Greater Phoenix Real Estate Update 1/14/2022

After nearly two years of headlines and non-experts forecasting a crash, a recent headline reads, “Housing costs will be ‘permanently higher’ following pandemic: Study”

I expect to see more headlines like this and hopefully, they will reduce the, “I’ll wait until prices go back down” comments. Waiting has proven to be incredibly expensive. In 2021 alone, Greater Phoenix saw a 28% appreciation rate, and the entire country increased by about 15%. Emotionally, the 2005 market felt a lot like the 2021 market, but the fundamentals of those markets were entirely different. Simply put the 2005 market was based on tremendous demand while the 2021 market was based on nearly non-existent supply.

“Given that pandemic housing trends are mostly preexisting trends accelerated, it’s possible home prices and rents would have risen to levels similar to where they are now even without the pandemic. It would have happened more evenly and more slowly. But looking ahead, it’s hard to conclude anything other than housing costs are going to be permanently higher moving forward.”

-OJO Labs Housing Study

National Real Estate:

New listing asking prices are a leading indicator. This week the median new single family listing asking price is $353,900 up 11% from last week’s $319,000. This is a shockingly huge increase. Each January the new listing asking price jump with the spring demand. The speed and amount prices jump changes each year. 2021 had steep inclines in January, steeper than most years past, and this year that spike is even steeper.

This is a massive spike. We are seeing the same patterns as last year, only sellers are more prepared for it this year and they want to take advantage of the market. This implies big price gains in closings in February and March. The total median asking price of the whole active market is up 1% in the week and is now $369,900. This indicates we are looking at another year of really big price gains.

Another leading indicator is price increases. 5.6% of the active market has had their prices increase over the past few months. Meaning houses currently listed that were purchased last fall or withdrawn from the market have been relisted and are asking higher prices. Locally this helps understand investor fix and flips and iBuyers. It is an indicator of demand and investors are leaning into that demand. Activity last fall indicated that this spring was going to be a bit more mellow than last year but based on the current trends it looks like we are on track for another spring of intense bidding wars and fast sales which only drive prices higher.

The AZ Market:

There is still time to register and join today’s Cromford Market Update with Tina Tamboer at 10am. For details and registration, click here.

Active inventory in Greater Phoenix remained flat this week with only 5230 listings. Supply remains 72% below normal and demand is 22.5% above normal. Prices are going up. While builders are building as quickly as possible, labor and supply chain delays prevent any meaningful increase in available homes.

Both nationally and locally iBuyers sold 20% of homes to institutional investors. Based on analysis of about 6500 iBuyer sales in 2021 through November, the companies averaged a purchase price/sales price premium of $15,197. This includes a single property gain of $267,000 as well as a single property loss of $192,612. Thank you, Tom Ruff of the Information Market for sharing your awesome data with me!

Nationally, apartments are being built at the fastest rate since 1980. Locally, we are expected to build 22,000 units in 2022, the most in the country.

Greater Phoenix year over year rent growth through November was 25.9% with net absorption at record levels and a 96% occupancy rate in Q4 2021. These are huge numbers.

“The inbound migration versus outbound is the best in the nation, and it’s attracting both Gen Z and millennials as well as baby boomers.”

-Doug Ressler, manager of business intelligence at Yardi Matrix.

Lending:

Effective April 1, Fannie Mae and Freddie Mac have a new fee for high balance and second home loans. Georgia Kromrei of Housingwire writes, “Upfront fees for high balance loans will increase between 0.25% and 0.75%, tiered by loan-to-value ratio. For second home loans, the upfront fees will increase between 1.125% and 3.875%, also tiered by loan-to-value ratio.”

Mortgage rates are up about a quarter percent in a week. Rates often move on news rather than the actual event. The Federal Reserve released its recent meetings’ minutes outlining the speeding up of the tapering of the $120 billion in bond and mortgage-backed securities purchases. The increasing rates combined with the increasing house prices could slow demand.

The mix of new loans is changing as rates increase. 2022 is expected to see a 63% reduction in refinance originations but a 9% increase in purchase originations. Combining this with the huge increase in equity American homeowners have tons of equity, see chart below. 2022 could be the year of home equity lines of credit (HELOCs)

Real Estate News:

Final Thoughts:

Elliott Pollack summarized it beautifully when he wrote, “At the beginning of each new year, people look forward with the hopes for a better life. New year’s resolutions are made (and often forgotten), but the new year brings a new outlook for many Americans. Here in Arizona, there is reason for a positive outlook. Our state has been one of the leaders in economic growth and that trend should continue. According to the U.S. Census, Arizona was third in population growth in 2021 behind only Florida and Texas. Based on our review of a number of forecasts, Greater Phoenix employment should grow somewhere between 3.7% and 5.3% in 2022 which could mean at least 80,000 new jobs. The state has also made tremendous progress in diversifying our economy including leading the country in both the semiconductor industry and biosciences.”

It is good to be in Arizona.

Copyright 2022 Sarah Perkins

Published by Sarah Perkins

Sarah has been in title & escrow sales since 2004. As an award-winning sales executive and now the Director of Strategic Accounts, Sarah’s role is to bring real estate transactions to Clear Title. To do this, she focuses on supporting her clients and helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.

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