Market Insights
Phoenix Valuations monthly blog capturing national and local trends impacting the real estate and appraisal market
Last updated September 5, 2023
https://www.reuters.com/markets/us/us-existing-home-sales-drop-prices-up-year-earlier-2023-08-22/
Data from the NAR, reported that July home sales volume activity nationwide continues to slide as sales fell 2.2% from a number of 4.16 million units in June 2023. Sales in the Western US continue to see the sharpest declines in sale activity largely due to waning demand as a result of mortgage interest rates in the 7-8% range. Home resales nationwide fell 16.6% year over year basis in July 2023. Inventory remains tight as homeowners with contracted servicing mortgage interest rates in the 2-4% range are less likely to sell their housing stock to enter the market at 7-8% range.
Study published 08/01/2023 by MyeListing revealed that the “great migration” of Americans continues to shake-up the US and where specifically the segment of wealthy Americans are moving from and moving to. IRS data analyzed revealed that States with the Largest Net Negative Tax Income Migration for outflows ranked worst were: California (1 @ -$343.2 million), New York (2 @ -$299.6 million), Illinois (3 @ -$141.7 million). . IRS data analyzed revealed that States with the Largest Net Positive Tax Income Migration for inflows ranked best were: Florida (1 @ +12.4 billion), Texas (2 @ +10.7 billion), Arizona (3 @ +9.4 billion). Arizona continues to attract high net worth income earners at a robust state.
Axios reported that the Phoenix residential real estate market has largely been “locked up” as 67% of Arizona homeowners have mortgages below 4% per Redfin data. Given the current mortgage market in summer 2023 in the 6-8%, this lack of appetite for homeowners to trade in their existing mortgages for a mortgage much higher, potential sellers have been particularly resistant to selling which is compressing the available inventory and housing stock.
https://moneywise.com/real-estate/us-real-estate-investors-losing-money-on-roughly-1-in-7-homes
Investors continue to be a large component of all residential housing with Phoenix market reported by Redfin that over 30% of all homes sold by investors in March reported to lose money on their venture capital business model. Phoenix was rated as the worst impacted market for investors to have the highest rates of investor loss.
Short term residential market continues to be in a state of influx with low levels of barrier of entry in Phx Metro coupled with higher levels of market participants entering the marketplace. There continues to be a robust debate on the market finding its “new normal” but many experts cite this market to be nuanced and the short term rental space largely depends on a homes core attributes for overall level of fiscal success (location, floorplan utility, uniqueness of unit, and digital marketing approach).
Case-Shiller index reported in early summer that the year over year % change was down approximately -6%, indicating a market rebalancing and modulating due to the continued interest rates pressure and household income debt levels at record highs.
https://thehill.com/business/4027962-investor-home-purchase-fall-by-record-amount-report/
Nationally, investor activity appears to be drastically pulling back as early 2023 investor activity accounted for as much as 40%, but by late May and early June the investor activity nationally has fallen to 18-20% as a total volume.
https://www.axios.com/2023/06/21/phoenix-chips-cars
Manufacturing at large continues to be a robust sector within the Arizona local economy. Large scale manufacturing groups like TSMC, LG, and EVelution are making Arizona a destination for jobs and a nationwide leader in chip manufacturing and electric battery dominance. Furthermore, a report by AXIOS featured Phoenix as one of the nation’s leaders in terms of technology and innovation notably due to the aforementioned manufacturing sectors but also a space for testing self-driving automation. As much as five EV manufacturers have set up their plants in Arizona since 2016.
https://www.cnbc.com/2023/05/11/homebuyers-are-interested-in-these-top-10-neighborhoods.html
HouseFresh a data online company tracked and segmented analytics from Zillow and put together their list of the 10 most queried neighborhoods for the US and Phoenix East Camelback / Camelback Corridor as the third most queried neighborhood. This emboldens the notion that Phoenix Metro is still a leader for inbound migration.
S&P Dow Jones: S&P CoreLogic Case-Shiller Phoenix Home Price NSA Index
Recent data reported by Core Logic, the Case Shiller Index reported for Phoenix metro a moderating macro trend with data ending in February 2023 conveying a negative annualized rate of -2.07%.
Rich States, Poor States: Arizona Economic Outlook Rank
Despite moderating prices in residential real estate adapting to the interest rate environment, the state of Arizona continues to be a top tier economic machine, as early 2023 data ranked Arizona as having the third most robust economic output of all 50 states.
United States Census Bureau: Growth in the Nation’s Largest Counties Rebounds in 2022
Migration patterns continue to be a leading indicator for Maricopa County in buttressing the local real estate market, as US Census released a recent report showing that the county ranks number one in terms of inbound migration sheer volume, this is the 7th year in a row Maricopa county has lead the country for this metric.
Construction Coverage: The Hottest U.S. Real Estate Markets of 2022
As the spring 2023 season changes to adaptations in demand, listing inventory, interest rates, and sellers have become more “friendly” in terms of striking deals with buyers, a recent report by Construction Coverage ranks Phoenix as falling in its ranking of hottest housing markets to number 41 on the list.
