MPES METRO PHOENIX ECONOMIC SNAPSHOT
2021 ECONOMIC REVIEW BOTTLENECKS, INFLATION, AND LEARNING THE GREEK ALPHABET Elliott D. Pollack & Co., January 2022
021 began relatively strong compared to the rollercoaster of 2020, with a stream of new healthcare solutions to the COVID-19 pandemic causing significant economic disruptions. Vaccinations and other therapies provided confidence to keep economies across the globe from shutting down and to continue the recovery effort in terms of employment, production, and trade. For the most part, consumers remained in excellent financial shape during the pandemic by maintaining employment and receiving government stimulus. This has allowed households to decrease debt and create higher amounts of cash savings. And when consumers are in good shape, the economy’s prospects are promising. Supply shortages and higher prices dominated headlines throughout the year. Inflation hit a 39-year high by the end of 2021 with a year-over-year rate of 6.8%. The last time the country saw inflation this high in 1982 was in the middle of a protracted recession. In stark contrast, we are in an expansion with high demand and limited supplies fueling the current growth in prices. Inflation is also being driven by a tight labor market. Employers are increasing wages to attract employees in a labor market where there are far more job openings than there are unemployed people. The pandemic is also continuing to impact supply lines with factories in Asia closing amid COVID infections and logistic backlogs at seaports. On top of that is
an estimated shortage of 80,000 truck drivers who are needed to deliver goods from the ports to distribution centers and customers. Inflation is expected to stay elevated through 2022. The Fed’s goal is to push inflation back to their 2% goal using all tools at their disposal. They are already reducing monthly bond purchases which are intended to lower long-term borrowing costs. Those purchases may now be reduced more quickly over the next few months. In addition, the Fed could begin raising its key short-term rate sooner than expected sometime this year. This would in turn raise borrowing costs for mortgages, credit cards, and business loans. A further threat to the economy is the Omicron variant. For now, the new variant is not affecting our economic outlook. However, these cases, as well as any new variant, pose some risk to employment levels, economic activity, and increased uncertainty for inflation. A more virulent variant could worsen supply chain disruptions. Despite that, the economy in 2022 is expected to grow at an above average rate. Supply constraints are expected to continue to create price increases. But because prices rose so dramatically in 2021, from consumer goods to home prices, the expected growth in prices this year will appear much more modest. Resilience, innovation, and adapting have been key ingredients in navigating this strange economic environment, and we remain optimistic about the continuing recovery and expansion for 2022 and beyond.
GREATER PHOENIX ECONOMIC FORECAST POPULATION
1.9% INCREASE 2022 1.9% INCREASE 2023
5.3% INCREASE 2022 4.3% INCREASE 2023
SINGLE FAMILY PERMITS
6.2% INCREASE 2022 5.5% INCREASE 2023
5.0% INCREASE 2022 0.0% INCREASE 2023
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
100K 90K 80K 70K 60K 50K 40K 30K 20K
1 2 M O N T H AV E R AG E S A L E S P R I C E P E R S Q F T GREATER PHOENIX - ARMLS RESIDENTIAL - MEASURED MONTHLY 1/5/22
$200 $180 $160 $140 $120 $100
$00 SEPT 2012
As the supply shortage continues, the real estate community looks to building permits and new home sales for signs of relief. The annual fiscal count from November 2020 to November 2021 shows a total of 35,456 single family permits for Maricopa and Pinal County combined, up 17.6% from the previous year. The highest annual fiscal count was reached in June 2021, with 36,820 permits filed since June 2020, a 41% increase from the previous year. This reflects a slowdown by builders in filing permits during the last half of 2021; not surprising since developers
A N N U A L S A L E S R AT E
GREATER PHOENIX - ARMLS RESIDENTIAL MEASURED MONTHLY 1/3/21
From January through June of 2021, the average sales price per square foot rose at an incredible average rate of 3.3% per month. However, from June through December, that average slowed to 1.1% per month as predicted. The median dollar amount over asking price peaked in June at $20,000 and declined to $10,000 by December. In the weaker seller markets of 2015-2018, it ranged between $2,000-$3,000 with only 15-18% selling over list price compared to 40-60% in 2021. Over the last 30 days, the supply level has continually declined while demand has remained stable. This is pushing the market farther into a seller’s market, indicating that prices may rise faster than 1.1% per month sometime over the next 3 months.
