Metro Phoenix home prices continuing to set records

Metro Phoenix home prices continue to soar to new records, and sales are climbing again.

Corporate investors are buying even more Phoenix-area houses to turn into rentals than they did last year, pushing the housing market to new peaks.

The median Valley home price hit an all-time high of $460,000 in March and is expected to climb to $470,000 during April based on pending sales, according to the Arizona Regional Multiple Listing Service.

Home sales across metro Phoenix jumped 26% in March from February.

The number of homes for sale ticked down about 1.2% in March, making it even tougher for regular buyers to find houses.

Corporate buyers purchased 1,854 houses in the area during the first three months of 2022, out of 23,900 total sales. That’s almost 8% of all Valley home sales for this year’s first quarter. It’s also up 123% from last year’s first quarter.

Institutional or corporate buyers are affecting metro Phoenix’s housing affordability as they compete with traditional buyers, said housing expert Tom Ruff of ARMLS’ Information Market group.

Most corporate buyers are paying cash for Phoenix-area investment houses.

“Rising mortgage rates will most likely lead to a pullback in demand by traditional buyers,” Ruff said. “The question then becomes, if traditional buyers do pull back, will this open a running lane for institutional buyers to increase their footprint?”

What’s driving housing market?

Ruff’s latest research shows these factors are behind the hot housing market, but some also could create bumps for it.

● U.S. consumer prices climbed 8.5% in March from a year ago and hit a 40-year high.

● The S&P 500 stock index is down 8.4% so far this year.

● Arizona’s unemployment rate dropped to 3.3% in March, the lowest rate in almost 50 years, according the Bureau of Labor Statistics.

● New home sales in metro Phoenix are down almost 12% from a year ago.

● Cash deals for homes jumped 30% during the first quarter of in 2022, compared with the same timeframe last year, according the Information Market.

● iBuyers Opendoor and Offerpad, also known as instant buyers because they do cash deals quickly and mostly online, purchased 1,160 Valley houses during the first three months of this year and sold 2,549 homes during this year’s first quarter.

● About 20% of the houses sold by iBuyers in metro Phoenix went to corporate buyers.

● Metro Phoenix led the U.S. among big cities with a 30.4% home price increase during the 12 months ending in February, according to Corelogic.

What can put the brakes on home sales?

Mortgage rates jumped during the past few months, something that could slow the housing market.

The average 30-year mortgage rate jumped to 5.1% last week, according to Freddie Mac. A year ago, it was 3.1%.

Two percentage points adds about $450 to the monthly payment on a $450,000 mortgage.

“This week, mortgage rates averaged five percent for the first time in over a decade,” said Sam Khater, Freddie Mac’s chief economist. “As Americans contend with the historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation.”

But Ruff said metro Phoenix home prices will continue to climb at least through June.

The Valley’s median could hit $475,000 in midMay based on pending sales, according to ARMLS.

“Some of the metrics suggest tailwinds to the housing market. Others suggest headwinds,” he said. “Altogether, they tell us it is windy, very windy.”