Forensic research studying the economy of Arizona during the pandemic showed that the job economy of the state was one of the most resilient and robust economies in the entire country according to the Brookings Report published February 2023
Phoenix Agent Magazine: Home appreciation drives significant wealth gains in Phoenix
Recent data conveys the robust nature of the appreciation experienced in Phoenix Metro from 2017-2022 from the NAR’s data index shows that Phoenix Metro showed the second highest percentage change over this five year window at 118% price appreciation. Many attributes are driving the rise in prices in housing stock ending in 2022, most notably a robust job economy, friendly business/personal state tax structure, and inbound migration.
Redfin News: The Typical U.S. Home Changes Hands Every 12 Years, Down From 2020 Peak
Recent data published by Redfin in March 2023, shows that average homeownership in a house is 12 years, down from the peak of 13.4 years in 2020 and 12.9 years in 2021. Analysts expect the average rate to continue to drop in the coming years as job portability and migration picks up.
Recent commentary by local Phoenix Association of Realtors president in February 2023 implied a rebalancing of the buyers and sellers market. The shift in the marketplace has been due to a myriad of factors (mortgage affordability, housing affordability, competing listings, and seller concessions rates), the rebalancing is a welcome state to many parties involved in early 2023 as the second half of 2022 saw the lowest levels of transactions on record while sellers and buyers assessed their options.
Fortune: The housing market correction just took a new turn
Housing analysts continue to report on the shifting attitudes of sellers in the changing landscape nationwide. More sellers are opting for price decreases and seller friendly terms to buyers as the market shifted from a sellers market to a buyers market from spring 2022 to summer 2022 in one of the quickest shifts all time.
Fox Business: Household debt skyrockets to highest level since 2008 financial crisis
Household debt continues to be a headwind for the American economy and likely is impacting the housing sector. Recently Fox News reported in Feb 2023 that household debt ranks at its highest level since 2008.
Real Estate Consulting: Top 10 Markets with the Most New Home Supply
Phoenix metro by the end of 2022 as reported in February 2023 that the offerings of new homes communities for sale by builders has the second highest rate of offerings in the entire nation. A welcome sign to shifting the tightness of available housing stock that the area experienced up until summer 2022.
Property Appraisal Zone: Housing Affordability Hits Record Low but Turning Point Lies Ahead
Housing affordability continues to be a major theme in residential real estate. According to the NAHB, housing start costs (bottlenecks in supply chain, rising construction, labor compression issues) have contributed to the affordability metrics declining in three straight quarters and now in 2023 the metric stands at its lowest level since the NAHB started tracking in 2012.
Yahoo Finance: 'Probably past the worst': Housing shows signs of stabilizing to round out 2022
Signs that the market’s worst sentiment and lowest activity levels are starting to take shape in February 2023. Builder sentiment conveyed a change from the lowest point a month prior in recent memory. Also, inventory continues to remain tight as available options for existing listings is just 10% higher than a year ago. Pending sales continues to gain modest traction, as December 2022 ended a six month slide in pending activity metrics.
Fox Business: Mortgage activity rebounds, skewed toward high priced homes
As mortgage rates have fallen over the course of 5 straight weeks into the first week in February 2023, mortgage applications have risen and average loan balances to highest levels since May 2022 in an uptick in recent activity, however, overall applications in February 2023 are still 58% lower from a year Prior.
National Mortgage News: Homebuyers prefer permanent buydowns rather than temps
Black Knight, one of the nation’s largest mortgage servicers and data providers on mortgage metrics reported that current buyers in early 2023 and late 2022 prefer permanent buydowns rather than temporary rate buydowns from their mortgage options both in sole purchasing of these options and in seller concessions due to the higher interest rate environment in relative terms to prior levels.
Market Watch: Mortgage demand recovers as mortgage rates fall for 5th week in a row
Mortgage demand continues to gain steam in February 2023 as applications are up 7.4% from the late January 2023.
WSJ: Home-Buying Companies Stuck With Hundreds of Houses as Demand Slows
Many interim home purchasing groups have been stuck and saddled with more inventory than their business models accounted for since the price volatility experienced in summer 2022 thru early 2023. It remains to be seen how much inventory these nouveau ventures will unload on the traditional open market if at all.
Phoenix Metro remains to be named as an MSA with market volatility as a recent national story citing an economist from Goldman Sachs sounded the alarm about the likelihood of 20% price decreases for the immediate future in the valley sun. The economist attributed many factors from the prior downturn in 2008, however, the valley’s economic activity is more robust and dynamic than the prior downturn.Expansion in the industries of high wage sectors of semiconductor, electric vehicle manufacturing /engineering, technology, software, and healthcare are many of reasons for a local economy less dependent on construction and tourism.
Forbes: A Record Share Of Home Sellers Gave Concessions To Buyers In The 4th Quarter
A record number of home sellers nationally have reportedly given buyer friendly concessions to get deals completed at a rate never seen before. According to Redfin, 41.9% of home sales in the fourth quarter 2022 had seller concessions, which is the highest metric ever reported. Concessions have made a comeback as rising mortgage rates, inflation and economic uncertainty have dampened home-buying demand, giving the buyers who remain in the market increased negotiating power.
