Softness Beginning in the Phoenix and Scottsdale Rental Market?

Softness Beginning in the Phoenix and Scottsdale Rental Market?

We knew it was bound to happen, the question was when? It’s looking like the when is now! The rental market is showing signs of slow-down. If we compare our rental market with 2021 at this time, we see the following supply changes occurring as reported by the Cromford Report:

  • single-family detached actives have increased by 99%
  • apartment actives have increased by 69%
  • townhouse actives have increased by 15%

Single-family detached (SFD) rentals are in much greater supply in 2022 and are currently 71% of all rental listings in the Arizona Regional MLS (ARMLS). At the same point in 2021 they were only 51% of rental listings. (Caveat: The ARMLS numbers represented here are not the entire market, however they do provide a fairly accurate picture of the whole market)

Cromford is also seeing the average asking price for single family detached rentals drop in the last year where the SFD is now averaging $1.61 per square foot (PSF). It was $1.97 this time last year having peaked at $2.09 per month previously.

Apartment average rents are currently at $2.16 PSF per month. For all types of condos, townhomes, and apartments (attached), the average asking price is currently $2.02 PSF per month. It was $1.90 this time last year.

Interestingly, the drop in rental prices is NOT happening to townhomes. In fact they have been increasing. They also remain in short supply. Apartment rents have also increased but supply is much better than a year ago. The appeal of townhomes for renters and investors is due to a at least a few factors:

  • Townhomes are attached like condos and apartments, but often with just 2-4 units being attached providing better privacy – more or less.
  • Many townhomes provide garages. Condos and apartments not so much.
  • Town home communities are more often gated

The big changes are in single-family rentals where supply has doubled over twelve months and the average rent asked has declined by 18%. SFD’s are actually less expensive to rent PSF, so if a prospective renter needs more space, they will get more for the money with an SFD.

Currently there is a large number of attached homes being built in Phoenix Metro. There is always a danger of overbuilding and we’ve certainly seen that in our past. Developers are no doubt seriously eyeing our market to discern future expansion (or not).

So today, while it’s still called today, there is market movement favoring renters. Now if the same thing could only be said for our first time home-buyers.

Better Days Ahead for Scottsdale and Phoenix Buyers?

Better Days Ahead for Scottsdale and Phoenix Buyers?

March numbers are showing continued huge strength in appreciation, but also possible trends that could slow the market. First, the stats:

  • Active Listings: 5,051 vs 4,088 last year – up 23.6% – and up 10.1% from 4,588 last month
  • Under Contract Listings: 11,620 vs 12,575 last year – down 7.6% – and down 3.6% vs 12,050 last month
  • Monthly Sales: 10,123 vs 10,398 last year – down 2.6% – but up 26.6% from 7,998 last month
  • Monthly Average Sales Price per Sq. Ft.: $291 versus $232 last year – up 25% – and up 2.3% from $285 last month
  • Monthly Median Sales Price: $456,000 versus $358,250 last year – up 27.3% – and up 2.5% from $445,000 last month

First, let’s look at our still hugely deficient listing inventory. Active (current) listings are up 24% (all numbers rounded) from one year ago and up 10% from last month – positive news for buyers! I’m not sure, however, how much help at this point this will be for our buyers, since mortgage rates are near 5%. Click here to read a great NPR article about it.

As expected, sales are slowing – somewhat. Under contract listings are down near 8% from last year, and down 3.6% from last month.

Sales spiked last month versus February, up near 27%, but have decreased versus last year by nearly 3%.

Crazy price increases continue. The monthly average sales price per square foot (PSF) is now at $291, compared with $232 just one year ago – a 25% rise. Of particular note is that the PSF is up from $285 just last month – a 2.3% rise. The Monthly Median has risen to $456,000 – a 27% increase from last year and up 2.5% from last month.

The huge bounce in mortgage rates these past few months (now near 5%) is combining with the higher priced inventory is eliminating MANY buyers from the market, especially the newbies. In fact, with all the purchases and owner refi’s over the past three years, there will be little incentive for homeowners to sell. There’s not much upside financially for them.

In fact, with all the purchases and owner refi’s over the past three years, there will be little incentive for homeowners to sell. There’s not much upside financially for them.

There also seems to be a possible turn in rentals. Rent prices are now decreasing, though not significantly. Average asking lease prices have fallen also, which is a leading indicator of closed rental prices.

Personally, I don’t see any major changes in pricing, either for sales or rentals. This was foreseen when we projected ahead of what the sales year has in store. We’re on the money regarding market slowing, but prices are still high. Is this a result of continued cash-buying investor groups?

Another story for another Monday!

Pray for Ukraine!

99% of Arizona’s Growth from Migration, Per Census Maricopa County Fastest Growing U.S. County

99% of Arizona’s Growth from Migration, Per Census Maricopa County Fastest Growing U.S. County

I went to the Suns game yesterday (vs Philly) with my buddy Walter. He has owned Suns season tickets since the Steve Nash era, the last time the local team was a championship caliber team, besides last year. I usually drive to these games, and they’re most always at night, but yesterday Walter graciously drove and it was an afternoon game. Now, why does this matter, and what’s it got to do with real estate?

Glad you asked.

Not driving, and being able to be an observer, I was blown away with the upward growth (literally) of downtown Phoenix. Numerous high-rise cranes were building modern commercial and residential structures. Former run-down neighborhoods (not all) were sprouting economic vitality. The arena (Footprint Center) was like no other arena event I’ve ever attended. It was a sellout (and it’s not even the playoffs) and the fan/arena noise was an amazingly fun assault on the senses. Of course, it does help to have the best pro team in the nation😉

Segue.

