Metro Phoenix is the “hottest” housing market in the U.S., according to a respected, national real estate expert.
But the new “hot” definition for housing is much different than during the boom when Valley prices climbed a crazy 50% in a year and new homes shot up at triple the pace they are going up now.
Real estate analyst John Burns is calling metro Phoenix hot now because prices aren’t expected to drop like they are in other big U.S. cities. He said that is due to the area’s sturdy job and population growth and shortage of new homes.
“Metro Phoenix is the Goldilocks of U.S. housing,” Burns said at the Land Advisors Organization’s annual real estate forecast in December. “It’s not too hot, and it’s not too cold.”
Why Phoenix is hot
- Valley home prices are forecasted to climb about 4% during 2020, while they have peaked or are falling in Chicago, Denver, Los Angeles, San Francisco, Portland, Houston, New York, Dallas, Nashville, Salt Lake City, Charlotte, Washington D.C., according to Burns Real Estate Consulting.
- Metro Phoenix ranks No. 4 for the most investors — about 28% of home buyers. Those buyers include ibuyers like Offerpad, flippers and big single-family rental firms such as VIP Homes that pay cash for houses.
- Despite the high ranking for investors, the Valley still has 8% fewer buyers who don’t plan to live in homes than it did during the boom of 2004-06 when speculators put little to nothing down on houses and then walked away when prices fell. Los Angeles, San Francisco, Houston and Nashville all have nearly 5% more home investors now than during the boom.
- Metro Phoenix was the second-fastest-growing area for new residents with more than 96,000 in 2018, according to Land Advisors' analysis of the latest federal census and labor statistics.
- The Valley is expected to draw 55,000 more residents by September, boosting the area’s population to 5 million.
- Almost 70,000 new jobs were created in the Phoenix area during 2019, ranking it the fourth-highest for U.S. employment growth.
“Employment growth for metro Phoenix has been incredible,” Greg Vogel, founder and CEO of Land Advisors, said. “We have added 350,000 jobs, far surpassing the 150,000 we lost during the crash.”
He said people and companies from states with high-cost housing and taxes, especially California, will continue to move to the Valley this year.
Recession watching
It’s been more than a decade since the economy, stocks and housing bottomed out. The long upward ride has most economists looking for a downturn or even a recession this year or next.
But Burns doesn’t see the housing market pulling the U.S. economy as it did during the Great Recession of 2008.
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He also thinks metro Phoenix will fare better in an economic slowdown or recession than other parts of the U.S.
Lower interest rates for home buyers, an undersupply of new homes built and projected stronger than average job and population growth in the Valley are why.
“It won’t be a housing-led recession this time,” he said. “Phoenix always fares better in downturns not tied to housing.”
Moving truck indicator
Housing starts, job data and other market indexes are important to tell the story of the economy but can get a bit wonky.
Vogel and Burns found a new economic indicator to track growth that everyone can easily understand: what it costs to rent a U-Haul truck to move to different parts of the U.S.
“U-Haul costs are an interesting sign that shows where people are moving,” Vogel said. “The prices to rent the trucks are based on demand.”
- It costs 11 times more to rent a truck from Los Angeles to Phoenix as it does to rent from Phoenix to Los Angeles.
- Someone moving pays three times more to rent a truck from Chicago to Phoenix than if they were making the reverse move.
- And it’s twice as much to rent a truck to relocate from Houston to Phoenix than to leave the Valley for Texas.
Another reason metro Phoenix is being called the hottest U.S. housing market.
Reach the reporter at Catherine.Reagor@arizonarepublic.com or 602-444-8040. Follow her on Twitter @Catherinereagor.
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January 12, 2020 at 09:00PM
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