BizJournals: Homebuyers now have the advantage in metro Phoenix market
The barometer for ever-shifting economics in the Phoenix housing market has recently tipped in the favor of Buyers in a dramatic fashion. Phoenix now ranks as one of the most Buyer friendly markets in the entire country due to the major shift in inventory and sellers opting for more favorable contract terms. Home buyers unequivocally have the advantage in purchasing power in early 2023. Home prices have slid in some areas, price points, building types (quality of construction / density) and vintage (year built).
Housing Wire: Dave Stevens on understanding this housing market
Demographically, the homebuyer age distribution for median age homebuyers is 34 years old, this segment of the population represents the largest grouping wave in age coming to the home-buying years the nation has ever seen.
Reuters: U.S. pending home sales sag more than expected in November
Continuing with the theme of stilted or mixed economic conditions, the NAR reported that pending home sales for a sixth straight month in November 2022 slid as an index of -4% to 73.9 down from October 2022's index of 77.0. "Pending home sales recorded the second lowest monthly reading in 20 years as interest rates, which climbed at one of the fastest paced on record this year, drastically cut into the number of contract signing to buy a home." said NAR Chief Economist Lawrence Yun. "Falling home sales and construction have hurt broader economic activity."
Seattle Agent Magazine: New-home sales rise again in November
Nationally, the data for demand continue to be choppy of inconclusive as the US Dept of Housing and Urban Development reported that on a monthly basis from October 2022 to November 2022 the uptick in new single family housing rose +5.8%.
RENT Check™ ARMLS: Closed Rental Units Per Month
Data released in December 2022 from the ARMLS continued to show the slowing demand in purchases in Phoenix Metro, as year-over-year data showed a slowing demand with -44.5% pending contracts in November 2022 relative to November 2021.
AXIOS: Mortgage buydowns are the hot new thing helping the housing market
Mortgage buydowns are a growing solution to the housing affordability issue as prices are holding in relative terms coupled with mortgage interest rates rising at their fastest rates in 40 years to help Buyers find their way into the market.
Realtor.com: Buyers May Have More Power Than They Realize Right Now—Here’s Why
Shifts in the marketplace have occurred as recent as October 2022 as reported by Realtor.com. Nationally, the number of houses on the market is up 33.5% (year over year) and over 92% of successful contracts have been negotiated with "buyer-friendly terms" per a survey completed, and days on market is up over 13% (year over year). Anecdotally, sellers are reporting more favorable terms with the recent increase in "mortgage rate buydowns" at the expense of the seller due to the rapidly increasing mortgage rates as reported.
Phoenix Agent Magazine: Phoenix named one of the cities with the best real estate prospects in 2023
Phoenix Metro continues to be a national player on the stage of competing markets for development as metrics in localized economics lend for support of developers and builders to stake new projects in the ground. According to the Emerging Trends in Real Estate report by PwC and Urban land Institute, they rank Phoenix as number 9 with the best cities for real estate prospects in 2023.
Phoenix Agent Magazine: Bidding wars with Wall Street
Competition with savvy investors, namely institutional financed groups and traditional buyers continues to add difficulty for conventional buyers to acquire the homes they desire. Recent data reported forensically that in 2021 alone, investors acquired as much as 31% of all single family homes as published by The Pew Charitable Trusts.
Forbes: The Power To Drive Change: How Millennials Are Affecting The Housing Market
Buyer demographics continue to shift in 2022 as Millennials (ages 23 to 41) represent a burgeoning segment of buyers encompassing roughly 43% (80 million) of all homebuyers according to the National Association of Realtors.
Phoenix Agent Magazine: International homebuyers target Arizona
Arizona as a state continued to be a large draw for international homebuyers as Coldwell Banker International Buyers Guide reported the sunshine state to be the 4th highest in demand for international homebuyers.
Phoenix Agent Magazine: Good news for prospective home buyers, according to RE/MAX
Nationally, the landscape for metrics in the residential real estate market is changing for Buyers and Sellers as demand continues to wane and listings continue to increase which results in a more competitive Buyers market according to RE/MAX as home sales across 53 major metro areas has declined 9.7% thru September and October 2022 from August 2022, first time inventory grew to a two-month supply of housing since November 2020.
Money Magazine: The 50 Best Places to Live in the U.S. | 2022—2023
Money Magazine recently named Tempe as the number two city in the entire country to live in terms of "50 Best Places to Live" as the category weighed a myriad of factors including economic metrics, low levels of unemployment, quality of life, diversity, and opportunities in the future. Affordability was cited as an important metric for Tempe, as was proximity to infrastructure and civic life options.
Single family homes had a median sales price of $470,000 in September 2022, down from $475,000 the previous month and from its peak of $510,000 in May 2022. Prices in Phx Metro appear to be normalizing and they subside from their peak values in early summer 2022 as listing have increased in volume and demand has cooled down with the dramatic rise in interest rates.
