YEAR-END 2022 REAL ESTATE MARKET REPORT

Those of us in the real estate industry are always asked “How’s the Market?” In our current market, it’s understandable that our clients might be skeptical when we respond with “It’s Really Good!” So, to prove our point, here’s some perspective!

First, let’s acknowledge that the market is decidedly slower than it was one year ago. THANK GOODNESS! The over-active market we were in during the past few years – especially in late 2021 and early 2022 – was not sustainable. So, when the media portrays “declining sales” let’s all understand ... that’s a good thing! And yes, there will be some price reductions in some markets and in some price categories. Those markets are typically more susceptible to the temperature set by interest rates. The good news is that there is an abundance of buyers who still would love to buy a home, and softening prices help those folks.

But, you ask, what about the folks selling those homes? Well, if they owned their home for more than a couple years, they are still likely to have a good deal of market influenced appreciation. According to the Case-Schiller Market Index, average values in the Phoenix marketplace were 31% higher in 2022 than 2020; between 2017 and 2022, prices increased 54%.

MARKETS SHIFT. THEY HAVE TO!

Markets shift. Some years, a market will surge. Other years markets decline. That’s what markets do. There are a variety of reasons, but the laws of supply and demand can’t be ignored.

Between 2020-2022, SUPPLY was short due to new home construction having been dormant for the previous 12 years. In addition, investors (both institutional and private) were purchasing rental properties in huge amounts, effectively taking those homes out of sales inventory. (Note: 36% of all households in Arizona are tenant occupied.)

On the DEMAND side, a convergence of the three largest buying groups occurred when the Millennials joined the GenX and the Baby Boom Generations to create more demand than this country has ever seen. And then, COVID hit. Lifestyles and priorities changed. Buyer trends shifted. Many Americans sought a better quality of life. With the advent of Zoom technology, a record number of buyers were able to work remotely and live where their hearts desired. Some markets saw dramatic negative impacts as people left urban centers for the suburban or rural lifestyle. Other markets, like Fountain Hills and Rio Verde with their small, hometown feel and amazing outdoor recreational activities flourished.

In fact, the community of Fountain Hills was one of those “in-demand” markets. The Cromford Market Index, a report that has been analyzing the Phoenix marketplace since the early 2000’s, consistently placed Fountain Hills among the highest (demand) indexes throughout the past two years among all valley markets. And, with the market shifting in the last half of 2022, Fountain Hills is the HIGHEST ranked market for demand vs inventory at the beginning of 2023.

Fountain Hills & Rio Verde Through the Years

In both the Fountain Hills and Rio Verde markets, the Absorption Rate is still historically low, indicating how long the current inventory of properties would last at the current rate of sales.

Local MLS Numbers also bear this out. In the graph above, “Fountain Hills & Rio Verde Through the Years,” notice that inventory is still low compared to most previous years, with an absorption rate of 1.8 months for the year-ending. That’s among the lowest of absorption rates for the previous 16 years ... by a wide margin!

Good News

According to the Case-Schiller Market Index, average values in the Phoenix marketplace were 31% higher in 2022 than 2020; between 2017 and 2022, prices increased 54%.

MORE ON SUPPLY VS DEMAND: THE U-HAUL EFFECT

The US Census Bureau recently released their numbers and, once again, Arizona is one of the top gainers for employment-based population growth. From July 1, 2021 to June 30, 2022, approximately 94,000 people parked their U-Haul in Arizona, making AZ the 5th fastest growing state in the US for that period. Approximately 58,000 moved to Maricopa County, equating to 159 people per day. On top of this, a major shift in the economic base of Maricopa County occurred in the past ten years. Yet, the new Taiwan Semiconductor (TSM) plant in Northwest Phoenix promises an even larger shift as new companies announce each month they are relocating to Phoenix to be near TSM. According to Nikkei Asia, a market reporting media company: “TSMC has said its investment in Arizona will create at least 4,500 jobs directly and some 10,000 supply chainrelated jobs.”

So, while the valley continues to rocket forward, there is one area that promises a friendly, hometown atmosphere unlike any other in the Valley of the Sun: Fountain Hills and its neighboring communities of Rio Verde, Tonto Verde and Trilogy at Verde River. Protected against the threat of traffic and urban sprawl by protected lands such as Indian Reservations, National Forest, Mountain Preserves and Regional Park, these communities offer the best of all options: Vast, scenic outdoor recreation plus all the conveniences of major airports, world class dining, shopping, sporting events and major employment hubs within minutes, all accessed by an impressive freeway system.

And those protected lands offer one other element any astute investor recognizes: A very limited opportunity for growth! So, now the supply side of the equation just became very interesting, indeed!

HYPERLINKS:

Arizona’s population growth leads the West in latest Census estimate: https://www.thecentersquare.com/arizona/arizonas-population-growth-leads-the-west-in-latestcensus-estimate/article_a9021cfc-822e-11ed-b0ed-17265649c857.html#:~:text=The%20data%20 is%20from%20July,12%20months%20ending%20last%20summer

Mortgage rates chart: Historical and current rate trends: https://themortgagereports.com/61853/30-year-mortgage-rates-chart

Forbes Housing Market Predictions For 2023: https://www.forbes.com/advisor/mortgages/real-estate/housing-market-predictions/

The ‘TSMC effect’ comes to Arizona as U.S. pushes chip ambitions: https://asia.nikkei.com/Business/Tech/Semiconductors/The-TSMC-effect-comes-to-Arizona-as-U.S.pushes-chip-ambitions