Greater Phoenix Blue Chip
ROUGH SLEDDING
First Quarter, 2024
Elliott Pollack
The housing market is having a rough go of it. Housing affordability nationally and in the Greater Phoenix area is near its lowest level perhaps ever. This is due to a combination of the highest mortgage rates in years combined with a record level of the housing price-to-income ratio (see charts 1-5). The number of existing homes on the market is at an unusually low level due to 75% of existing homeowners having a mortgage with a rate below 4% while today’s rates hover above 7%. In addition, tastes in home design and look have changed making older homes less competitive. This has pushed many potential buyers into either apartments or new homes. The competitive edge for apartments has improved as the supply/demand equation for that product is forcing down rents thus reducing the monthly cost of an apartment. In addition, new home builders now have a competitive advantage in several ways. For example, they can buy down rates for some time giving buyers plenty of time to refinance at a later date. The design of a new house can be fresher and more up to today’s needs and wants. And a home can be smaller with fewer amenities thus making it more affordable. This is why the percentage of new home sales as a percent of total sales is now the highest since the housing bubble. This can also be seen in the data. Year-to-date in 2024, existing housing sales in Maricopa County have been down by 6.2%. But new home sales were up 2.6%. Single family permits were up over 20% while apartment permits were down over 25%.
Permits in the greater Phoenix area fell off a cliff in the second half of 2022 and did not recover until August 2023. Thus, the comparisons for single family permits were easy in the first quarter of this year and should be relatively easy in the second quarter. So, despite all the issues the housing market now faces, new single family permits in Greater Phoenix are forecasted by the panel to be up in 2024 and again in 2025.
GREATER PHOENIX BLUE CHIP: RESIDENTIAL
| 2024 | 2025 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Single Family Permits | Multi-Family Permits | Apt. Vacancy (Q4 %) | Apt. Absorp. | Single Family Permits | Multi-Family Permits | Apt. Vacancy (Q4 %) | Apt. Absorp. | ||
| CBRE | 29,550 | 12,050 | 7.3% | 16,675 | 34,590 | 13,200 | 6.7% | 7,752 | |
| Elliott D. Pollack & Co. | 27,000 | 10,000 | 7.5% | 10,000 | 29,000 | 8,000 | 8.5% | 9,500 | |
| Griffin Consulting | 26,000 | 12,400 | 5.3% | 14,000 | 28,000 | 13,000 | 5.1% | 14,000 | |
| Land Advisors | 21,500 | 7,500 | 7.0% | 17,000 | 22,500 | 9,000 | 5.5% | 18,500 | |
| Nathan & Associates | 23,000 | N/A | N/A | N/A | 24,000 | N/A | N/A | N/A | |
| South West Growth Partners | 25,500 | 8,500 | 7.2% | 9,000 | 26,000 | 6,000 | 7.5% | 7,500 | |
| Univ. of Arizona Eller College | 27,685 | 16,245 | N/A | N/A | 27,612 | 13,084 | N/A | N/A | |
| CONSENSUS | 25,748 | 11,116 | 6.9% | 13,335 | 27,386 | 10,381 | 6.7% | 11,450 | |
MARICOPA COUNTY MORTGAGE PAYMENT CHANGE
| March 2021 | March 2024 | |
| Median Sales Price – New | $391,640 | $513,285 |
| Median Sales Price – Existing | $360,000 | $459,000 |
| Mortgage Rate Only | 3.08% | 6.82% |
| Interest & Principal – New | $1,501 | $3,018 |
| Interest & Principal – Existing | 31,069 | 21,592 |
Mortgage payments for a new home have increased 101% and 96% for an existing home since 2021 – LTV 90%
Source: Freddie: Information Market