Valley housing prices broke a slew of records in 2020 - SanTan Sun News SanTan Sun News

Valley housing prices broke a slew of records in 2020

January 25th, 2021 SanTan Sun News
Valley housing prices broke a slew of records in 2020

Executive Editor

The Phoenix Metro housing market broke a load of records in 2020, according to a web service that closely watches home sales in Pinal and Maricopa County.

The Valley market broke records for highest listing success rate, highest average price for monthly and annual sales and highest square foot price for listings as well as monthly and annual sales – among others – according to the Cromford Report.

Those price records also are reflected in new data from Standard & Poor’s Case Shiller Home Price Index for June-October – the latest data available, Cromford noted.

Of the 19 largest metro markets in the country, it said, Phoenix exceeded the national average increase for home prices, though it fell to third place behind New York and San Diego, respectively.

Cromford also reported that on Dec. 15, the contract ratio in the Phoenix market hit an all-time high of 180.

Contract ratio “specifically measures the number of completed sales contracts relative to the supply of active listings,” it has said, explaining that “the higher the number, the greater the buying activity relative to supply.”

If this number rises, it is a sign of growing contract activity and a positive signal for sellers.

But may not come as a big surprise for homebuyers in the Metro Phoenix market who have seen prices rise and the inventory of affordable homes continuing to shrink over the past year.

Cromford said that even though the contract ratio fell on Christmas to 171.6, it called it “still a freakish number for the last week of December, noting the contract ration for the last week of 2019 was only 63.

For smaller parts of the Valley market, moreover, Cromford said, “the contract ratio has become outlandish, confirming just how unbalanced this market is.

“Selling a home is easier than falling off a log, but buying one can be a very difficult and discouraging task,” it said, echoing the frustration many homebuyers have been feeling.

How outlandish was demonstrated in Cromford’s contract ratios for several Valley communities. El Mirage posted a staggering 589 while Gilbert and Maricopa had contract ratios of 326 and 364, respectively. Chandler was at 345 while Tolleson 450.

To get a better idea of what those numbers mean, Cromford explains, “Higher priced locations tend to have consistently lower contract ratios, so a very hot reading for Paradise Valley would be anything over 25. For Scottsdale anything over 50 would be considered very hot, while for most of the market, values over 100 would indicate similar strength.”

“The areas that are primarily focused on the 55+ market are relatively cool,” it added. “Sun Lakes is at 112 while Sun City is at 116 and Sun City West is reporting 106. Normally these would be considered hot readings, as normal would be around 40, but relative to the rest of the market right now, they are rather unimpressive.”

In what was its most dire description all year, Cromford also said the Valley’s housing supply “is collapsing in so many areas.”

“Not only do we have fewer homes for sale, the ones that remain available are at a very high average price,” it continued, noting that in two weeks last month, “the supply of single-family homes in the city of Phoenix has dropped 12 percent while the average list price has risen 2.2 percent.”

Compared with this time last year, the supply of single-family homes in Phoenix is down 54 percent while the average price is up 22 percent.

“And Phoenix is not even an extreme example. For that we recommend Gilbert, where supply is down 66 percent since last year and the average price is up 27 percent. We should also remember that supply was 53 percent below normal in December 2019, so we thought that was a very tight supply at the time.”

For frustrated buyers who are still renting and may be inclined to wait until the market cools – a prospect no one is predicting in the short term – Cromford had equally dismal news.

“The rental market in Greater Phoenix is just as crazy as the re-sale market,” it said.

“We see that the average lease price per square foot per month is up 15 percent from this time last year, rising from $1.01 to $1.16. This is across all dwelling types. If we focus exclusively on single-family rentals then the average lease price per square foot per month has risen from 94 cents to $1.11. This is an 18 percent increase, so it seems clear that the rent for single-family homes is rising faster than for attached properties.

“Townhomes are up from $1.20 to $1.30, a rise of 8 percent, while apartments are down from $1.43 to $1.42,” it added.

Cromford said there’s a reason why apartment rental costs increased only 4 percent while the cost of renting townhomes and single-family homes soared:  ”Apartments appear to be much less sought-after thanks to the pandemic. This is a pattern that is being repeated around the world. Working from home increases the desire for more space and a yard.”