Mimi Sadeghi | Metro Phoenix Economic Snapshot

MIMI

Exceeding your Expectations

BY CITY

2018

2019

Glendale

$272,826

$290,218

Phoenix

$324,994

$345,548

Mesa

$305,896

$326,968

Peoria

$333,149

$352,968

Litchfield Park

$362,262

$368,543

Tempe

$347,229

$365,766

Gilbert

$364,294

$388,474

Chandler

$367,983

$386,587

Cave Creek

$534,254

$545,162

Fountain Hills

$569,638

$595,258

Scottsdale

$737,024

$778,256

Carefree

$923,743

$915,234

Paradise Valley

$2,006,319

$2,299,865

2019 SALES STATISTICS

BY COMMUNITY 1/1/2019 - 1/1/2020

METRO PHOENIX

BY THE NUMBERS

$39,172 AVERAGE INCREASE IN SALE PRICE

Community

Average Sale Price

Days on List/Sell # Market Price Ratio Closed

Ancala Clearwater Hills DC Ranch FireRock Gainey Ranch Grayhawk Kierland* McDowell Mountain Ranch McCormick Ranch Silverleaf Troon

$1,287,774 169 97% $2,829,091 148 93% $1,312,542 125 97% $1,471,015 241 94% $1,065,867 146 96% $752,461 91 98% $564,589 67 98% $688,749 72 98% $714,471 86 97% $3,245,461 254 94% $1,091,610 139 95%

46 11 99 25 15 112 37 184 26 48 34

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

Mimi Sadeghi C. 480.217.3305

mimi.sadeghi@russlyon.com www.mimisadeghi.com

If your home is currently listed, this is not a solicitation for that listing.

METRO PHOENIX ECONOMIC SNAPSHOT

Russ Lyon | Sotheby’s International Realty 7669 E Pinnacle Peak Rd Suite 110, 85255

2020

12,000 listings for sale among 1.3 million existing housing units.

Bottom line, Greater Phoenix needs more new construction to accommodate the population growth.

ECONOMY 2020: CONTINUED GROWTH AMID UNKNOWN UNKNOWNS ELLIOTT D. POLLACK & COMPANY

By Tina Tamboer, The Cromford Report

F

irst, to summarize 2019’s economic performance national employment is up 1.6% which is more than 2.3 million jobs. The biggest employment winners in percentage terms were natural resources and mining, construction, educational and health services, leisure and hospitality and professional and business services. The unemployment rate is currently at a 50-year low.

Real GDP is up 2.3% year-to-date after gains of 2.9% last year.

Personal consumption expenditures (consumers account for almost 70% of economic activity) lead the way with a 2.6% gain.

Federal spending is growing at almost twice the rate of inflation while state and local spending is growing at modestly less than the rate of inflation. Inflation, at around 2%, remains under control. And wage growth, while expanding at about 3.1%, still seems under control given the rate of unemployment and the amazing growth of employment given where we are in the cycle.

And the S&P 500 returned 30.43% for the year (33.07% including

dividend reinvestment). While clearly not sustainable, it’s the best performance in years so enjoy the glow.

In Arizona, year-to-date employment is up 2.6% compared to 2.8% last year. Construction, manufacturing, and educational and health services led the way. In Greater Phoenix, employment is up 2.9% year-to-date and has created 82.3% of all the jobs created in the state so far in 2019. In 2018, Greater Phoenix employment grew by 3.3%. So, while the rate of growth is slightly lower, the absolute numbers are very good. By the way, Greater Phoenix is 3rd out of the 36 major markets in the U.S. in terms of percentage employment growth. Tucson so far this year is up 1.9% compared to 1.2% in 2018. And the new housing market is on fire with large gains in new permits over the last few months. Demographically, demand for housing of all types should remain strong in the new year.

Going into 2020, the national economic outlook is actually brighter than it was six months ago. Gone is the negatively sloped yield curve, the threat of a trade war, government shutdowns, significant worries about the housing market and the fear of a near term recession (for now). Consumers seem to be in good shape as jobs are plentiful, real incomes are increasing and, with the possible exception of student loan debt, are in good financial shape. Business investment is slow but that will change if consumers continue to shop. It appears that 2019 had a strong holiday retail sales season. This was especially true of goods purchased on the internet which surveys suggest were up 18% over 2018. All this is true despite this being the longest recovery/ expansion in U.S. history.

This is not to say we are not without problems nor is it saying the economy could be derailed by something beyond the horizon.

