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Housing Market Research Phoenix Arizona

Comprehensive Housing Market Research Report Phoenix, Mesa Scottsdale AZ

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Housing Market Research Phoenix Mesa Scottsdale AZ

Population and Households

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Housing Market Research Phoenix AZ

Since 2000, the population of the Phoenix-Mesa-Scottsdale HMA has grown rapidly, increasing by a total of 1.1 million, or 34 percent, to more than 4.3 million. Net in-migration accounted for approximately 70 percent of this growth. During the earlier part of the decade, from 2000 to 2004, the population increased by an average of 109,000, or 3.2 percent, a year. Because employment grew at a faster pace from 2004 through 2006, more people moved to the HMA and the population increased by an average of 160,000, or 4.2 percent, a year. When the economy began to weaken in 2007, population growth slowed to an average of 82,800, or 2.1 percent, a year, through the current date. As of April 1, 2010, approximately 40 percent of the HMA population resides in the Phoenix submarket, with the remaining 60 percent in the Greater Mesa-Scottsdale submarket.

From 2000 to April 1, 2010, in the Phoenix submarket, the population increased by an average of 27,050, or 1.9 percent, a year, while in the Greater Mesa-Scottsdale submarket, the population increased by an average of 82,350, or 3.6 percent, a year. In the Phoenix submarket, growth was equally divided between net natural change (resident births minus resident deaths) and net in-migration, whereas in the Greater Mesa-Scottsdale submarket, 76 percent of the population growth was attributed to net in-migration. See Figure 4 for population and household growth in the HMA from 1990 through the forecast period and Figure 5 for the components of population change in the HMA from 1990 through the forecast period.

The number of households in the HMA increased at an average rate of 2.1 percent a year from 2000 to 2010. Toward the latter part of the decade, household growth slowed to an average of 0.4 percent a year. Most of the decline in household growth is a direct result of a slowdown in population growth; however, weak economic conditions also contributed to doubling up and a delay in younger household formation.

As the economy recovers during the forecast period, population and household growth rates are expected to increase, growing at 2.1 and 1.5 percent, respectively, for the entire HMA compared with growth rates during the past 3 years; however, growth rates will be below the 2000s average. By the end of the forecast period, the population is expected to reach 4.6 million and the number of households is expected to total 1.5 million.

Phoenix Arizona Housing Market  Trends

Sales Market Phoenix Submarket

The home ownership rate in the Phoenix submarket increased from 60.7 percent in 2000 to 61.4 percent in 2008. As credit tightened and housing market conditions continued to soften during the past 2 years, the home ownership rate declined and is currently estimated to be back down to the 2000 level (see Table DP-2 at the end of the report). Figure 6 shows the number of households by tenure in the Phoenix submarket from 1990 to the current date.

The sales housing market in the Phoenix submarket is currently soft. In the 12 months ending March 2010, the number of existing home sales increased by approximately 20 percent, from 28,000 to 33,900 homes compared with home sales in the previous 12 months, according to Arizona State University (ASU) Realty Studies. Home sales were down, however, in the first quarter of 2010, relative to the first quarter of 2009. The number of existing single family homes sold declined by 6 percent from 7,900 homes sold in the first quarter of 2009 to 7,400 homes sold in the first quarter of 2010. During the same period, the median home sales price of existing single-family homes increased 14 percent to $102,900.

Foreclosure sales currently account for 45 percent of total single-family home sales compared with 6 percent in 2007, according to ASU Realty Studies.

The number of existing condominiums and townhomes sold was up 67 percent, to approximately 1,600 homes, during the first quarter of 2010 compared with the number sold during the first quarter of 2009. The number of existing condominium and townhome sales is up, primarily due to the extremely low prices. The median sales price for an existing condominium or townhome during the first quarter of 2010 was $84,500, down 21 percent from the median price during the first quarter of 2009, and down 90 percent from the peak price in the first quarter of 2007. Condominium and townhome sales in the Phoenix submarket accounted for approximately 20 percent of total home sales during the first quarter of 2010 compared with only 10 percent in the Greater Mesa-Scottsdale submarket.

New home sales continue to decline, following a trend that began in 2006. According to ASU Realty Studies, the number of new single-family home sales declined to approximately 200 homes sold during the first quarter of 2010 compared with 275 homes sold during the first quarter of 2009. The number of new single-family home sales peaked in the first quarter of 2005 at approximately 1,425. Sales of new condominiums and townhomes are also down significantly, from 100
homes sold in the first quarter of 2009 to 35 homes sold in the first quarter of 2010. The number of new condominium and townhome sales peaked in 2007 at approximately 500.

