Metro Phoenix homebuyers won’t get a reprieve from rising prices anytime soon as competition for houses heats up again.
The Valley’s housing market isn’t expected to be as frenzied as it was in 2021, but prices are on track to keep steadily climbing until probably May, according to real estate analysts.
The median home price in the Phoenix area hit a record $427,000 in December, up 28% for the year, according to the Arizona Regional Multiple Listing Service.
That number is expected to climb to $430,000 in January, based on pending sales.
The market slowed a bit last summer as the supply of homes for sale ticked up, which gave more potential homebuyers hope. But listings dropped again in December.
“Normally, at this time of year we have around 16,000 houses listed for sale in metro Phoenix,” Tina Tamboer, senior housing analyst with the Cromford Report, recently told more than 100 real estate agents at Bobby Lieb’s HomeSmart Elite meeting. “Now we have less than half that many.”
She said it’s still a very strong seller market.
How low can listings go, prices rise?
In December, there were 8,648 houses for sale across metro Phoenix, according to Arizona Regional Multiple Listing Service. That’s a 21% drop from November and an almost 12% decrease from December 2020.
Tamboer said prices could climb 1% or more a month this year.
Agent Christa Lawcock (left) walks through some of the previous inspections with Mike and Lynne Sherman as they wait for the inspector to conclude his inspection in a home in the historic Encanto neighborhood in Phoenix on May 21, 2021.
During the first half of last year, prices climbed about 3.2% a month, according to the Cromford Report. But when the supply of homes for sale started to climb last summer, price increases fell to about 1.3%.
The Valley’s median home price climbed $95,000 in 2021 from $333,000 in December 2020. The median was a much more affordable $290,000 at the end of 2019.
2021’s home price jump isn’t the biggest one in recent metro Phoenix history. The Valley’s median climbed 40% during the boom year of 2005, and 31.6% during 2012, when the housing market began recovering from the crash.
Home sales climbed 3% in December from November and ended the year with the highest total — 129,544 — since 2005, when 177,395 sold, reports Arizona Regional Multiple Listing Service.
“We begin 2022 with the lowest number of active listings at year’s end on record,” said housing expert Tom Ruff with Arizona Regional Multiple Listing Service’ Information Market research group.
He said the big unknowns that could affect the housing market this year include inflation, rising interest rates and Wall Street’s homebuying spree.
Investors are wildcard buyers
So-called “iBuyers” and corporate investors are snatching up a growing share of Phoenix-area homes, outbidding many first-time buyers and pushing up prices.
Agent Christa Lawcock (center) talks with Mike and Lynne Sherman as they wait for the inspector to conclude his inspection in a home in the historic Encanto neighborhood in Phoenix on May 21, 2021.
Analyst Ivy Zelman, known and respected for pre-crash warnings during the housing boom of 2004-06, is calling Phoenix the No. 1 market in the U.S. for big corporate investors and iBuyers like Offerpad and Opendoor.
The Wall Street-backed investors purchased between 15% to more than 20% of Valley houses a month during the last four months of 2021.
Deep-pocketed buyers are drawn to metro Phoenix’s population growth, rebounding job market and rapidly rising rents.
iBuyers flip homes, but most corporate investors turn them into rentals.
Rents in metro Phoenix are soaring, and investors are snatching up both houses and apartments.
The average rent on a Phoenix-area home or condo climbed almost 20% last year to hit $2,035, according to national research firm CoreLogic. That increase is second only to Miami in the U.S.
Valley apartment rents climbed a staggering 29% in 2021, compared to 4.3% in 2020, according to ApartmentList. That puts the Phoenix-area in the top 10 cities for the fastest growing rents in the U.S. The rent on a typical two-bedroom apartment is now $1,488.
If these investors slow their buying sprees, supply could climb and prices flatten or not climb as fast. Both would shift the Valley’s housing market more towards buyers.
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When will the housing market cool?
The first sign of a housing market that is beginning to slow off the frenzied pace of the past two years will be when list prices began to fall, Tamboer said.
During the last few months of 2021, about 40% of Valley houses were selling above their listing prices.
If listing prices dip, the next signs of a cooldown will be sellers beginning to offer buyers home warranties and then starting to agree to pay for repairs.
Neither is a big trend now, and Tamboer said the current data shows the market won’t stop favoring sellers for awhile.
“The market isn’t going to get better for buyers anytime soon,” Tamboer said.
Reach the reporter at Catherine.Reagor@arizonarepublic.com or 602-444-8040. Follow her on Twitter @Catherinereagor.
AUTHOR: Catherine Reagor