With mortgage rates poised to climb to fresh highs, there are concerns that this will further constrict the supply of existing homes as the spread between older vintage mortgages and the current market widens.
Phoenix builders will likely continue to benefit as demand favors new builds. When mortgage rates previously exceeded 7%, sales crashed until builders were able to address affordability concerns with price cuts, mortgage rate buydowns, and incentives.
However, profit margins are already under pressure and could run thinner as the median existing-home price trends lower and even apartment rents retreat from recent highs.
Strengths
Large investments by Intel and Taiwan Semiconductor Manufacturing Co. (TSMC) have bolstered local manufacturing job growth. Intel's $20 billion and TSMC's $40 billion investments will have added a combined 7,500 new jobs as well as spur thousands more in additional jobs from ancillary suppliers.
Weaknesses
The unemployment rate in Phoenix has been moving higher. While they remain well below 5%, WARN notices have been running much faster year to date than a year ago. Major employers like Lucid have announced layoffs affecting nearly 1,000 workers.
Supply
Quarterly housing starts decreased 30.8% from a year ago, while the number of available vacant developed lots sits at 35,133, up 25.4% over the same quarter last year.
Sales
New-home sales in the Phoenix-Mesa-Chandler metropolitan area decreased 31.8% year over year to an annualized rate of 14,362 units in July. Existing-home closings for the 12-month period ending in July posted a year-over-year decline of 45.6% to an annualized rate of 71,008 units. Of those, 11,633 were attached units, and 55,117 detached.
Prices
The average list price for a new detached home in the Phoenix-Mesa-Chandler metro decreased 9% from 2022 to $507,219 in July, while the average list price for a new attached home decreased 5.9% over the same period to $639,338. Homes priced over $550,000 experienced the most closing activity over the past year. The new-home affordability ratio for a detached home reached 28.2% in July.
Economy
Total nonfarm employment in the metropolitan statistical area increased 2.1% from the same period last year to 2,377,100 payrolls in June, with approximately 6,100 more jobs compared with the previous month. The local unemployment rate increased to 3.1% in June compared with 3% in May. June's jobless rate is lower than it was this time last year when it stood at 3.4%. Zonda forecasts the region's unemployment rate will finish the year at 2.9%.
Community
The current population for the area is approximately 5,125,340 people and is projected to increase by 1.6% this year. There are approximately 1,899,340 households in the region, which is up 2.2% year over year. Forecasts show that current household formation is expected to increase by an annual growth rate of 2.6% for 2028. Incomes increased by 4.3% from the previous year to $81,555.
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