AEI: Prevalence of GSE Appraisal Waivers
Appraisal waivers which are essentially the loan consideration underwriting's option to decline the need for collateral (house in consideration) to have an updated valuation assigned to the audit have been a growing trend since mid 2019 as more lenders and GSE's opted for a quicker approval process. Appraiser waivers depend on the creditworthiness of the borrower, the risk of the intended use of the loan and other factors. Recently though, the appraiser waivers have tapered off in sheer volume as the spike in interest rates have staved off the volume of refinances whereby most the prevalence sits for these types of expedited valuation processes are utilized.
AXIOS Phoenix: Phoenix median home price drops $20k but a crash is unlikely
Median home prices in Phoenix metro slid $20,000 ($440,000) from June to July recently. This is the second straight month of decreasing median home prices from the peak of $465,000 in May 2022. The July median price is still well above the years prior median price by more than $45,000 in 2021.
Volatility in sales volume continues to be a theme as a recent report indicated that Phoenix metro made the list for one of the top four market where buyers are cancelling contracts in summer 2022, largely due to the lack of affordability reported.
Bloomberg: Phoenix Inflation at Record 13% Shows Divergence Among Cities
Due to the increase in home price and the robust nature of the inbound migration patterns, it was recently reported that Phoenix metro leads the nation in inflation (+13%) of the 22 metro areas studied by the Bureau of Labor Statistics.
Bloomberg: Home-Flipper Opendoor Hit With Losses in Echo of Zillow Collapse
iBuyer technology firm and real estate group Opendoor, which is a large market participant in the Phoenix metro market, recently reported losses on 42% of its transactions and as much as a negative $175 million in adjusted earnings. Opendoor has been selling their inventory in Phoenix metro at a quicker pace as the market shifted from early spring to early summer in a sellers to buyers market.
Point 2 Homes: Home Prices in 190 U.S. Metros Broke All Known Records in the Last Decade
Phoenix metro from a decade longitudinal study (2011-2021) stands as one of the best performing city metros (top4 in the nation) from a percentage of change in price as recently reported August 2022. Growth over this time period was reported at +259.65%.
Phoenix Agent Magazine: RE/MAX: Phoenix median-sales price slides as inventory jumps
Metrics for Phoenix continued to change as inventory or new listings for year over year change was reported at 34.1%, which was second most out of the fifty plus metro areas surveyed according to Re/Max brokerage. The continued increase in metrics are applying downward pressure on the market, and logically, the median sales price for Phoenix slid -3.6% ($460,000) in July 2022 relative to the high reported in June 2022 ($477,000). Number of homes sold annually has fallen over 25% since July 2021.
Mansion Global: Migration Hits All-Time High in the U.S.’s Shifting Housing Market
Despite a cooling housing market, the migration patterns and migration intent continues to rant at an all time high per Redfin. July 2022, Redfin reported that approximately 33.7% of their users were searching for homes in different metropolitan areas, that's the most since 2017. Phoenix ranks 6th on the list of the most queried markets for all the 100 plus metropolitan areas searched.
Redfin News: Homebuyer Competition Falls to Lowest Level Since Early Months of Pandemic
The demand for Buyers in the Phoenix market per Redfin's proprietary data, conveyed that the metropolitan area is least competitive in relative terms when it comes to listings that face "competitive buyers / bidding wars". Phoenix showed a July 2022 bidding war rate at just 26.6%, which is less than half of the bidding war / competitive buyers rate where the metric stood just one year ago (53.9%). Bidding wars nationally have declined for six straight months as the market cools and rebalances toward a more traditional market.
Fortune: A ‘fake’ recession? Wall Street chief economist sees misleading signs for 2022
Economists have yet to have complete consensus on the future of the American economy as conflicting data points are at odds with one another (inflation vs unemployment rates at record low levels).
Mid July 2022 the first economic data reported by ARMLS showed for the first time in four years a price drop of median prices of approximately $10,000 from May 2022 ($510,000) to June 2022 ($500,000). It remains to be seen how much an effect the rising mortgage rates will have on the market in general.
Almost a quarter (24.5%) of all home-purchase agreements in Phoenix Metro were cancelled in June 2022 according to Redfin as a result of increased borrowing costs.
Phoenix Agent Magazine: Phoenix home price growth exceeds 28% in May, deceleration on the horizon
Since the historic rise in mortgage interest rates commencing in Spring 2022, the real estate market has been in a state of flux and volatility. Mortgage expenses reported to skyrocket by roughly 50% in a matter of months. Demand in sales activity has decreased across all price points and all areas in Phoenix Metro. Inventories have been steadily increasing across Maricopa and Pinal counties as the market shifts from a Sellers market to a more balanced or neutral market. Trailing data as recent as early July reported that Phoenix price growth from May 2021 to May 2022 surged to +27.3%:
Fortune: The Fed plans to ‘reset’ the housing market—raising the likelihood of falling home prices
Barron’s: The Housing Market Just Hit a Wall. What’s Next for Prices, Brokers, and Builder Stocks.
