Greater Phoenix Residential Market: 2021 January Results

What Do You Think Went Up and What Went Down?

The Greater Phoenix residential market once again showed its strength in January 2021. Indications are that the competition to own or rent a single-family resale home are intensifying. One of these indicators is that in January 2021 it became more expensive to purchase a single-family resale home and more expensive to rent one. The information in this report was compiled from Arizona Regional Multiple Listings Services, Inc., data. The following results are for single-family resale homes in Greater Phoenix.

The median purchase price in January 2021 was $380,000. This set another record and the eighth consecutive month it has increased. This is $5,000 or 1.3% higher than in December, and $60,000 or nineteen percent higher than January 2020. The median monthly rent in January 2021 was $1,895. This is $45 or 2.4% higher than December and $245 or fifteen percent higher than January 2020.

Powering the increase in purchase prices are extremely tight inventory and extremely high demand. The number of monthly single-family resale home listings to come on the market in January 2021 were 5,577. This is 1,145 or seventeen percent less than January 2020 when there were 6,722. In fact, the number of new listings in January 2021 to come on the market was the lowest for a month of January in the last twenty years. The most likely reason for this low number of seller’s listing their homes was the resurgence of coronavirus cases. And lack of inventory limits choices for those that are considering a move. So, these sellers are just waiting.

The two reasons keeping daily total inventory constantly low are not only the lack of new monthly active listings but the speed that active listings go under contract. In January 2021, the percentage of properties that were on the market fourteen days or less was thirty-five percent compared to twenty-two percent in January 2020. In January 2021, forty-eight percent of properties under $250,000 were under contract in fourteen days compared to twenty-seven percent in January 2020.

Sellers are taking advantage of tight inventory by raising median list prices. The median list price in January 2021 of $399,000 is a record. This is $54,000 or sixteen percent higher than January 2020. The median list price in January 2021 was the ninth successive month it climbed.

While the number of January 2021 new monthly listings were close to an all-time low for a month of January, the number of January 2021 sales were close to an all-time high. Sales in January 2021 were 4,883.This is 426 or ten percent higher than January 2020.The only January this century that has recorded more sales was January 2006 which had 4,943.

Table One lists twenty-seven cities that are in either Maricopa County or Pinal County. It compares results for January 2021 to January 2020. The majority of these cities had more sales in January 2021 than January 2020. Every city but one had less new monthly listings this January than last January. For every city listed in the table both the median purchase price and the median monthly rent was higher in January 2021 than 2020.

Rising prices don’t seem to have affected sales. Of course, low mortgage rates are offsetting some of the cost of rising prices with lower monthly mortgage and principal payments. I do believe rising prices affect a segment of the market. First-time homebuyers and move of up-buyers now need to have a larger down payment since a down payment is a percentage of a purchase price. Table Two does a simple comparison of a principal and interest payment for the last five years for the month of January. The table takes what the median purchase price was in a given January with the buyer putting down ten percent on a conventional loan, and getting what Freddie Mac said was the thirty-year fixed rate at the time. The table shows that in January 2021 a principal and interest payment is $55 higher than January 2020. Note: this comparison is just an example to see if principal and interest payments are going up or down. A buyer needs a certain FICO score to obtain the best rate. And if the buyer puts down less than twenty-percent on a conventional loan they will have monthly mortgage insurance. So, buyers please meet with a loan officer to know how high of a purchase price you may qualify for.

Conclusion

So, the first month of 2021 was the second-best January on record for the number of sales, while the number of new monthly listings was the lowest in twenty years. Increased sales with decreased new monthly listings will keep daily inventory at an all-low. Will prices climb higher in February? YES. A bright spot for some time later this year is: As coronavirus cases go down, as we hope, more sellers will list which means more buyers will buy. Note: Starting soon will be monthly call for real estate agents to go over trends and strategies for competing in today’s residential marketplace. To receive notification, email me at FWilcox@gcta.com