PSAZ | Metro Phoenix Economic Snapshot | August 2021

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problem, from the cost and availability of raw and finished materials, to labor shortages, to transportation hiccups. But as long as demand remains strong, these issues will eventually be resolved. Consumers’ pent-up savings have been the source of strong demand and its driving up prices, with housing at the forefront. Fortunately, with continued vaccinations, more and more of the economy has reopened and spending will shift from goods towards services. This will help bolster those industries hit hardest, such as food services, tourism, and hospitality.

VACCINATING TOWARD FULL RECOVERY Danny Court, Elliott D. Pollack & Company

We can already see this happening in the hotel industry. In Arizona, last month’s occupancy level was 91% of 2019 occupancy for the same month. So, we are certainly trending in the right direction and should see full recovery soon, barring any new roadblocks. Inflation reached its highest rate (5.0%) since August of 2008 and will remain a concern for the rest of the year. As of now though, the Fed remains optimistic that inflation effects are temporary and no changes to their policy are expected.

T

he U.S. economy is continuing to trend toward full economic recovery, driven in large part by continued vaccination efforts which have now surpassed 150 million in the United States. Economists have raised their economic growth outlook again in June. The GDP forecast for 2021 is now 6.7% and 4.4% for 2022. Expected growth is the result of job openings, a red-hot real estate market, and pent-up demand for goods, services, travel, and everything that has been denied the public for the past year.

Here locally, for about 22 consecutive months, Maricopa County has led the nation in housing price appreciation. In the last year, prices are up around 20% and are up 43% from just two years ago. In May, the median sale price of a resale home surpassed the median price of a new home, something that is rarely seen. Prices are rising due to (1) limited for-sale inventory and (2) demand as Greater Phoenix continues to see in-migration.

Consumer spending on goods has been hampered, not by lack of demand, but rather bottlenecks in production and the supply chain. Purchases, especially in the durable goods category (think cars, appliances, furniture, etc.) have been plagued by backorders, pre-orders, uncertain delivery timeframes, and delays. Every aspect of the global supply chain appears to be causing some of the

So, are we in a bubble? No. A bubble is typically driven by a surge in asset prices fueled by irrational behavior and disconnected from fundamentals. By that measure, what is happening in housing today is the opposite of a bubble. Our demographics and expected new population are outpacing the available housing supply. The housing industry remains in a healthy position and will help drive the economy forward.

GREATER PHOENIX ECONOMIC FORCAST

POPULATION

RETAIL SALES

EMPLOYMENT

SINGLE FAMILY PERMITS

1.7% INCREASE 2021 1.7% INCREASE 2022

14.2% INCREASE 2021 5.1% INCREASE 2022

4.8% INCREASE 2021 5.4% INCREASE 2022

7% INCREASE 2021 3.2% INCREASE 2022


RESIDENTIAL REAL ESTATE

Residential

Real Estate Tina Tamboer, The Cromford Report

T

he Greater Phoenix housing market has continued to bust at the seams in the first half of 2021. According to the May 2021 release of the U.S. Census report on population and housing units, Maricopa and Pinal County grew in population by 2.1% and the number of new housing units grew by 1.6% between July 2019 and July 2020. In the last 10 years, the Greater Phoenix population has grown 20% while housing stock has grown 11%, resulting in only 2.4 new homes for every 10 people added to the population. This includes apartments, condos, townhomes and single family homes. For perspective, the period of overbuilding between 2000-2010 pumped out nearly 5 homes for every 10 people added to the population, that is one half of a home built for every new person, causing a glut of vacant homes with few people to live in them. By 2019, after 9 years of weak housing growth, the housing glut had been consumed and converted into a shortage. This shortage, combined with the post-pandemic surge of new residents over the last year, has resulted in highly competitive buyer behavior, record-low supply, and the following year-over-year price appreciation measures through the Arizona Regional MLS (ARMLS):

• The annual average price per square foot rose 23.0% from $178.36 to $219.39. • The annual average sales price increased 25.1% from $357,903 to $447,570. • The annual median sales price gained 20.1% from $290,000 to $348,250.