The economy is always vulnerable to shocks. The biggest headlines today are all centered on the heightened tensions between the U.S. and Iran and the threat of war. While this particular crisis may blow over and the economy may continue generally as it otherwise would have, it brings into play “unknown unknowns”. This term, brought back to life by Donald Rumsfeld in 2002, originated well before then. These are the types of events that represent unforeseen uncertainties out there that are not discounted into forecasts.

While no one can be sure, the odds at the moment seem to be that the ultimate retaliation by Iran should not cause meaningful economic damage to our economy. But, if it does create such damage, it could push a slowing economy into a mild recession. And If it does, that “unknown unknown” would change the economic picture at least temporarily. However, the economic fundamentals for the U.S. and Arizona remain excellent and we expect 2020 to be a year of continued growth despite the uncertainties.

W

elcome 2020! A year ago the market looked significantly different than it does today. Back then demand had dropped to 12% below normal while supply was 34% below normal and sales volume was declining. Since then the market has seen a turnaround increase in buyer demand and a sharp decline in supply resulting in the following year-over-year price trends through the Arizona Regional MLS: The annual average price per square foot rose 5.9% from $162.68 to $172.30 The annual average sales price increased 6.3% from $323,604 to $344,150 The annual median sales price gained 6.5% from $260,000 to $277,000 Starting off the year, buyer demand is now 2.5% above normal for the season and supply is a staggering 49.4% below normal.

Closed sales through the local MLS in 2019 totaled 96,788, up 3.7% from 2018’s count of 93,368 sales despite a shaky first half of the year. As of January 5th, there were only a miniscule 11,600 listings for sale in the MLS. A normal level for the start of the year would be over 28,000 listings and levels haven’t been this low since 2005. This means buyers will need a lot of patience, persistence and quick responses to win a bid for a home this year.

The buyer competition is only getting worse with Maricopa County listed as one of the fastest growing metropolitan areas in the country. At the lowest point of 2005 there were approximately 9,000 listings and our population was estimated at 3.8 million for Maricopa and Pinal County combined. Today the combined population is estimated to be 4.8 million and there are under

ANNUAL SALES RATE GREATER PHOENIX - ARMLS RESIDENTIAL - MEASURED MONTHLY 1/1/2020

Developers are answering the call for housing units, but to the beat of their own drum. Single family permits year-to-date through November 2019 were up a modest 7.8% over last year, and new home sales were up 6.8%. Multi-family permits were up an impressive 23.3%, but townhouse and condo sales were surprisingly down 29.2%. While there is immense demand for condo and townhome purchases, unfortunately the majority of what’s being built in the multi-family category are not condos and townhomes going up for sale; they are commercial apartments going up for rent. Despite above-normal demand, builders are modest in their pricing as the annual median sale price for a new single family home rose just 4.2% from $321K to $335K compared to the resale annual increase of 6.5%.

With prices projected to continue increasing in Greater Phoenix for the greater portion (if not all) of 2020, concerns over affordability begin to creep up. These concerns have been mitigated as private sector earnings in the Valley grew 5.1% over last year. Interest rates have also remained stable under 4% for the past 6 months. Low unemployment, higher wages and affordable mortgage rates mean a family making a median annual income of $72,900 could afford 68% of what sold in Greater Phoenix in the 3rd quarter of 2019, well within normal range. This outperformed the national affordability measure of 64% during the same time frame and vastly improved from the 56% recorded at the end of 2018.

Rentals are not getting more affordable. The median rent paid on closed leases through the Arizona Regional MLS (not including commercial apartments) was $1,550/month for a median size unit of 1,600 square feet, an annual increase of 8.8% from the $1,425 monthly rent measured a year ago. Since 2014, landlords have accounted for 10-15% of sales each month according to Affidavits of Value recorded with Maricopa County. This is considered a normal level of traditional landlord demand, unlike 2012 which saw a historical high of 34% of sales recorded in a month.

To summarize, housing prices will not be declining in Greater Phoenix anytime soon in 2020 due to the extreme imbalance between supply and demand. Inbound migration continues to outpace outbound migration resulting in a net population gain.

Affordability remains normal for now due to increases in wages and low mortgage rates; and rising rents with few vacancies tells us that demand for housing is real and not driven by short-term speculators this time around.

12 MONTH MOVING AVERAGE SALES PRICE PER SQ. FT. GREATER PHOENIX - ARMLS RESIDENTIAL - MEASURED MONTHLY 1/1/2020

12,000 listings for sale among 1.3 million existing housing units.

