If you ever wondered what it is that makes real estate go up (or down) in price...It's supply and demand. Different factors will effect supply and demand but in the end the supply and demand left at hand is the determining factor in market fluxuation. It's easier to understand if you break it down to a simple example. Pretend you are in a world where only 10 families live. The climate where you live is extreme. Like the worst of Phoenix's heat in the summer and colder than Canada in the winter. There are no means to travel to better climate. There is one completely built home with all life's necessities available within it and has room for only one family. There are no resources to build an additional home. Do you think that fact that 10 families (the demand for the house) would be in dire need for the 1 available house (the supply) would effect the price. Yes, it would. In fact we can conclude that in the case of rising or high demand (10 families) and low or declining supply (1 home), prices will rise. This of course works the opposite way when supply is high and demand is lower.
With that said, let's look at some Greater Phoenix MLS data and see how the market is positioned with respect the supply of homes we have currently for sale.
The above graph clearly shows a significant decrease in inventory in the below $250K price range.
In the moderate price range ($250-$500K), inventory is more plentiful and we see an actual 2 year increase in inventory; however, sale volumes over the same time period were greater than the amount of inventory. This means that demand was greater than supply. It turns out that demand is greater than supply in reference to all three price range categories referenced herein.
In the higher price points we see inventory levels increasing putting much less pressure buyers as seller's will have to be more flexible as inventory levels increase. Yet again, sale levels even at these price points indicate greater supply than demand.
The words of Roy Rodgers sum it up once again, "Don't wait to buy real estate, buy real estate and wait".