Phoenix up in stocks, institutional investors

They say, “As California goes, so goes the nation,” but when it comes to 21st American real estate century, perhaps the baron is Phoenix.

The metropolis of Arizona was ground zero for the real estate bubble and the subsequent foreclosure crisis — after which institutional investors began engulf distressed properties the. More recently, Phoenix was the hub of iBuying and the the fastest climb house prices in the country.

Today in the Valley of the Sun? Inventories are increasing, as are the number of cash buyers.

The Regional Multiple Listing Services in Arizona and Information Marketsa 100% owned Arizona MLS company, shared with RealTrends a treasure trove of data on a market that has changed rapidly over the past few months amid the 30-year mortgage interest rate almost doubledrising consumer prices and public markets scared by the possibility of a recession.

The number of active listings on this MLS — which includes Phoenix plus half a dozen surrounding cities such as Scottsdale and Tempe — has soared 249% over the past four months. As of June 20, the number of homes listed on the MLS was 12,539 compared to 5,022 on February 7.

Listings soared while the total number of home sales gradually declined. The total number of homes under contract fell 18% to 9,898 as of June 20.

And, for May, home sales in the Greater Phoenix area were down 5.1% month-over-month and 9.3% year-over-year to 8,278. houses.

“We are still in a seller’s market, but the change has been dramatic and rapid,” said Chey Tor, agent at RE/MAX Ascend Realty in Scottsdale, Arizona. “If this trend continues, we will be in a real buyer’s market by the end of the summer.”

A major caveat to this, however, is the price. Average prices for new catalogs continue to soar – up 24% to $647,500 in May 2022. Actual sale prices are not rising as fast as they have during parts of 2021 However, they climbed 17% year-over-year in May to $589,100.

The Federal Reserveof course, tries to fight against this inflation, by raising the recommended overnight lending rate between banks by 3/4e one percent last week. This move could increase the yield on mortgage bonds and, therefore, mortgage interest rates, which are already hovering around 6%.

But Tom Ruff, president of Information Markets, sees other market factors beyond the broader economy.

One is the number of institutional investors, including companies Premium The partners, roof and Invitation houseswhich accounted for 7.5% of all Greater Phoenix area purchases in May, according to a review of Maricopa County records.

These buyers, Ruff said, are buying homes below the median sale price, keeping the mansions and renting them out, thus raising the Phoenix price floor. In other words, business owners made almost 15% of all purchases at a price below the median sale price of $589,100 in May.

“I’m concerned about the effect institutional investors have on affordability,” Ruff said.

Not included in these institutional investors are what Ruff calls “fix and flip” companies, including iBuyers. open door and Block of offers, which accounted for 6.6% of the May sales market. Instant buyers have an outsized influence in the Valley of the Sun. Opendoor has one of its three office centers in Phoenix, and Offerpad is based in nearby Chandler.

Including iBuyers and institutional investors, cash purchases accounted for 33% of the Greater Phoenix market in May, down from 28% last May.

The Phoenix numbers come as U.S. home sales fell month-over-month and year-over-year, according to the National Association of Realtors. Lawrence Yun, chief economist at NAR, sounded a note of optimism on Tuesday, saying the slowdown could be less a reason for panic and more a sign of normalization.

“Home sales are basically back to the levels seen in 2019,” Yun said.