As we come to the end of the third quarter and we enter the fourth quarter of the year, we wanted to take a look at both home prices and rental prices. Here in Phoenix, we have had a record-breaking year in terms of home price appreciation and market forecasters continue to wonder how long this real estate market performance will continue. And while this performance is great for property sellers, it remains challenging for buyers trying to have their purchase offers accepted to buy a home. Let’s look at some of the factors driving Phoenix Home Prices to new heights in the article that follows.
Phoenix Remains Strong in Net In-Migration
Demand for residential real estate remains strong in every price level and in most sub-markets across the Phoenix area. Quite a bit of the demand is driven by continued strong in-migration into Phoenix from a number of areas. But the data continues to show that many of those new Arizona residents are leaving California and migrating to Phoenix. They are selling their homes in California and buying bigger homes with more space at a price much less expensive than the city they are leaving in California.
According to Thomas Brophy, research director at Colliers International, there are 262 people moving into the Phoenix area each day, a 25% increase from the 210 people that were moving here each day prior to the coronavirus pandemic. These people are buying homes when possible and keeping the demand for rentals equally strong when finding a home in this competitive market is proving difficult.
Phoenix Home Prices Continue to Increase at a Record Pace
The Case-Shiller U.S. National Home Price Index was released this week for July and it shows that home prices in Phoenix continue to increase at a break-neck pace. Home prices here in Phoenix showed a 32.4% year over year increase which led the nation in appreciation. Nationally, the index reported a 19.7% annual price increase for homes in the U.S., up from 18.7% in June. In the 20 City Composite index published by Case-Shiller, home prices in 19 of the 20 cities tracked now stand at all-time highs.
The analysis of the data by the Case-Shiller team suggest that people are continuing to move from urban apartments to suburban homes and to warm weather cities and areas. Home prices have been strongest in the Southwest and West and this trend analysts believe will continue.
Phoenix Rental Prices Continue to Climb
The average monthly rent for a 3 bedroom single family home in the Phoenix area is $1,830 according to CoreLogic. Compared to other large metro areas around the US this is still relatively affordable and remains a factor why people continue to move to the area for an affordable cost of living.
While rent still may be affordable in the Phoenix area, Phoenix had the highest year over year increase in single family rents at 18.9% according to the Core Logic Single Family Rent Index. The team at Core Logic also found that rents are increasing at a faster pace in luxury rentals rather than lower price rentals, suggesting that there are more higher income people moving to the area than lower income families.
What’s Next for the Phoenix Housing Market?
With people continuing to move from large urban cities in the East and Northeast seeking warmer weather in a more suburban environment, cities in the West and Southwest will remain the beneficiaries of new residents settling in the area to start a new life. With that said, home prices in Phoenix are predicted to increase by 20% or more in the next 12 months as strong demand for residential property continues to push prices up.
According to the Zillow Home Value Index, the five States expected to see the highest home price increases through August 2022 are California, Arizona, Nevada, Utah, and Idaho. These home price predictions reflect trends that we have seen for the past year of people seeking cities where they can spread out, living in a warm weather environment, possibly buying a larger house than the house they are leaving, and somewhere they can enjoy the outdoors more than they have in the past.
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