Unprecedented demand pushes Valley home price gains to No. 1 in the nation
Source: Phoenix Business Journal | Angela Gonzales
Once again, Phoenix has reported the highest year-over-year gains in home price growth, well ahead of other key U.S. cities.
With a 9% year-over-year gain in May among 19 cities measured by the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, Phoenix was followed by Seattle, at 6.8% and Tampa, Florida, at 6% growth. The national average was a 4.5% annual gain, down from 4.6% in the previous month.
Phoenix-area housing demand continues to skyrocket, while supply languishes, said Jim Belfiore, founder of Phoenix-based Belfiore Real Estate Consulting.
“The perfect storm is here, and with mortgage interest rates so low, buyers should expect home prices to continue to rise unabated,” Belfiore said.
Inventory continued its downward trend to 1.5 months of inventory, with less than 25% of current listings priced at $300,000 or less, said Thomas Brophy, national director of research and analytics for Colliers National
Even despite the surge in prices, the average home sales price in the Valley in June was $305,000 — about $70,000 less than the national average sales price — while the median price was $368,600, according to the Arizona Regional Multiple Listing Service.
Demand has never been higher, Brophy said,
“Not only is demand accelerating, and this is true across both single and multifamily product types, but mortgage rates have continued to remain at or near all-time lows,” he said.
Selma Hepp, deputy chief economist for CoreLogic Inc. (NYSE: CLGX), told the Business Journal that home buying fundamentals driven by demographics and favorable mortgage rates suggest housing demand will remain solid.
“Phoenix maintained its home price growth rate for the 12th consecutive month with an increase accelerating to 9% compared to last May,” Hepp said.
Jessica Morin, director of market analytics for CoStar Group in Phoenix, said the region’s continued population growth is feeding into the trend.
“Robust population growth, a moderation in single-family home building over the past decade, and historically low mortgage rates are driving demand for housing and pushing up pricing,” Morin said. “Similiarly, among largest multifamily markets, Phoenix ranks among the top five for annual growth rent.”
Plus, she said, multifamily rents in metro Phoenix increased 3.2% over the past 12 months, which is above the national average of 0.3%.
To paint an even brighter picture for the Valley, metro Phoenix had the lowest unemployment rate of all the Metropolitan Statistical Areas with more than 1 million in population as of 2010 Census, Brophy said.
The Phoenix MSA added nearly 27,000 jobs in May and another nearly 17,000 in June, he said, as many businesses were rehiring after cutting payrolls drastically in April.
Usually, between May and July are the weakest job growth months, he said.
“In fact, going back over the last decade, Phoenix MSA always chocked up a negative job loss over the May through July months,” Brophy said. “Nonetheless, beginning in August through the end of the year are generally our strongest months for job growth averaging 110,510 jobs per period since 2010, with the last three years averaging over 120,000 jobs.”
Gazing into his crystal ball, Brophy sees an improving economy within the next few months.
“While there is significant near-term volatility, if this job trend pattern holds, and there’s no new lockdowns and a whole host of other things that could delay the recovery, we could see a return to job market ‘normalcy’ by the end of the year or, in the least, within striking distance of our previous employment highs,” Brophy said