“…the Phoenix Metro community as a whole, saw more population growth than any other metro community…”

According to Census data, Arizona’s population gained almost 100,000 this past year. And 99% of our resident growth is attributed to migration, rather than the “natural change” of births and deaths. Of the 98,330 new residents, only 832 were attributable to natural change. Check out this article from the Business Journal:

Maricopa County alone, added more residents (58,246) than any other County in the country. Further, the Phoenix Metro community as a whole, saw more population growth than any other metro community, behind only Dallas-Fort Worth-Arlington area. Arizona ranks, per the Census, as the 3rd fastest growing state in the U.S.

What was just a few years ago never really discussed, but is now the most oft question of the day for The Bodeen Team:

When will this (price escalation) end? Based on the above local and statewide story, not real soon. Seemingly, our demand for a limited supply of housing will continue unabated for the foreseeable future. This will further increase values locally, and statewide.

Caveat: Having said that, in 46 years of residential real estate experience, I’m no stranger to market changes. And when they happen, they can happen quickly.

When The Market Would the Phoenix Metro Market Change? It’s Observable

When The Market Would the Phoenix Metro Market Change? It’s Observable

Well today is the near Ultimate Twosday, 2-22-22. I suppose the ultimate, ultimate Twosday would be 2-22-2222. But, hey, this is close enough.

So here’s your Bodeen chuckle for the week. Let’s go back to 1969, with that one hit wonder from Zager and Evans: “In the Year 2525.”

Enjoy:

Now I’m not implying that our market will reach “normal” in 200 or 503 years, but it won’t be anytime soon, either. We’re showing two charts today with converse directions: The Greater Phoenix Metro current market “median sales price,” and “Days of Inventory.”

First we’ll look at our current median sales price:

According to the Cromford Report, our Median Sales Price continues to rise to a present day $445,500, which is up from $350,000 one year ago – a 27% increase. Will this change? Yes, it will, but the change will look like 2001 to 2004, where there was a 21% change – over three years — or, 7% per year. And it could take a while to commence that line. 6 months? A year? Longer, before that modest annual increase sets in?

Can we begin to see when the market will change? Yes. “Days of Inventory” is probably the best leading indicator we have of a changing market.

Our market will change in favor of buyers as the days of inventory increase. As listings stay on the market longer, this will work in tandem with increased listings on the market, bringing greater supply. Supply must increase! Supply can of course increase due to a number of factors, such as pricing and mortgage rates getting too high. Affordability, or lack of it will bring more listings.

Also, having worked in this industry since the creation of dirt, I’ve seen a few things. Historically, when prospective home sellers believe that that market has hit it’s peak, they will put their home on the market to try and catch the top. This is truer of investors which currently own over 200,000 rentals in Phoenix. If major corporate rental owners liquidated their holdings, we’d see a mass market shift. That will not happen. Investors (landlords) saw rents rise in the 20% plus range. And the rental market is as tight as the buying market. They’ve got a hugely good gig going. Investors are still buying.

To wrap: Beg. Borrow. Steal. Just buy a house.

What If Only the Rich Could Buy a Phoenix or Scottsdale Home? Laughable? Read On…

What If Only the Rich Could Buy a Phoenix or Scottsdale Home? Laughable? Read On…

“The dream of homeownership has grown more out of reach for many middle-class Americans during the pandemic.” This is the opening line from an article in the Wall Street Journal one week ago. Check out that Article here.  The exact title is “Middle Class Gets Priced out of Homes.”

That National Association of Realtors released a recent study, in which the article stated that at the end of 2019, there was one available listing that was affordable for every 24 households in the income bracket of $75,000 to $100,000. By December 2021, the figure was one listing for every 65 households! Per the WSJ, the study “found that housing affordability worsened over the past two years for all but the very wealthiest Americans, and the shrinking number of homes on the market made home buying more difficult in every income bracket.”

Metro Phoenix and Scottsdale becoming unaffordable?

As we’ve been sharing for a while now, Phoenix-Metro is becoming unaffordable with only worse prospects in (at least) the near future. Whereas just a few years ago, we were considered an affordable relocation for companies looking to move here, but that has now all but disappeared. More and more, we will be seeing articles such as: “Phoenix Ranks among the least affordable American Cities.” Check out that Article here. 

Less than two years ago, the median sales price of a home in Phoenix Metro was $180 per square foot. Today it is $280 psf. Homes currently under contract continue to show further price increases as well.

To compound matters, the article accurately points out that in many areas, rents are quickly rising also, having made it more difficult for folks to save up for a down payment. This is a cruel reward for prospective buyers wanting to do the right thing to get into a house affordably.

This is certainly true of Phoenix Metro. The double whammy of rent and purchase price increases is truly eliminating any good options for our local middle class.

No laughing matter.

North Scottsdale Median Price Rose 10% in One Month?!

North Scottsdale Median Price Rose 10% in One Month?!

The North Scottsdale real estate market is killing it! The seven zip codes which comprise North Scottsdale are currently showing a monthly median sales price of $715,000. One month ago, the median sales price was $650,000. This is a median increase of $65,000 in one month! Yes, you heard me correctly, the North Scottsdale median sales price rose $65,000 – 10% – in one month.

Listing inventory in North Scottsdale has plummeted. One year ago, North Scottsdale home inventory was at 1409. This year, there are only 1044 homes currently for sale in North Scottsdale – a 26% drop!

How about North Scottsdale rentals? Rising to record lease prices, North Scottsdale home rental prices just hit $1.45 per square foot (psf) this September. This is .06 cents psf higher since last month and a rise of .17 cents psf in one year – a 13% rental price increase.

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