Mortgage interest rates have risen from April to June in 2022 at their fastest pace since the rates have been tracked dating back to 1987. Experts all over the country have weighed in that the impact on the housing market will claw back on demand as applications for mortgage financing are down over 16% year over year comparison. Affordability continues to be a concern for those living in Phoenix Metro. Inventory reporting is starting to pick up in Phoenix Metro by June 2022. Experts range from cautioning a housing correction modest estimate to a stable pricing estimate in the near future. It remains to be seen what impact the rising mortgage lending rates have on the real estate market especially after the last two years of the reported record appreciation rates.
Recently, reporting agencies have uncovered one of the main drivers of market participants at unprecedented levels, the investors or private equity buyers. According to research, a full 1/3 of US homes were purchased by investors in January 2022. This is the highest level ever reported.
Phoenix Agent Magazine: Smaller markets lead the way in Q1 home-price gains; Phoenix sees 27% rise
Phoenix when compared to national metrics surged passed the national average and ranks in the top 10 MSA's for price appreciation annually (+27%).
HW Media: CoreLogic: U.S. home-price gains hit all-time high in March
Home prices nationwide climbed to an all-time high per CoreLogic in March 2022. Largest measured growth reported in the 45 year metric tracking history. Homeowners payment-to-income ratio stands at 32.5% which is just 1.6 percentage points shy of the record set (34.1%) in July 2006 according to Black Knight.
AXIOS: The crazy housing market is finally slowing down
It appears nationwide the trend toward asking price reductions is amplifying with respect to prior recent periods. Also noted is the inventory of available housing stock is increasing. These characteristics should give rise to a more competitive market especially for the Buyers pool.
Forbes: Housing Has A Troubled Future
The real estate market is an ever-evolving machine. Since the inflation picked up steam in mid-2021 and carried into 2022 at record levels, the stock market's volatility, and the rising interest rates across all levels of leveraged debt (housing, personal, auto, business credit lines), many economists and new outlets are reporting a cooling or slowdown in the economy, with some even forecasting a recession looming. This remains to be seen, and each real estate market is local with varying degrees of market participants at all price points. Nevertheless, these evolving attributes that will likely change the real estate market will continue to be monitored fervently and closely by the appraiser.
The Washington Post: Mortgage rates hit 5 percent, ushering in new economic uncertainty
Fortune: Homebuyers hit with another blow as mortgage rates soar 24% in March
In March 2022, a new shift in increasing mortgage interest rates due to the Federal Reserve raising its benchmark interest rate to curb inflation (highest levels of inflation in four decades) caused for pause in mortgage applications and a potential cooling effect on the robust housing market's appreciating values. Mortgage rates spiked 24% in March and are now at rate level not seen since 2011 (4.5-5.25%) as reported in March and April 2022. With Redfin reporting that a record 80% of homes are being purchased by investors who are typically cash buyers and therefore less sensitive to rate increases, it remains to be seen how much of an effect the rate increases will have on the housing market. Certainly, first time homebuyers it will impact.
Census: Over Two-Thirds of the Nation’s Counties Had Natural Decrease in 2021
Migration patterns from domestic inbound movers continue to bolster the demand for housing in Phoenix Metro. Early March 2022, the US Census Bureau released its findings in migration and population patterns from its study covering 2020-2021 during the CoVid pandemic. Overall Maricopa County as a county added the most domestic US inbound citizens leading the entire country with +46,866. As an MSA, Phoenix-Mesa-Chandler lead the entire country with positive net domestic migration at +66,850 new residents added.
Additionally, Case-Shiller, on e the nation's leader in real estate metrics reporting, conveyed that Phoenix Metro increased +32.6% year over year change from January 2022 to January 2021, which was number one in the nation.
Phoenix Agent Magazine: Phoenix No. 2 in the nation for median home sale price increase
Late Spring 2022, empirical data was released confirming the unrivaled appreciation rates that Phoenix Metro is continually experiencing relative to the competing rest of the United States. Late March 2022, RE/Max, a leader in residential brokerage reported that of the 51 metropolitan areas, Phoenix ranked number 2 with a February year over year change at +28.6%.
Redfin News: Real Estate Investors Are Buying A Record Share Of U.S. Homes
Demand is surging for investors market share in the Phoenix Metro area per Redfin. Redfin recently reported $3.8 billion (Q4 2021) was exhausted by investors for Phoenix Metro, this is the second largest investor volume in the country in a category of 40 of the largest metropolitan areas in the country. This equates to 28% of all homes in the market being bought by investors for the fourth quarter 2021, which is 5th highest rate for the entire country.
Phoenix Agent Magazine: Phoenix among top 5 metros for real estate development
One of the drivers of the price increases is the local job market, and construction/development is a major sector for Phoenix Metro with analysis in the following fields of single-family, multifamily, office, industrial, and self-storage. A recent study pegged Phoenix Metro as the 4th strongest and most robust in the entire country for the preceding decade.
