The inventory of resale homes in metro Phoenix is shrinking, causing concern among the state's leading real estate companies.

Officials say their inventories are selling faster than they can replenish them because resale homes are on the market for days now, not weeks, and sellers are receiving multiple offers.

The causes? Mortgage rates that remain at 40-year lows and investors and speculators looking to real estate for a better return than stocks.

Coldwell Banker Success Realty President Bill Jilbert and Realty Executives President John Foltz say the market has about 8,000 resale homes and condominiums, down from about 20,000 in early 2004.

Inventory "is down tremendously," although there are pockets of new homes in the Valley, where inventories are starting to climb, and experts believe investors are putting their homes back on the market, Jilbert said. "But in prime areas, such as Scottsdale, there's not much on the market today," he says.

Foltz says another factor causing a decline in resale inventory is caused by homeowners, as they buy new homes, keeping their old homes for rentals "because they see the market appreciating so rapidly."

Jilbert and Foltz add that with the slight uptick in mortgage rates in late March, the rush in residential investment should start slowing. They said the rate could reach 7 percent by year's end.

Foltz says the projected gradual increase in mortgage rates could be the first hint of a slowdown in the metro Phoenix real estate market.

If true, the combination of a mortgage rate increase and a slowdown in sales could start reining in the rapid increases in prices. One downside is that it would make housing less affordable to prospective homeowners who are in the marginally qualifying range.

"We think that decrease in demand might also show a change in the (property) appreciation rate, which could give at least those savvy investors and speculators a reason to slow down their demand," Foltz says
One of the positives resulting from the busy single-family home market is the investment sector rehabilitating older neighborhoods, such as central Scottsdale between Pima and Hayden roads, from McDonald Drive to Thomas Road.

"Drive through that neighborhood, and you'll see a dumpster in front of about every 10th house," Foltz says. "The quality of the housing in those neighborhoods is improving significantly."

Investors buying and renovating older homes "might not get as much return for their investment, but it's less risky," Foltz adds.

The only part of the local housing market immune to almost anything except a negative stock market is the luxury home division. Luxury homes priced from about $5 million and more in metro Phoenix, which are selling a little faster these days, generally are unaffected by changes in mortgage rates, says Dub Dellis, marketing director for The Walt Danley Group at Coldwell Banker Success Realty.

When it used to take a few years to sell the seven- and eight-figure homes, "now it's only a few months.

"If they're priced well, even in the several millions, they're selling and selling relatively quickly," Dellis says.

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