Market Insights
Phoenix Valuations’ monthly blog capturing national and local trends impacting the real estate and appraisal market.
Phoenix Metro Economic Conditions
Last Updated February 27, 2024
Sales activity in February 2024 has picked up dramatically in Phoenix metro, the number of homes actively for sale was notably higher compared to last year, growing by 7.9% according to Realtor.com. With the rise in inventory, time spent on market dropped to more than two weeks shorter than pre-pandemic levels. Time on market dropped 14 days compared with 2023, good for second biggest drop in the nation.
https://www.axios.com/local/phoenix/2024/02/07/mortgage-free-homeowners
Phoenix continues to attract cash buyers and high equity homeowners as a place holder for their residential assets. Census Data tracked by Axios in February 2024 reported that 33.8% of homeowners in Phoenix own their house outright, that’s up from 32% in 2017.
Investors continue to play a large role nationally in overall residential purchasing activity. Redfin reported in February 2024 that investors accounted for 26.1% of all “low-priced homes sold in the United States in the fourth quarter”, this is the highest share on record and up from 24% a year ago.
https://www.bizjournals.com/phoenix/news/2024/01/30/home-prices-headed-back-up-in-metro-phoenix.html
Late January 2024, Case-Shiller reported that prices in Phoenix for the first time in nine months of steady declines in prices, a reverse was in order a January reversed that trend with month-over-month gains.
In January 2024, WalletHub announced its list of 182 cities with the Best Cities for Jobs in 2024, and Scottsdale ranked number one in the entire country. Tempe made the top 20 list on the ranking at number 13 and Chandler ranked 26. This further conveys the local job economy on a national level being a burgeoning place for jobseekers with fertile ground for expected job growth and income growth which underpins the real estate market.
High interest rates continue to be a headwind in the residential housing market, as nationally sellers are slashing their list prices at record levels according to Redfin Corp, which found 20.8% of active listings nationally had a price drop in October as reported in December 2023.
In December 2023, it was announced that Phoenix Metro continues to attract semi-conductor investment and burgeoning job activity as ASM International plans to invest $300 million in a new headquarters and research and development facility in Scottsdale that will create 500 new high skill jobs in 2026.
https://www.bizjournals.com/phoenix/news/2023/11/13/domestic-migration-patterns-impact.html
Recent data in November 2023 from a leading research firm reported that Arizona had fourth highest inbound net migration from 2021-2022 with +78,000 in the country. Continually buffering the demands on housing stock.
Seven Arizona billionaires land on Forbes 400 - Phoenix Business Journal (bizjournals.com)
Arizona continues to be a burgeoning market for those in ultra wealthy stratosphere calling the state home. Seven of the Forbes wealthiest Americans reside in Arizona as reported.
US Housing Market Is Starting to Flash Some Hope for Homebuyers (businessinsider.com)
Sellers are slashing asking prices, Redfin says | Fortune
Early fall 2023, signs of the real estate market shifting toward more competing listings was a welcome sign to potential buyers who have had less than typical listing on the market in relative historic terms. In addition to rising listings volume, the number of listings showing decreases in list prices gained in volume.
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).
History of the Phoenix Metro Market
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.