Affordability for the area is becoming a challenge with the price increases. March 2022, Scottsdale was reported to be 20th least affordable city in the entire country. Other notable cities for the county came in at the top 65 least affordable in Glendale (26), Mesa (31), Phoenix (37), Tucson (41), Chandler (61), and Gilbert (65).
Phoenix Agent Magazine: Inside the numbers behind the Phoenix-area housing boom
Housing inventory continued to be an issue, as inventory currently stands at 0.6 months in early 2022 (a traditional balanced market is 4-6 months of inventory). Final list prices are receiving on average 99.9% purchase prices which is unprecedented for the Phoenix Metro market area. Compression is also being conveyed on the side of marketing times, days on market year over year has dropped 20% to just 33 days on average for Phoenix Metro.
Upwork: The New Geography of Remote Work
AXIOS: Lots of Americans plan to move because of WFH
The landscape of the real estate market is unequivocally ever evolving. The motivations and reasons for the migration patterns nationwide and especially Phoenix Metro appear to be accelerating due to the CoVid Pandemic as companies and businesses have offered "work from home" status employment. The new paradigm of flexibility in the economy has spurred proliferating migration rates and patterns. The academic report released March 2022 reports that a robust figure of 9.3% (18.9 million) of Americans plan on moving because of remote work compared to 6.1% in October 2020. The paper suggest that "long term movers" are a growing figure within the 'work from home' sector.
The luxury market between $1M and $10M has been just as competitive with a lack of reporting inventory and a velocity of money increasing with marketing times decreasing and sales volume increasing at historic levels.
Ultra luxury deals have been a robust sector within the macro market as sales over $10M are up in sales volume over 10% from last year.
AZ Big Media: Phoenix leads U.S. with year-over-year home price increase
SP Global: S&P CORELOGIC CASE-SHILLER INDEX REPORTS 18.8% ANNUAL HOME PRICE GAIN IN NOVEMBER
2021 Phoenix Metro continued its robust appreciation pace as it lead the country once again in year over year price increasing rates from October 2020 to October 2021 at +32.3% county wide (prudent to differentiate between macro and borough specific submarkets as appraisers professionally do), albeit the appreciation rates ten to be "leveling-off" or "cooling" as the winter months are in session. It remains to be seen as whether the cresting of percentage rate increasing are seasonal or fundamentally macro.
Phoenix Metro continues its nationwide leading appreciation rates as Case Shiller reported in January 2022 that as a metropolitan area its year over year price change was +32.2%.
Phoenix Business Journal: Home price growth slowed slightly, but Phoenix metro still tops nation
Fall and Winter 2021 the macro-economic conditions showed signs of volatility on the side of supply chain (materials shortages due to Covid disruption and high demand in construction) and labor compression (subcontractors and craftsmen shortage due to high demand in construction) in the housing market. Prices in both categories (materials / labor) have been reported across all sectors as rising dramatically. It remains to be seen whether the inflationary conditions Phoenix Metro is experiencing Q3-Q4 2021 are transitory or more permanent.
November 2021 Zillow, the nations largest iBuyer and data analytics firm announced it was no longer in the business of buying, selling, and remodeling for profit as a quarterly loss over $420 million in Q3 2021 was reported. Zillow cited unpredictability in forecasting home prices and it is implied they faced issues with remodeling for profit in their business model. Zillow is selling all of their inventory in Phoenix Metro which will undoubtedly add additional inventory to an already tight inventory status Q3-Q3 2021.
Reuters: Intel breaks ground on $20 bln Arizona plants as U.S. chip factory race heats up
In fall 2021, Intel continued the robust semiconductor streak of investment in Phoenix Metro as it announced two more plants underway with a total investment of $20B. The added plant will bring construction jobs and high wage tech jobs to the already burgeoning job market in Phoenix Metro.
Construction Dive: $12B chip fabrication complex underway in Arizona
In summer 2021, news broke with respect to a high tech semiconductor plant breaking ground in North Phoenix as Taiwan SemiConductor Manufacturing Co. is developing a multi-phase plant that will span over two decades of construction and confirmed total investment of $12B with some speculation that a secondary phase to the plant will cost in excess of $23B. The plan will undoubtedly add 1900 high tech and high wage jobs to the Phoenix Metro job market.
AZ Big Media: Phoenix leads nation with 29.3% year-over-year home price increase
Phoenix Metro continues to see rapid price increases in the third quarter 2021, as the Case Shiller Index reported that year over year gains for Phoenix Metro lead the entire country as reported in September (June to June data) at +29.3%. This is the 25th consecutive month in a row for Phoenix Metro leading the country in appreciation rates.
Phoenix Metro is the second fastest metropolitan area where affordability is shrinking in relative terms due to rapid appreciation over the last year from 2020 March to 2021 March, where for the 22nd consecutive month, the market of Phoenix Metro has lead the country in appreciation rates topping 20% annualized (average home price is up 24.8% from a year prior).
Per The Cromford Report, June 2021 saw the lowest distressed inventory sales on record all time. Cromford also reports the average sales price in May was the highest ever. Inventory currently hovers at 76% below normal rates; this is a big driver partly of price appreciation in Phoenix Metro.
