Despite reports that the Phoenix metro’s housing market may be cooling, the Valley once again is leading the nation in home price growth.
Phoenix saw the highest year-over-year home price growth in June, at 29.3%, according to the latest S&P CoreLogic Case-Shiller Indices. That’s the 25th consecutive month Phoenix has led the nation in the report.
The Valley was followed by San Diego and Seattle, which respectively saw year-over-year increases of 27.1% and 25%. All 20 cities reported higher price increases in the year ending June 2021 versus the year ending May 2021.
“As has been the case for the last several months, prices were strongest in the Southwest (+22.7%) and West (+22.6%), but every region logged top-decile, double-digit gains,” the report stated.
In its August KnowledgeBase research report released on Aug. 27, Zonda reported that housing demand was flat from July to August. New home sales were down 31% in August from the annual peak month of May and 15% lower this August from August 2020.
In another indicator of the Valley’s cooling housing market, single-family homebuilding permits in July were down 7% from July 2020, new home closings in July also were down by 18% from July 2020, according to a housing report issued by RL Brown Housing Report.
On the national level
The latest Case-Shiller report put the average national home price growth in June at 18.6%, up from 16.8% a month earlier and from 14.8% in April. All 20 cities in the report’s composite reported higher price increases for the year ending June versus the year ending in May.
“June 2021 is the third consecutive month in which the growth rate of housing prices set a record, Craig Lazzara, managing director and Global Head of Index Investment Strategy at S&P DJI, said in a statement. “The National Composite Index marked its thirteenth consecutive month of accelerating prices ….”
“We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the Covid pandemic, as potential buyers move from urban apartments to suburban homes,” Lazzara stated. “June’s data are consistent with this hypothesis. This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing. More time and data will be required to analyze this question.”
What about next year?
A separate report from online home services portal Porch Group Inc. predicts that Phoenix home prices will increase over the next 12 months by 26.2%, the second-highest percentage increase in the country for large cities, behind Austin, Texas, which has home price growth pegged at a whopping 37.1%.
San Diego, California, ranks third, with a projected home price growth of 24.7% by August 2022.
Seattle-based Porch Group (Nasdaq: PRCH) crunched national home sales data from Zillow, Redfin and the U.S. Census to make its home price predictions.
According to the Zillow Home Value Index, the five states expected to see the highest price increases through August 2022 are California, Arizona, Utah, Idaho and Nevada. Meanwhile, anyone who tried, successfully or not, to purchase a home in the past 12 months knows it was a tough grind. According to the report, more than 60% of buyers were putting offers on houses sight unseen and the number of homes being bought without an inspection nearly doubled compared to the previous year.
Despite some reports from Valley brokers about a recent slight cooling in prices, the predicted 26.2% increase in Phoenix home prices would still surpass the prior year’s growth of 23.5%. Porch Group lists the current Phoenix median home price at $367,484 with a sale-to-list price ratio of 102%.
With a median household income of $67,896, Phoenix has a home-price-to-income ratio of 5.41.
Prices in Tucson, meanwhile, are predicted to rise by 18.6% in the next year, down slightly from 19% in the past 12 months, based on an average median home price of $273,526. That ranks the city at No. 15 on the list, just behind Sacramento, California.
In the ranking of small cities, Flagstaff is predicted to see the fourth-highest price percentage increase in the country by August 2022 at 25.2% (median home price $463,091). The median household income in Flagstaff is $56,169, giving it a home-price-to-income ratio of 4.87.
Flagstaff falls in behind No. 1 Santa Cruz, California (28.9%), Bend, Oregon (28.7%) and St. George, Utah (25.7%) in the ranking of small metros.
Sierra Vista, the other small Arizona city mentioned in the report, is expected to see a home price increase of 7.2% (median price $183,652).
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