next jump could happen within 12 months.
A shortage of labor and construction materials only further exacerbates the situation. There are new homes on the horizon, however, start dates and delivery dates get delayed. New home and remodel delays are a national phenomenon, not just a local issue. However, these delays impact the existing home sales because typically the buyer of a new home is the seller of an existing home and this creates a domino effect.
Even with rising interest rates we still have not yet seen a drastic – or minimal – reduction in housing demand. However, affordability is the biggest issue we face. Not too long ago a million dollar home represented luxury and opulence. Inflation has pushed gas prices near $5 per gallon within city limits and nearly a million dollars will buy a 2,515 square foot home with three bedrooms and two and half baths.
Two years ago, a half million dollars purchased the same average home. The lemonade, Flagstaff now has a whole slew of new millionaires rich with home equity. Congratulations! Onward and upward, we go and where it stops nobody knows. The good news is real estate promises to be nothing short of record setting growth this spring.
Have your own prediction for spring real estate? Call, text or email me!
Text Lori