Greater Phoenix Blue Chip

THE NEW HOME MALAISE CONTINUES…

First Quarter, 2026

Elliott D. Pollack & Company

Greater Phoenix single family permit data for the first two months of 2026 show a market that is having a difficult time. Compared to last year, January permits were down almost 35% and February single family permits were down almost 8%. The March numbers will be out in the middle of April. So, right now favorable demographics are being overwhelmed by a combination of affordability issues. Currently principal and interest payments for the family median price single family home in Greater Phoenix are 42% of median household income compared with a historic norm of about 28%. Other factors include economic uncertainty, a significant reversal in net immigration to the U.S. (now at the lowest level in 40 years), the lock in effect of the low interest rates prior to 2023 that has slowed housing turnover and interstate migration in the U.S., and slow and erratic job growth.

Several factors have delayed household formation including:

• Young adults (18-34) still living at home with their parents.
• 20-somethings delaying marriage.
• Couples who get married are staying married longer (fewer divorces).
• Boomers living longer and healthier and thus staying in their homes longer.

The huge decline in net immigration into the U.S., combined with the other factors mentioned, has significantly affected both single family and apartment demand. All of these things delay demand. It is a temporary issue, but no one knows how temporary. On the positive side, the largest population group today is 32-38 year olds. This will push up home buying over the next several years as well.

Where are young families moving to? Not surprisingly, they are moving from high housing cost areas to low housing cost areas. And while the Greater Phoenix area is still growing, the rate of growth has clearly slowed. This is likely to continue for a while. Consumers making less than $150,000 are pulling back on bigger expenditures and believe it is a bad time to buy a home. The cure for this includes lower interest rates, a decline in home prices, an increase in the number of smaller, less expensive homes being delivered by homebuilders, and continued increases in real incomes. It will also take some common sense on the part of government. That’s a lot to ask for, especially at the Federal level where congress is working on legislation (21st Century ROAD to Housing Act) that would reduce, not increase, new supplies of Build for Rent product at the exact time when new affordable supply of all types of housing is sorely needed.

The current bad news will hopefully turn into better news as the longer-term outlook is expected to improve. We will get through this. Just not today.

GREATER PHOENIX BLUE CHIP: RESIDENTIAL