In response to the continued decline in new home sales, home builders have kept single-family home construction, as measured by the number of permits issued, at low levels. According to preliminary data, during the 12 months ending March 2010, the number of permits issued for single-family homes declined by 125 homes, or 7 percent, to 1,600 homes compared with the number of homes permitted during the previous 12 months. The number of single-family homes permitted in 2009 totaled approximately 1,325, the lowest it’s been since at least 20 years ago (see Figure 7). Single-family permit activity peaked in 2004 at a high of 12,750 homes permitted and has declined every year since that time.

During the forecast period, current and anticipated sales housing market conditions will support the estimated demand for 2,800 new sales units. A portion of this demand will be met by the 700 homes currently under construction that are expected to be completed during the first year of the forecast period (see Table 1). As a result of the 9,600 vacant available sales units that need to be absorbed, new units should not be needed until the third year of the forecast period.

Another portion of demand could be met by some of the estimated 37,500 other vacant units becoming available for sale during the forecast period. Demand for new sales units is expected to be strongest in the $175,000-to-$224,999 price range (see Table 4).

Rental Market – Phoenix Submarket

The rental market in the Phoenix submarket is currently soft. A high level of apartment construction in 2007 and higher inventories of single-family homes and condominiums being offered for rent have further increased already high apartment vacancy rates and put downward pressure on rents.

In addition, recent net out-migration and households doubling up have further reduced demand. The current rental vacancy rate in the submarket is estimated at 15.2 percent, nearly double the 7.9-percent rate in 2000 (see Figure 8). As of the first quarter of 2010, apartment vacancy rates in Phoenix ranged from 10.7 percent in Central City/Sky Harbor to 28.6 percent in West Central Phoenix, according to Real Data, Inc.

Vacancy rates were highest in West Central Phoenix, partly due to the out-migration of Hispanic households that have been affected by new employer sanction laws on illegal immigrants. Central Black Canyon had the lowest average rent, at $552 a month, during the first quarter of 2010, down from $592 during the previous year. The highest average rent was in the Central Phoenix/Encanto area, at $866 a month, up slightly from $857 in the previous year.

Multifamily construction, as measured by the number of units permitted, continues to remain low since the beginning of 2009. According to preliminary data, the number of multifamily units permitted declined from approximately 1,950 units during the 12 months ending March 2009, to 410 units during the 12 months ending March 2010.

The highest number of multifamily units permitted, going back 20 years, was in 2007. The excess vacancies, resulting from the completion of the units permitted in 2007, were a major cause of the current soft market conditions. See Figure 9 for multifamily building permit trends in the Phoenix submarket from 1990 to the current date.

Although condominiums accounted for approximately 40 percent of permits issued for multifamily units in 2005, nearly all permits issued during the past 12 months for multifamily units are estimated to be for rental use. Estimates indicate that it will take several years for the current excess supply of vacant available rental units to be absorbed into the rental market. To prevent prolonging the current soft market conditions, during the 3-year forecast period, no additional rental units should to be constructed. If some of the estimated 37,500 other vacant units become available for rent during the forecast period, a recovery in the
rental market could be prolonged.

Sales Market – Scottsdale-Mesa Submarket

In the Greater Mesa-Scottsdale submarket, the home ownership rate is estimated at 71 percent (see Table DP-3 at the end of this report), approximately 10 percentage points higher than in the Phoenix submarket. The large disparity in home ownership rates is attributed to home affordability and household demographics in the Greater Mesa-Scottsdale submarket. The current percentage of home owners is down from 72 percent in 2008 and 72.7 percent in 2000. See Figure 10 for the number of households by tenure in the Greater Mesa-Scottsdale submarket from 1990 to the current date.

The sales housing market in the Greater Mesa-Scottsdale submarket is currently soft; however, some indicators suggest the market is slowly moving to balanced conditions. Despite the soft market, existing single-family home sales during the first quarter of 2010 are up to double the number of homes sold in the first quarters of 2007 and 2008. During the first quarter of 2010, the number of existing single-family home sales increased to approximately 22,275 homes sold, up from 19,125 home sold in the first quarter of 2009, according to data from ASU Realty Studies. Much of the rise in home sales can be attributed to low sales prices and the federal tax credit incentives for first-time home buyers.

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