Expert sees rents slightly decreasing, supply increasing - SanTan Sun News SanTan Sun News

Expert sees rents slightly decreasing, supply increasing

May 13th, 2022 SanTan Sun News
Expert sees rents slightly decreasing, supply increasing

By Paul Maryniak
Executive Editor

The average sale price of a single-family house in Chandler has increased 51% in two years and while home prices likely will continue to rise, mortgage rates and an apparent cooling in demand may spell trouble ahead for sellers, a leading Valley housing analyst said last week.

Chandler was not alone in seeing such a staggering increase in average sale prices among 17 Valley cities that the Cromford Report routinely monitors: 12 of the 17 cities saw the average sale price jump by at least 60% between the 17th week of 2020 and the 17th week of 2022. The average sale price of a Chandler home rose from $518,720 to $633,076 in that time, it said.

Valley-wide, the Cromford Report reported that over the past six weeks, “active listing counts are rising very strongly” –  up more than 32% in a month – and called it “one of the most dramatic shifts in direction we have ever seen.”

“If this trend continues for several months the market dynamics will change significantly,” it said.

Cromford Report also called out media reports of a continuing surge in rent, saying the most recent data from the Phoenix metro housing market shows rents are starting to fall slightly, available rental units are increasing and nervous landlords are starting to offer deals to attract tenants.

Over the last few weeks, the Cromford Report has been identifying data that prompted it to state on April 22: “Almost everybody is saying rents are going up. Not in Phoenix, they’re not. With rents going down and mortgage rates and home purchase prices going up, the argument for buying over renting is starting to look significantly weaker.”

Stating that the sellers market is slowly deteriorating in 17 major Valley municipalities, the Cromford Report said that between mid-March and mid-April, Cromford Report noted, “We have seen a 34% increase in the number of new rental listings added to ARMLS (Arizona Regional Multiple Listing Service) compared with the same four weeks in 2021.

It added there has also been a 20% increase in the number of rental homes available over the past four weeks.

And on May 1, it reported, “Supply has been arriving in greater quantities over the past few weeks. This applies to both rental and for-sale listings. The most dramatic rises are in rentals. There were 2,550 new rental listings created in the last four weeks, which is up 45% from the same four weeks of 2021.”

The for-sale active listing count (excluding UCB and CCBS) across all areas & types has jumped 27% in just 4 weeks. This is even faster than we experienced in April 2005. That’s a scary percentage, even though the absolute numbers remain small. If this growth rate persists through May and June, the market will be very different by July.

Cromford Report is not saying rents are heading back to pre-pandemic levels – a scenario no housing expert anywhere is saying is on the horizon.

But what it means, it said, is “renters of single-family detached homes are seeing far more choice than they did last year and we are starting to see homes advertised with ‘the first month’s rent is free.’ Rental supply is particularly strong in Gilbert.

“This appears to be a significant turnaround in the rental market and it does not seem to have been recognized by the media outlets, who are mostly still referring to rising rents. That is so 2021.”

Meanwhile, for those trying to buy or sell a house, the data is mixed but leaving no one much to necessarily cheer about, according to the data supplied by the Cromford Report and various other sources.

The Cromford Report has developed an index for 17 Valley cities that measures how far each is tilted toward either sellers or buyers, with 100 indicating a balanced market. While indices in all 17 submarkets were pointed downward last week, the lowest threshold was 210 in Buckeye while the highest was 537 in Avondale. Chandler was at 406. That means all the markets are still weighted heavily toward sellers.

But Cromford also stated, “Red flag warning. The housing market is changing more rapidly with rising supply and falling demand. While it remains far above normal for now, the (index) is dropping fast.”

It also noted that its Cromford Market Index not only “is accelerating downward,” while it is still “a very hot market, the downward trend is so powerful it appears possible that it will drop below 300 in a matter of weeks rather than months. …We do not know when this decline will bottom out.”

But buyers shouldn’t take much comfort in all this. For one thing, Cromford noted, “Prices will continue to rise for many months since they are trailing indicators of market conditions.”

In a report April 30, it looked at monthly average sale prices in the 17 Valley submarkets it monitors for the 17th week of 2020 and compared it to that of this year. The average percentage different between the old average price and the current one was at least 50% in all but three of the 17 communities: Tempe, 48%; Sun City, 46% and Fountain Hills, 34%.

But don’t feel sorry for Fountain Hills: it posted the fourth highest average sales price in the Valley with $922,843 – behind only the three communities with seven-figure average home sale prices: Paradise Valley, $4.35 million; Scottsdale, $1.46 million; and Cave Creek, $1.15 million.