This week in real estate I'm going to talk about what caused the bubble to burst 10 years ago and how today's market compares to that bubble. This market feels so similar to what we experienced in 2005 and 2006. We have strong appreciation multiple offers and homes seemed to be selling so quickly. But today's market is not a bubble.
Let's look at the first chart that shows the average days on market or how long it takes to sell a home in the greater Phoenix area. This greater Phoenix area includes Maricopa county in addition to Pinal and Yavapai counties the days on market were as low as 25 days in 2005, which is significantly lower than the 73 days we see now that's how long it's taking today to sell a home on average. after the bubble burst it took an average of 140 days to sell a home.
So how did today's prices compare? This next chart shows the average sales price per square foot over the past 16 years also for the greater Phoenix area. Prices peaked in 2006 and an average of a hundred and eighty four dollars per square foot. Prices dropped in 2008 and 2009 and then they bottomed doubt in 2011 at 82 dollars per square foot, that's a decrease of 55%. Since then prices have increased steadily as demand has increased and supply has decreased. Appreciation has been strong but not out of control like what we had seen in 2005 and 2006. Today's average price per square foot is at a hundred and fifty three dollars per square foot which is only 83 percent of what we saw at peak.
As you can see there are a lot of similarities about what's going on in the market but it is different in 2005 and 2006 people were getting easy access to money and that is what was causing the prices to go up unlike today we are seeing prices go up because there is a lack of supply and when you have a lack of supply it's actually a much more natural way for it to go up so what will happen is right now we have interest rates that are very low however we've started to see them go up and as they go up buyers will be priced out of the market and that is going to be the thing that reduces the demand and as demand gets reduced our supply will become enough and we'll go back to a more balanced market and that means that our prices will start to stabilize and will flatten out.
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