REAL ESTATE
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THE CHANDLER ARIZONAN | WWW.CHANDLERNEWS.COM | SEPTEMBER 19, 2021
From Uptown to Downtown, we cover Chandler like the sun
Market ‘precarious’ for buyers and sellers, expert says BY PAUL MARYNIAK Arizonan Executive Editor
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riven by iBuyers and investors that are gobbling up substantial numbers of houses, Valley home buyers and sellers may be entering a disquieting and even “precarious” period while renters are facing a continuing rise in rents, judging by the latest observations by a leading analyst of the Phoenix Metro market. The Cromford Report outlined a series of trends from August sales and listings that likely won’t bring many smiles to anyone but landlords. “Many surprising changes have occurred in the market over the past month,” Cromford said as it reported that the average sale price per square foot soared by 27.9 percent between August 2019 and last month, up from $194.97 to $249.31. That pushed up the monthly median sales price in the same time period by 23.4 percent, from $325 to $401,000. Several developments in August caught the Cromford Report’s eye, particularly a decline in new listings that appears to have been driven by a spending spree by large investors and iBuyers. “Ordinary home buyers are losing some of their motivation, thanks to prices that are vastly higher than last
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year,” Cromford said. “Despite low interest rates, affordability has slipped below the normal range for Greater Phoenix.” The report stated, “If it were not for the activity of investors and iBuyers – and particularly the latter – the market would have cooled during August. This would have been following the trend established since April. “However, iBuyers have purchased so
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many homes over the last month that they are significantly distorting the market dynamics. These homes are mostly going to be re-marketed shortly, so they will almost certainly increase supply over the coming weeks.” Cromford noted, “iBuyers have made offers well in excess of the pricing that we saw from them” in the first half of 2021. He said it is unclear how iBuyers will price their homes once they return them to the market because “normal buyers no longer have the appetite” they showed through June 2021. “Achieving sale prices well over cost could prove quite tricky” for the iBuyers, it suggested. Cromford noted that iBuyers purchased about 2,869 homes over the last three months, which “represents almost 9 percent of resale purchases.” They also have not sold as many as they have bought, though they are selling more to institutional investors, the Cromford Report stated.
Moreover, it noted, the prices paid by iBuyers for homes are 53-75 percent higher than they were paying a year ago, even though the median price of homes sold in the Phoenix Metro region has increased 26 percent. The iBuyer and investor buying spree has sharply impacted the availability of resale homes, it said. “We can see that the iBuyers (particularly Opendoor and Zillow) have increased their inventory massively,” the Cromford Report said. “If iBuyers had not done this, we estimate that supply would already be higher by some 1,800 listings…We conclude that pricing would also be weaker without their intervention. This begs the question: what happens if they stop buying on this massive scale?” “Investors, too, can decide to stop their buying spree at a moment’s notice. The market is therefore more precarious than if demand were primarily growing through owner-occupiers,” it added. The news is a lot happier for investors that rent – and not so hot for their tenants, judging by the Cromford Report’s findings. “Investors intending to rent out their properties are a different matter and the rapid rise in rents over the past year has justified them splashing out,” it said. “Indeed, far more homes are going from iBuyers straight to the rental operators than we saw prior to July 2021. This takes homes off the re-sale market for a long time and reduces supply.” It also noted “large scale investors with deep pockets are crowding out smaller investors.” “We have seen larger buying sprees from investors before, notably between 2011 and 2013,” it continued. “However we have never seen iBuyers so determined to increase their top line.” The average rental price per square
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