Phoenix Business Journal: Arizona among top states ranked for economic momentum, report says
Economically, Arizona's economy ranks in the top six states for the first quarter of 2021 for economic expanding GDP (2.06%) according to the Washington D.C. State Policy Reports. This robust figure underscores one of the many reasons Arizona's real estate market is improving and continues to be resilient since the CoVid pandemic.
Anecdotal interviews with top producing sales brokers and agents are reporting "bidding wars" and many well priced listings receiving accepted offers above list price as the inventory levels continue to be at all-time lows. The demand continues to stay strong and swell even in the luxury markets and high-end markets as inbound migration patterns show buyers who are leaving metropolitan areas such as Denver, Southern California, Seattle, Portland, Chicago, and New York peg Phoenix metro as a destination for housing. According to Redfin real estate news, Phoenix is the top destination for a record number of wealthy buyers to relocate from expensive wealthy coastal metropolitan areas.
Zillow: Austin Expected to be Nation’s Hottest Housing Market in 2021, Leading a Sunbelt Surge
Winter 2020 continued to convey improving economic conditions in the robust Phoenix metro housing market with data agencies reporting that sales activity and price metrics were some of the highest levels on record as inbound migration patterns continue to increase, mortgage interest rates at or near all-time lows, and unemployment figures receding with an improving dynamic statewide economy.
Early 2021 and mid-spring 2021 continued to build on the aforementioned economic conditions. A panel of lead economists nationwide viewed Phoenix metro as the second "hottest" housing market forecasted for all of 2021 according to Zillow.
Forbes: Arizona’s Luxury Real Estate Market Shaping Up To A Record Year
Additionally, the luxury submarket (sales prices exceeding $1,000,000 and above), for 2020 might be considered the most voluminous and robust that Arizona has ever experienced. At the very utmost echelon levels of the market, recently sales have eclipsed the $20,000,000 levels and setting all-time records. Sales data from the $1M to $6M range is up over 138% when compared to last year (2019).
The luxury or high-end markets have performed in unprecedented fashion for June and July of 2020. These two months were coupled as having the highest ever individual months of sales volume exceeding $500,000 in sales price, with July being the highest ever at 1788 total sales per The Cromford Report. The Cromford Report also reported July as having the highest sales ever for homes selling exceeding $1 million.
August 2020, Case Shiller reported year over year price increase at 9.9% which continue to lead the nation and almost twice as high as the national average of at 5.7%. Inventory continue to be below historic norms hovering between 1-2.5 months of inventory.
Though the first half of 2020 has been defined as tumultuous and unprecedented times since the CoVid-19 pandemic has had its effects socially, economically, and in migration patterns. From March until May the real estate economics were largely stilted and without any numerable statistics of relevance to report due to the vastly small volume of sales data as Arizonans were in large scale self isolation and quarantine. In stark contrast, June, July, and August were months with improving economic conditions with record low interest rates, low housing inventory (house listings in summer 2020 were at record lows all time), increase in inbound migration demand, and the Arizona economy showing resiliency as federal agencies reported the state as having the third lowest unemployment rate in the nation. Despite the pandemic, the summer months showed strong and resilient metrics in housing prices across all price points. Migration patterns have been both anecdotally reported (interviews with developers, luxury brokers, interior designers and mortgage brokers) and empirically reported by digital online services and national bureaus as being robust with Arizona drawing inbound homeowners departing from California, Washington, Colorado, Illinois, and New York most notably.
Additionally, the summer of 2020, Case Shiller Index reported Arizona as having the highest year over year appreciation in the nation at +9% from June 2019-2020.
Phoenix Business Journal: Arizona's 2019 GDP growth among top in the nation
Phoenix Business Journal: Maricopa leads US counties in job growth, new data shows
Phoenix Business Journal: Phoenix home price gains now the highest in the US
Early 2020 economic data for the state of Arizona continued with reporting conveying the improving economic conditions that were unprecedented and largely unrivaled by all other states in the US. In February 2020 the Phoenix housing market lead the entire country for year over year price changes (Case-Shiller). In late February 2020 the Bureau of Labor Statistics reported that of the 10 largest counties in the US, Maricopa County reported the largest increase in job growth in terms of percentage increase (+3.2%) for the entire country from 2018 Q3 to 2019 Q3. Bureau of Economic Analysis in April reported that Arizona was the third fastest expanding statewide economy from 2018 Q4 to 2019 Q4 at 3.3% in the entire US. The following hyperlinks are the sources for the aforementioned reporting.
Phoenix Business Journal: Arizona's economy hums along
Additionally, the metrics for the Arizona economy continue to be robust with the GDP expanding at fourth best in the country at 4% in 2018 as reported in second quarter 2019
Phoenix Business Journal: Maricopa County still fastest-growing county in U.S., Census says
In early 2019, it was reported by the Phoenix Business Journal that Maricopa County was the fastest expanding county in the entire country from 2017-2018.
