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THE SUNDAY SANTAN SUN NEWS | SEPTEMBER 26, 2021
Left: This 3,879-square-foot house on S. Oregon Court in Sun Lakes recently sold for $1.12 million. Built in 2007, the two-story home has five bedrooms and three baths and boasts of a number of features including a loft with a balcony, swimming pool and gourmet kitchen. The sale price was about $50,000 over the listing price. Right: This home on S. Welch Place in Chandler’s Arden Park neighborhood recently sold for $1 million. The 4,765-square-foot, two-story home was built in 2002 and has five bedrooms and three baths. (Special to SanTan Sun News)
Valley analyst sees ‘precarious’ times for home buyers, sellers BY PAUL MARYNIAK Executive Editor
Driven by iBuyers and investors that are gobbling up substantial numbers of houses, Valley home buyers and sellers may be entering a disquieting and even “precarious” period while renters are facing a continuing rise in rents, judging by the latest observations by a leading analyst of the Phoenix Metro market. The Cromford Report outlined a series of trends from August sales and listings that likely won’t bring many smiles to anyone but landlords. “Many surprising changes have occurred in the market over the past month,” Cromford said as it reported that the average sale price per square foot soared by 27.9 percent between August 2019 and last month, up from $194.97 to $249.31. That’s pushed up the monthly median sales price in the same time period by 23.4 percent, from $325 to $401,000. Several developments in August caught the Cromford Report’s eye, particularly a decline in new listings that appears to have been driven by a spending spree by large investors and iBuyers. “Ordinary home buyers are losing some of their motivation, thanks to pric-
es that are vastly higher than last year,” Cromford said. “Despite low interest rates, affordability has slipped below the normal range for Greater Phoenix.” The report stated, “If it were not for the activity of investors and iBuyers – and particularly the latter – the market would have cooled during August. This
Ordinary home buyers are losing some of “ their motivation, thanks to prices that are vastly higher than last year, despite low interest rates, affordability has slipped below the normal range for Greater Phoenix.
”
– The Cromford Report
would have been following the trend established since April. “However, iBuyers have purchased so many homes over the last month that they are significantly distorting the market dynamics. These homes are mostly going to be re-marketed shortly, so they will almost certainly increase supply over the coming weeks.” However, it also predicted, “Prices
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have been pretty flat for the past 3 months, but are likely to rise once more during the fourth quarter.” Cromford noted, “iBuyers have made offers well in excess of the pricing that we saw from them” in the first half of 2021. He said it is unclear how iBuyers will price their homes once they return
them to the market because “normal buyers no longer have the appetite” they showed through June 2021. “Achieving sale prices well over cost could prove quite tricky” for the iBuyers, it suggested. Cromford noted that iBuyers purchased about 2,850 homes over the last three months, which “represents almost 9 percent of resale purchases.” The iBuyer and investor buying spree has sharply impacted the availability of resale homes, it said. “We can see that the iBuyers (particularly Opendoor and Zillow) have increased their inventory massively,” the Cromford Report said. “If iBuyers had not done this, we estimate that supply would al-ready be higher by some 1,800 listings…We conclude that pricing would also be weaker without their intervention. This begs the question: what happens if they stop buying on this massive scale?” “Investors, too, can decide to stop their buying spree at a moment’s notice. The market is therefore more precarious than if demand were primarily growing through owner-occupiers.” Investors dominated the Valley housing market in August, the Cromford report as “demand has shifted away from owner-occupiers of primary residences towards landlords, investors, fix-and-flips and second homes.”
It cited data showing: Sales of homes intended to be primary residences are down 14 percent; Sales of homes intended to be rented are up 97 percent; Sales of home intended to be secondary residences are up 98 percent. The news is a lot happier for investors that rent out – and not so hot for their tenants, judging by the Cromford Report’s findings. “Investors intending to rent out their properties are a different matter and the rapid rise in rents over the past year has justified them splashing out,” it said. “Indeed, far more homes are going from iBuyers straight to the rental operators than we saw prior to July 2021. This takes homes off the re-sale market for a long time and reduces supply.” It also noted “large scale investors with deep pockets are crowding out smaller investors.” “We have seen larger buying sprees from investors before, notably between 2011 and 2013,” it continued. “However we have never seen iBuyers so determined to increase their top line.” The average rental price per square foot has increased from $1 per square foot to $1.36 in the past two years, Cromford said. “That is a 36 percent increase in just two years and must be a budget problem for tens of thousands of tenants,” it said, noting rents increased by 28 percent in the previous 18-year period. “The cost of renting has escalated over a very short period,” Cromford said. “The housing bubble of 2004-2008 saw little to no rise in rents and in fact the low point was 64 cents in February 2005, just as the for-sale market was reaching its highest frenzy. This time is very different, showing that the rapid appreciation in home values is due to real shortage of housing rather than speculative activity based on easy money.” However, Cromford also noted that all housing costs are soaring in the Valley. “Although the cost of renting has jumped 36 percent over two years, the average home price per square foot has increased by far more – from $169.26 to $262.21, a jump of 55 percent,” it said.