In the last year there have been a total of 111,426 new listings added and 108,994 sales closed through ARMLS, establishing a new historical high. Supply levels in the ANNUAL SALES RATE

MLS dropped to their lowest count of 3,525 in March 2021 (normal supply level should be around 25,000 listings in March) while recorded demand activity was still 19% above normal seasonal expectations. This massive imbalance between supply and demand resulted in a larger percentage of sales recorded over list price, rising from 24% in June 2020, to 34% by January 2021, to 60% by June 2021. The median dollar amount over asking price rose from $4,000 to $6,000 to $20,000 in the same period. The median time on market prior to an accepted contract has been 7 days or less since mid-January. The median rental rate through ARMLS is $1,895 per month, up $250 (+15%) over this time last year. The monthly dollar and percentage increase trends higher in larger homes. For example, the median monthly increase for homes under 1,000 square feet is $100 (+9%) while the increase for homes between 2,200 and 2,400 square feet is $395 (+20%). While the level of appreciation in home values and rental rates over the last year is staggering, the Greater Phoenix market proved to be able to sustain it, aided by wage growth and low interest rates. One year ago, the Home Opportunity Index (HOI) published by the National Association of Home Builders reported that a family making the median income for Greater Phoenix could afford 70% of what sold in the second quarter. Normal range is between 60% and 75%. By the first quarter of this year, the affordability measure had dropped to 63%, but still considered within normal. The measure for Q2 2021 has not been released as of the day of this writing, but it is expected to be lower than 63% and possibly land on the lower side of normal or slightly below. As affordability weakens, the question on the minds of homeowners and tenants alike is whether the housing market can sustain the rampant appreciation rate of the last 6 months. The consensus among local housing analysts is that it cannot. However, Greater Phoenix is not projected to plunge into a buyer’s market either and home values are not projected to decline at this time. That would require a glut of housing, and total supply is still too low to accommodate the population at large. The next few months may see an increase in listings for sale as some homeowners exit forbearance. At the same time, lending guidelines are loosening as more people return to work. A more reasonable expectation is that home values will continue to rise, but at a slower rate over the next 6 months. 12 MONTH AVERAFE SALES PRICE PER SQFT GREATER PHOENIX - ARMLS RESIDENTIAL - MEASURED MONTHLY 7/6/21

GREATER PHOENIX - ARMLS RESIDENTIAL MEASURED MONTHLY 7/4/21 110K 100K 90K

2005

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$200 $180 $160

80K 70K

$140

60K

$120

50K

DEC 2020

SEPT 2020

DEC 2019

SEPT 2019

JULY 2020

JUNE 2020

JULY 2019

DEC 2018

JUNE 2019

SEPT 2018

MARCH 2019

JULY 2018

DEC 2017

SEPT 2017

JUNE 2018

MARCH 2012

JULY 2017

DEC 2016

JUNE 2017

SEPT 2016

MARCH 2017

JULY 2016

DEC 2015

SEPT 2015

JUNE 2016

MARCH 2016

JULY 2015

DEC 2014

JUNE 2015

SEPT 2014

MARCH 2015

JULY 2014

DEC 2013

SEPT 2013

JUNE 2014

MARCH 2014

JULY 2013

DEC 2012

JUNE 2013

SEPT 2012

MARCH 2013

JULY 2012

DEC 2011

SEPT 2011

$00

JUNE 2012

20K

MARCH 2012

30K

$100

JULY 2011

40K


BY CITY

2020

Mid-2021

Glendale

$272,903

$365,822

Phoenix

$316,262

$427,300

Mesa

$290,995

$378,992

Peoria

$336,070

$450,762

Litchfield Park

$334,957

$477,911

Tempe

$310,943

$408,068

Gilbert

$380,387

$527,266

Chandler

$363,014

$494,561

Cave Creek

$524,939

$783,846

Fountain Hills

$475,560

$707,446

Scottsdale

$615,827

$911,840

Carefree

$774,445

$1,053,155

Paradise Valley

$1,940,080

$2,639,978

METRO PHOENIX BY THE NUMBERS AV E R A G E S O L D P R I C E

$137,448 AVERAGE INCREASE IN SALE PRICE

Community

Average Sale Price

Days on Market

List/Sell # Price Ratio Closed

Aviano

$960,231

38

102%

13

Arcadia

$952,731

50

100%

50

Biltmore

$952,315

60

99%

79

Coronado (downtown)

$506,633

31

100%

6

Fireside at Desert Ridge

$583,656

17

102%

9

Fireside at Norterra

$523,278

18

101%

18

Encanto

$487,842

40

100%

31

Moon Valley

$520,373

39

101%

70

Tatum Highlands

$558,104

23

103%

42

01/01/2021 - 06/30/2021 Tatum Ranch

$530,346

22

102%

91

Desert Ridge

$668,327

28

103%

111

2021 SALES STATISTICS

BY COMMUNITY

Statistics gathered from ARMLS. All information deemed reliable but not guaranteed. (Single-Family Residences)

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