Phoenix Business Journal: More people moving to Maricopa County than anywhere in the U.S.
2016 was a year of housing supply balancing out and conveying monthly supply of traditional eras of similar balance and in turn stable price points with some areas experiencing nominal appreciation. 2017 has followed the same trends and market stabilization with areas located closest to supporting infrastructure conveying market appreciation rates. Gentrification and development "in-fill" projects and one-off site developments are a trend as of late within these areas most proximal to supporting infrastructure. 2017 conveys robust job environment and population growth in the positive for Phoenix Metro which are the driving factors in the appreciation rates noted and at a minimum the market stabilization starting in 2016 and to beyond. Investor demand from both inside and outside Phoenix Metro has been robust, a recent study (ATTOM Data Solutions) in Q2 2017 the county of Maricopa lead the entire country for number of "flips". 2018 has expressed strong indicators in the residential real estate market for Phoenix metro thru the first two quarters of activity both in price stabilization and in some areas appreciation. Localized markets in proximity to infrastructure, upper echelon ranked public/private schools, retail centers, public transportation, and employment centers are expressing robust appreciation. Recently record low unemployment levels, robust job growth, compressed lending interest rates, and high net positive immigration to the state have all contributed to the early 2018 positive trends for real estate pricing and metrics. In-fill projects continue to be an emphasis for builders and investors for submarkets near the aforementioned higher level supporting infrastructure. New construction and re-engineered existing building stock (remodel projects) have trended toward higher fenestration levels (larger natural light openings) and inside/outside living concepts for homes generating the highest sales metrics ($/SF).
To establish additional support regarding Phoenix Metro, and namely Maricopa County’s robust economy and overall improving macro economic conditions over the course of 2012-2017, the appraiser cites an article reported by Phoenix Business Journal. Maricopa County from this five year period has lead the entire country for counties in terms of people moving from outside and into Maricopa County. Positive net migration is a core component to robust local economic growth. Maricopa county saw 221,000 people for inbound migration.
The following serves as a narrative arch from a macro sense of the Phoenix Metro market and its cyclical market expressions over years and longer periods of times. The narrative although is not relevant to the recent considerations in the current marketplace that are affecting the local market conditions:
Historically, in general the Phoenix Metro market most negatively affected by volatile market conditions in macro terms (including both Maricopa and Pinal counties), are those areas with the greatest concentration of subprime loans originated between the years 2003-2007. In general, the late stages of 2005 and the first half of 2006 first appeared to reflect downward pressure on pricing with an increase in listing inventories in many areas. Additionally, outlying communities with significant new SFR construction, with lower price points have been adversely affected to the greatest extent. Core areas with established infrastructure have out-performed these outlying areas in terms of overall market value decline.
Beginning in second and third quarter of 2011 the markets showed signs of stabilization and recovery by virtue of markets housing inventories expressing three to four months or less of housing inventory. The housing inventories have commonly conveyed in many markets below the commonly held notion of "balanced" (i.e. three to four months of housing inventory) where the demand for trailing periods of three to nine months of housing absorption rates is greater than the supply of SFR's as listings. Succinctly, it appears that certain markets are prudently reported as balanced and a trend toward a Sellers market.
Proficient real estate professionals across Maricopa and Pinal counties initially reported a significant drop in inventory coinciding with the national foreclosure moratorium from publicly traded national banking institutions in the highly publicized "robo-signing" of trustees notices. Following the moratorium, the national multi-billion dollar settlement concerning the five largest mortgage services in the 1st quarter 2012 set the stage for conditions conducive to typical macro market conditions which may have lead to the Phoenix Metro market's noted rates of appreciation. Unequivocally, Phoenix Metro (Maricopa and Pinal counties) as reported by two leading index agencies (Federal Housing Finance Agency and Case-Shiller) lead the entire US domestic markets for overall appreciation for the period of late 2011 (3rd quarter) to late 2012 (4th quarter).
Phoenix Metro has conveyed and expressed robust appreciation rates from a macro perspective starting in third quarter 2011 until third quarter 2013, however, it should be noted that recently, intrinsic relative quantitative changes in the market most notably the relative increase in mortgage lending rates since second quarter 2013, the decrease in the raw number of resales, an increase in the raw number of listings, and continual subsiding foreclosures have conveyed and expressed a relative increasing trailing monthly housing supply which has resulted in downward pressure on the markets as a whole. The downward pressure on the markets appear to have staved off the prior relative robust appreciation rates to more conventional appreciation rates starting in the fourth quarter of 2013. The downward pressure from a fundamental perspective have caused some of the segmented submarkets to convey One-Unit Housing Trends as Stable as early as the first and second quarters of 2014. Additionally, from a macro perspective increasing housing supply in the second and third quarters of 2014 has applied modest downward pressure on the markets as a whole relative to prior recent time periods in late 2013 and early 2014. The years of 2014-2015, Phoenix Metro widespread experienced appreciation and in some localized markets in proximity to infrastructure experienced robust appreciation as job creation reporting was gaining momentum and interest rates were at lower than typical pricing.
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