Market Update For July

The most common measurement tool for pricing is nominal dollars when expressing sale prices. Yet, this can be a little misleading if we are thinking about how expensive homes are today compared with 24 years ago.

The average $/SF for January 2001 was $99.04 across Greater Phoenix for all dwelling types. In June 2024 the same measure was $299.44. On the face of it, prices have increased by 202% and are now over 3 times what they were at the start of 2001. However, this is not a very fair comparison, since the dollar of 2001 would buy you a lot more stuff than it does today. It was worth 79% more than the dollar in June 2024, based on the Consumer Price Index.

The chart below compares the average $/SF over time - in green, using the nominal dollars we are all familiar with. The blue line shows the same average $/SF but expressed in 2001 dollars. We used the Consumer Price Index to make the adjustment for each month between 2001 and 2024.

We can see that homes are certainly more expensive (on a price per square foot basis) than in 2001 - but only up by 69% in "real terms", not 202% as suggested by the nominal dollar amounts.

We can also draw some other interesting conclusions:

1. Home prices in real terms were below Jan 2001 levels throughout the period Sep 2008 to Apr 2015. That was 7 years in which you could pick up a bargain.

2. Home prices in real terms are still significantly lower today than at the peak of May 2022.

3. Home prices in real terms are similar to those at the late stages of the bubble in the first half of 2006.

4. Home prices in real terms are similar to those at the end of 2021.

5. The 2 big boom periods were quite short - mid 2004 to mid 2005 and mid 2020 to mid 2022.

6. The 1 big bust period was also quite short in duration - from early 2007 to early 2009.

The two booms were quite different in nature, since the first was followed by a long period (2006 to 2011) with a huge excess of inventory for sale, which the second was followed by a period in which inventory remained below normal. This is why we have two booms and only one bust.