1 https://www.census.gov/newsroom/blogs/random-samplings/2021/10/ pandemic-impact-on-2020-acs-1-year-data.html
2021 started the year with 5,536 active listings in the MLS and immediately dropped to a historical low of 3,525 by the end of March before rising 110% to 7,410 in October. Supply then took another turn down and ended the year at 5,324, 3.8% below where it started. This is despite 114,644 new listings added to supply last year, the highest annual count since 2011. Even in a weaker seller market like 2018, supply would be expected to fluctuate somewhere between 15,000 to 17,000 active listings at any given time. Unless more supply hits the market, competition for what’s available will remain high and prices will continue to rise as Greater Phoenix heads into its peak Spring season.
The question of affordability continues to plague the housing market in terms of how much appreciation can be sustained in 2022. Unfortunately, quality estimates of household income were severely impacted by the 2020 Covid-19 pandemic as the US Census was forced to cut short the American Community Survey1 before it was completed. This severely handicaps efforts to determine the state of affordability in Greater Phoenix. As a result, analysts will need to lean into supporting hard data and Wall Street-backed buyers and investors will need to be extra careful. In the meantime, prices will continue to rise, possibly at a faster rate, for at least 3-6 more months in Greater Phoenix.
The annual average price per square foot rose 28.3% from $194.23 to $249.20. The annual average sales price increased 25.3% from $394,314 to $494,093. The annual median sales price gained 25.1% from $315,000 to $394,000.
reater Phoenix continued to break records in 2021. A preliminary count of 105,175 sales through the Arizona Regional MLS show 2021 outpaced the 2020 count of 100,675 by 4.5%. More impressively, 2021 overtook the previous record of 103,177 for calendar-year sales set in 2005 by 1.9%. The highest record count of MLS sales for a fiscal year was achieved between June 2020 and June 2021 at 108,974. Public record and MLS sales are still coming through at this early stage, but 2021 has set a new benchmark from which to compare future years. Below are the following year-over-year price appreciation measures through the Arizona Regional MLS (ARMLS):
2021 also saw the end of forbearance extensions. As of December 21st, there were 891,000 mortgages remaining in forbearance nationally according to Black Knight, an 81% improvement from the peak of 4.76 million counted the week of May 26th, 2020. It’s reasonable to deduce that the local increase in supply from March to October may have been boosted by properties exiting forbearance, however it’s clear that whatever contribution this made did not have a major effect on price appreciation other than slowing it down. If the release of 3.9 million mortgages were not enough to cause home values to decline over the course of 19 months, then the remaining 891K will not be significant.
Micheal Orr, Principal of The Cromford Report
RESIDENTIAL REAL ESTATE
struggled throughout 2021 with uncertainties surrounding the delivery of materials, inflation, and labor. With an estimated time of 10-14 months to build a home, many are struggling to complete the permits already filed. Multi-family permits hit a fiscal record count of 15,976 in November, up 20.1% from the previous year. Judging from a decline in new condo/townhome purchases year-overyear, most of the new multi-family permits are for rent.
by CITY Goodyear Glendale Phoenix Mesa Peoria Litchfield Park Tempe Gilbert Chandler Cave Creek Fountain Hills Scottsdale Carefree Paradise Valley
2020 $352,125 $307,286 $364,140 $328,221 $377,093 $378,058 $353,490 $431,719 $408,331 $629,810 $583,191 $721,760 $870,032 $2,086,990
2021 SALES STATISTICS
METRO PHOENIX BY THE NUMBERS
2021 $451,112 $387,886 $445,368 $401,036 $469,719 $517,829 $425,325 $557,002 $511,334 $792,123 $692,383 $918,395 $1,105,861 $2,712,146
AV E R A G E S O L D P R I C E
$168,867 AVERAGE INCREASE IN SALE PRICE
Average Sale Price
Days on Market
List/Sell # Price Ratio Closed
Mountain Park Ranch
01/01/2021 - 12/31/2021 Superstition Foothills Val Vista Lakes
Statistics gathered from ARMLS. All information deemed reliable but not guaranteed. (Single-Family Residences)
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