Bottom line, Greater Phoenix needs more new construction to accommodate the population growth.

ECONOMY 2020: CONTINUED GROWTH AMID UNKNOWN UNKNOWNS ELLIOTT D. POLLACK & COMPANY

By Tina Tamboer, The Cromford Report

F

irst, to summarize 2019’s economic performance national employment is up 1.6% which is more than 2.3 million jobs. The biggest employment winners in percentage terms were natural resources and mining, construction, educational and health services, leisure and hospitality and professional and business services. The unemployment rate is currently at a 50-year low.

Real GDP is up 2.3% year-to-date after gains of 2.9% last year.

Personal consumption expenditures (consumers account for almost 70% of economic activity) lead the way with a 2.6% gain.

Federal spending is growing at almost twice the rate of inflation while state and local spending is growing at modestly less than the rate of inflation. Inflation, at around 2%, remains under control. And wage growth, while expanding at about 3.1%, still seems under control given the rate of unemployment and the amazing growth of employment given where we are in the cycle.

And the S&P 500 returned 30.43% for the year (33.07% including

dividend reinvestment). While clearly not sustainable, it’s the best performance in years so enjoy the glow.

In Arizona, year-to-date employment is up 2.6% compared to 2.8% last year. Construction, manufacturing, and educational and health services led the way. In Greater Phoenix, employment is up 2.9% year-to-date and has created 82.3% of all the jobs created in the state so far in 2019. In 2018, Greater Phoenix employment grew by 3.3%. So, while the rate of growth is slightly lower, the absolute numbers are very good. By the way, Greater Phoenix is 3rd out of the 36 major markets in the U.S. in terms of percentage employment growth. Tucson so far this year is up 1.9% compared to 1.2% in 2018. And the new housing market is on fire with large gains in new permits over the last few months. Demographically, demand for housing of all types should remain strong in the new year.

Going into 2020, the national economic outlook is actually brighter than it was six months ago. Gone is the negatively sloped yield curve, the threat of a trade war, government shutdowns, significant worries about the housing market and the fear of a near term recession (for now). Consumers seem to be in good shape as jobs are plentiful, real incomes are increasing and, with the possible exception of student loan debt, are in good financial shape. Business investment is slow but that will change if consumers continue to shop. It appears that 2019 had a strong holiday retail sales season. This was especially true of goods purchased on the internet which surveys suggest were up 18% over 2018. All this is true despite this being the longest recovery/ expansion in U.S. history.

This is not to say we are not without problems nor is it saying the economy could be derailed by something beyond the horizon.

The economy is always vulnerable to shocks. The biggest headlines today are all centered on the heightened tensions between the U.S. and Iran and the threat of war. While this particular crisis may blow over and the economy may continue generally as it otherwise would have, it brings into play “unknown unknowns”. This term, brought back to life by Donald Rumsfeld in 2002, originated well before then. These are the types of events that represent unforeseen uncertainties out there that are not discounted into forecasts.

While no one can be sure, the odds at the moment seem to be that the ultimate retaliation by Iran should not cause meaningful economic damage to our economy. But, if it does create such damage, it could push a slowing economy into a mild recession. And If it does, that “unknown unknown” would change the economic picture at least temporarily. However, the economic fundamentals for the U.S. and Arizona remain excellent and we expect 2020 to be a year of continued growth despite the uncertainties.

W

elcome 2020! A year ago the market looked significantly different than it does today. Back then demand had dropped to 12% below normal while supply was 34% below normal and sales volume was declining. Since then the market has seen a turnaround increase in buyer demand and a sharp decline in supply resulting in the following year-over-year price trends through the Arizona Regional MLS: The annual average price per square foot rose 5.9% from $162.68 to $172.30 The annual average sales price increased 6.3% from $323,604 to $344,150 The annual median sales price gained 6.5% from $260,000 to $277,000 Starting off the year, buyer demand is now 2.5% above normal for the season and supply is a staggering 49.4% below normal.

Closed sales through the local MLS in 2019 totaled 96,788, up 3.7% from 2018’s count of 93,368 sales despite a shaky first half of the year. As of January 5th, there were only a miniscule 11,600 listings for sale in the MLS. A normal level for the start of the year would be over 28,000 listings and levels haven’t been this low since 2005. This means buyers will need a lot of patience, persistence and quick responses to win a bid for a home this year.

