Metro Phoenix Housing … On Fire? Coasting? Headed for Dumpster?

2020 through 2021 ranks right up there with any other period for unimaginable metro-Phoenix housing market activity. The few following charts illustrate the activity and current status.

There was an interesting article regarding the metro-Phoenix housing market in most recent issue (Dec 2021) of the AZ Journal of RE and Business by Fletcher Wilcox, an Analyst with Grand Canyon Title and Founder of TheWilcoxReport.com. Below are some graphics from that article.

The following chart illustrates the rather surprising correlation between the monthly rent and the sale price for a SFD (single-family-detached) home in the metro-Phoenix area:

…. Sale Price = 200 x Rent
… for the last year anyway, an easy “rule-of-thumb” to keep in mind

Even at the now-elevated prices for metro-Phoenix, just 17 years of rent would typically pay the principal for a home purchase.

Sale Price verses Rent

 

The following chart illustrates the current “pausing” in the local for-sale housing market, pausing for the cities listed in red anyway.

The migration to Arizona from California, and elsewhere, has slowed somewhat, likely due to both the increase in prices here over the last 18 months and due to the season.

Home sales in metro-Phoenix have receded from a high in the April – June period to a low in December every year for many decades, with 2020 being the only exception. 2021 is seeing a more normal version of that annual cycle.

It is very likely that the very high increase in demand will restart mid-January, as normal for the cycle.

Metro-Phoenix Housing Market Pause 2021

 

The chart below illustrates the change in volumes for home sales and new listings, change in rentals volume, as well as the change in median sale prices and rents … city-by-city from Oct. 2020 to Oct. 2021.

It’s a short story:

  • most sales volumes were significantly down
    … but sales match the new listings numbers… what got listed got sold
  • all rental volumes were significantly up
  • for real estate, these price increases are astounding

Sales + Rentals Oct 2021-2022

Of course, a foundational issue for the home sales market has been the very low home-purchase interest rates, perhaps the lowest in my lifetime. The chart below presents predictions by the sources of most of this money, Freddie Mac, Fannie May, and conventional lenders, as published recently in the Mortgage Bankers Association newsletter.

Not surprisingly, interest rates are expected to increase, but still hold to levels supporting home purchases.

For sure, for both price and interest rate, buying sooner will very likely be much better than later.

Interest Rate Forcast 2022

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