TR_October_2020

HOME PRICE METRICS Coming into 2020, Phoenix SFR home prices have been rapidly rising, supported by the large pop- ulation increase and robust econ- omy creating new jobs and wage increases. As of June 2020, the median single-family home value in the Phoenix MSA was $325,000, a 5-year increase of 40 percent and averaging over 8 percent year-over- year growth since 2012. The Phoenix MSA is third in the country for new single-family con- struction. The Census Building Per- mit Survey shows 21,300 total unit permits and 13,500 SFR permits YTD through June 2020. Seasonal and new-buyer demand from historically low interest rates, plus below average inventory, has led to home price increases be- tween June and July of over 2.5 percent. Phoenix MSA Home Price Forecast through 2021 The historically low interest rates

and comparatively high rental pric- es will continue to motivate buyers to compete for available inventory through the fall and winter. Prices will remain supported in the near term due to reduced inventory, low interest rates, seasonal demand, and buyer motivation towards single-family properties in more suburban areas. However, any further resurgence in COVID-19 cases in the fall-winter flu-season period could restrict the economy and slow purchase activ- ity. Those who do not qualify for a forbearance extension or loan-mod may affect prices by adding invento- ry at discounted prices. Risks include tighter lending restrictions, a slow recovery for the job market, new-buyer attrition, and increasing defaults from non- GSE loans. Buyers and investors will be expecting to find deals at a discount, and this sentiment will put downward pressure on prices. 2020 (H2) SFR Housing Price Fore- cast: +2 percent to +5 percent 2021 Phoenix home prices should

remain stable if COVID outbreaks remain controlled, leading to a return in jobs. Real (non-stimulus) income will stay flat or decrease slightly as the economy ramps up. Mortgage interest rates are pre- dicted to remain low through next year, and any dip in prices should encourage demand from both homebuyers and investors. Demand will stay elevated in the suburban areas, while demand in the more populous areas will be muted. If interest rates climb, this will be a negative factor for the market by slowing purchase activity. Other risks for 2021 include vari- ability around expiring forbearance and eviction policies. Once the con- sumer protections expire, spikes in foreclosures and evictions will have a negative effect on prices. 2021 SFR Housing Price Forecast: -5 percent to +5 percent Disclaimer: The variability around this forecast is wide and dependent upon data available as of June 2020. The severity and duration of the COVID-19 epidemic, as well as the response of the public and policymakers, continues to change daily. Rental Rates Phoenix has been the hottest market for single-family rental price appreciation over the last five years, boasting the #1 increase in rent prices of 45 percent. As of June 2020, the median three-bedroom, SFR home in the Phoenix MSA is $1,685/mo. Year-over-year change for a three-bedroom detached SFR is up nearly 5 percent, which is an $85 annual increase. Across the metro, zip-code level three-bedroom SFR rents have a wide range of $1,300 to $2,750.

Current Rent Price

Rent vs Income

Current Home Price

3Bd SFR Rental Price

Rent Vs Income Ratio

SFR Home Price

$1,200

$2,000

20.0%

40.0%

$150,000

$500,000

88 | think realty magazine :: october 2020

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