2020 will go down as a great year for homeowners and a bad one for renters.
Despite the COVID-19 pandemic, metro Phoenix home prices increased faster than in any year since the housing boom, boosting many homeowners’ equity to the highest level since the crash.
A lot of homeowners struggling during the pandemic received relatively easy forbearance agreements with their lenders that helped them hold on to their homes.
And homebuyers were able to tap record-low interest rates and see their house appreciate in months after they moved in.
But most Phoenix-area renters saw their monthly payments climb as their incomes fell. Unlike in other parts of the U.S., rents didn’t decline in the Valley during 2020.
An influx of residents from pricier housing areas on the West and East Coasts helped drive up both rental and housing costs in metro Phoenix.
Eviction bans and rental aid helped many Arizona renters, but some were evicted wrongfully. Others didn’t get aid fast enough in Arizona and lost their homes.
Bigger gap in housing
The pandemic has widened the gap between homeowners and renters.
ASU economist Dennis Hoffman said it’s clear that renters, many of whom are service workers with lower-paying jobs, were hit the hardest financially by the pandemic.
And those are the people who already were struggling to afford housing.
The “winners are well-to-do individuals who have existing homes, have stable professional positions, are computer savvy and can work from home,” he said. “Many have saved considerable amounts of money during the pandemic. And a considerable portion of this savings is going toward new investment and reinvestment in housing. This further drives up the cost of housing for those left behind.
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“So, the winners are exacerbating the affordable housing problems faced by the losers. The situation results in a perpetual cycle of poverty.”
Hot housing market
Demand from buyers far outpaced the supply of Valley houses for sale in 2020, except when the pandemic first hit during March and April. Bidding wars for homes priced below $500,000 have been the norm since mid-May.
Many homeowners could sell for tidy profits but would have had to pay the same higher prices or rising rents to move, so they didn’t.
The imbalance and bidding wars pushed up metro Phoenix’s median home price, which climbed 17% in 2020, according to the Arizona Regional Multiple Listing Service.
Higher home prices gave struggling homeowners, who couldn’t get forbearances, the option to sell. That’s a big reason foreclosures remain at record lows in the Valley.
“We begin December with 28.2% fewer homes for sale today than we saw one year ago,” said Tom Ruff, housing expert with ARMLS’s Information Market. “At the same time, demand increased 27.4% year-over-year, with ARMLS reporting the highest sales volume for any November in history. Low supply and high demand can only mean one thing: higher prices.”
Rents climb, too
Demand for rentals in the Valley was strong, too, during 2020.
Despite tens of thousands of new apartments opening up in metro Phoenix in the past few years, rents climbed more than 4% during the pandemic, according research firm YardiMatrix.
But rents in New York, San Francisco, Los Angeles and Washington D.C. fell.
Growth watchers say renters, who can work from home and aren’t tied to a city anymore, moved from those high-cost cities to Phoenix, Sacramento and cities in the Midwest.
Metro Phoenix was the seventh most popular place for people to move in 2020, according to move.org’s top 10 list. The region didn’t rank in the top 10 for places people moved from last year.
The Valley’s more affordable suburbs are seeing the biggest rent increases.
Research from AdvisorSmith that looks at smaller suburbs of big cities shows Avondale had the highest rent jump in the U.S. – 14.3% in 2020. Surprise ranked No. 6 on the top 10 list, with an 11.2% increase.
More help needed for renters
In the most recent Household Pulse Survey from the U.S. Census, about 10% of Arizona renters said they weren’t caught up on their monthly payments to landlords.
About $90 million in federal dollars went to rental aid in Arizona during 2020. But it wasn’t enough to help the state’s many struggling tenants and their landlords.
Arizona renters owe at least $178 million to their landlords, and as many as 250,000 renters could be facing eviction, according to National Council of State Housing Agencies.
The extension of the Centers for Disease Control and Prevention eviction ban to the end of this month will help if the $25 billion in rental aid approved through the latest federal relief package gets distributed fast.
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States don’t know how much of the rental aid they will receive yet, but all are guaranteed at least $200 million.
Nationally, housing groups wanted another $100 billion in federal aid to help low-income renters hurt by the pandemic.
Bigger unemployment benefits and stimulus checks will help struggling renters, but those are short-term fixes for people struggling because their jobs have gone away and might not come back.
Housing advocates want the eviction ban extended to March 31.
Many hope that help for struggling renters and landlords will be near the top of President-elect Biden’s agenda.
Reach our housing reporter at firstname.lastname@example.org or 602-444-8040. Follow her on Twitter @catherinereagor.
AUTHOR: Catherine Reagor