The buyer competition is only getting worse with Maricopa County listed as one of the fastest growing metropolitan areas in the country. At the lowest point of 2005 there were approximately 9,000 listings and our population was estimated at 3.8 million for Maricopa and Pinal County combined. Today the combined population is estimated to be 4.8 million and there are under

ANNUAL SALES RATE GREATER PHOENIX - ARMLS RESIDENTIAL - MEASURED MONTHLY 1/1/2020

Developers are answering the call for housing units, but to the beat of their own drum. Single family permits year-to-date through November 2019 were up a modest 7.8% over last year, and new home sales were up 6.8%. Multi-family permits were up an impressive 23.3%, but townhouse and condo sales were surprisingly down 29.2%. While there is immense demand for condo and townhome purchases, unfortunately the majority of what’s being built in the multi-family category are not condos and townhomes going up for sale; they are commercial apartments going up for rent. Despite above-normal demand, builders are modest in their pricing as the annual median sale price for a new single family home rose just 4.2% from $321K to $335K compared to the resale annual increase of 6.5%.

With prices projected to continue increasing in Greater Phoenix for the greater portion (if not all) of 2020, concerns over affordability begin to creep up. These concerns have been mitigated as private sector earnings in the Valley grew 5.1% over last year. Interest rates have also remained stable under 4% for the past 6 months. Low unemployment, higher wages and affordable mortgage rates mean a family making a median annual income of $72,900 could afford 68% of what sold in Greater Phoenix in the 3rd quarter of 2019, well within normal range. This outperformed the national affordability measure of 64% during the same time frame and vastly improved from the 56% recorded at the end of 2018.

Rentals are not getting more affordable. The median rent paid on closed leases through the Arizona Regional MLS (not including commercial apartments) was $1,550/month for a median size unit of 1,600 square feet, an annual increase of 8.8% from the $1,425 monthly rent measured a year ago. Since 2014, landlords have accounted for 10-15% of sales each month according to Affidavits of Value recorded with Maricopa County. This is considered a normal level of traditional landlord demand, unlike 2012 which saw a historical high of 34% of sales recorded in a month.

To summarize, housing prices will not be declining in Greater Phoenix anytime soon in 2020 due to the extreme imbalance between supply and demand. Inbound migration continues to outpace outbound migration resulting in a net population gain.

Affordability remains normal for now due to increases in wages and low mortgage rates; and rising rents with few vacancies tells us that demand for housing is real and not driven by short-term speculators this time around.

12 MONTH MOVING AVERAGE SALES PRICE PER SQ. FT. GREATER PHOENIX - ARMLS RESIDENTIAL - MEASURED MONTHLY 1/1/2020

MIMI

Exceeding your Expectations

BY CITY

2018

2019

Glendale

$272,826

$290,218

Phoenix

$324,994

$345,548

Mesa

$305,896

$326,968

Peoria

$333,149

$352,968

Litchfield Park

$362,262

$368,543

Tempe

$347,229

$365,766

Gilbert

$364,294

$388,474

Chandler

$367,983

$386,587

Cave Creek

$534,254

$545,162

Fountain Hills

$569,638

$595,258

Scottsdale

$737,024

$778,256

Carefree

$923,743

$915,234

Paradise Valley

$2,006,319

$2,299,865

2019 SALES STATISTICS

BY COMMUNITY 1/1/2019 - 1/1/2020

METRO PHOENIX

BY THE NUMBERS

$39,172 AVERAGE INCREASE IN SALE PRICE

Community

Average Sale Price

Days on List/Sell # Market Price Ratio Closed

Ancala Clearwater Hills DC Ranch FireRock Gainey Ranch Grayhawk Kierland* McDowell Mountain Ranch McCormick Ranch Silverleaf Troon

$1,287,774 169 97% $2,829,091 148 93% $1,312,542 125 97% $1,471,015 241 94% $1,065,867 146 96% $752,461 91 98% $564,589 67 98% $688,749 72 98% $714,471 86 97% $3,245,461 254 94% $1,091,610 139 95%

46 11 99 25 15 112 37 184 26 48 34

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

Mimi Sadeghi C. 480.217.3305

mimi.sadeghi@russlyon.com www.mimisadeghi.com

If your home is currently listed, this is not a solicitation for that listing.

METRO PHOENIX ECONOMIC SNAPSHOT

Russ Lyon | Sotheby’s International Realty 7669 E Pinnacle Peak Rd Suite 110, 85255

2020