Newsroom | Economic and Housing Boon Fuels Regional Growth

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Rapid Rise in Jobs and Home Prices Show Troubling Trend. One person moves to the Valley every six minutes. Those changes have altered the region’s population, economy, and housing markets.

Rapid Rise in Jobs and Home Prices Show Troubling Trend

Economic Growth, Housing, RAD

With plenty of sunshine and a friendly business environment, companies, and people, are relocating to the Valley at a rapid pace. One person moves to the Valley every six minutes! Those changes have altered the region’s population, economy, and housing markets. To assist with its regional planning efforts, the Maricopa Association of Governments (MAG) has tracked data from 2000 until today. 

During that time, large-scale employers have added more than 450,000 jobs to the region. With more jobs come more people and a greater need for housing. While the region’s economic growth story is generally positive, the housing story paints a slightly different picture. 

Overview of the Phoenix metropolitan area

Tale of Two Decades

Before the economic crash in 2008, the number of new housing units skyrocketed. That includes everything from new homes, built-for-rent units, and apartments. From 2000 to 2010, there were 389,400 new housing units built. After the crash, it was a very different story. Those numbers in the last 11 years are 43 percent lower than in the previous decade. 

“Because we started to grow so much more quickly in the past few years, the housing supply just hasn’t quite caught up yet, and combined with the supply chain issues, it makes it really difficult,” said MAG Executive Director Eric Anderson during a recent update to the MAG Regional Council. 

Nearly two hundred thousand new housing units are planned for the region, most of which are in the West Valley.

The increase in housing units has coincided with a decline in the number of vacancies. Since 2010, the number of vacant units has fallen by about seven percentage points, from 12 percent to five percent.

Are Short-term Rentals a Long-term Problem?

Incredible weather in our region brings in out-of-town guests, many of whom are looking for vacation rentals.  Investors are buying homes and turning them into short-term rentals. There are 23,152 short-term rentals across the Valley. They account for almost six percent of all homes in Paradise Valley and more than four percent of homes in Scottsdale and Cave Creek. And that has an impact on each of those cities.

“It does matter because it affected our census in 2020, so we had an undercount of approximately 16,000 people,” said Scottsdale Mayor David Ortega following the presentation. That translated to $4.5 million less in revenue share,” he said. 

“All of these (units) tend to become a big stress point. Scottsdale tends to be a place where they (investors) are looking at multifamily units, but they are premium. They are going for $4,000 to $7,000 a month units. Sometimes it is presented under the guise that we are helping policemen and firemen and teachers. No. You would need seven teachers in the same place to pay the rent,” Ortega said.

Home construction and investor money

Rising Costs and Rising Inventory

The average price of groceries and gas has risen. So has the cost to rent or own a home. While those statistics are troubling, one positive trend exists. The number of available homes is up 78 percent over the past year. One contributing factor is the number of investors building homes for rent.  

“We have been tracking those single-family complexes for rent, and it is definitely a growing trend,” said MAG Regional Analytics Director Anubhav Bagley.

 “Until about two years ago, it was around 5,000 units. Right now, you have about 24- or 25,000 units in the pipeline that are being built for rent.”

A lot of investor activity is coming into the market, partly because rents are at a sustainable point, and where it is enough for people to make money on their investment.

“It was telling when we had the downturn in 2008, 2009, and 2010. You had these large-scale investment groups come in and buy homes for rent only,” said Bagley. “They haven’t walked away from those investments.”

Cause for Concern

The number of cost-burdened households in the region is cause for concern. A cost-burned household is a household that spends more than 30 percent of its income on housing expenses. In the Valley, more than half a million households (518,003) are cost-burdened. More than 230,000 of these households spend more than 50 percent on rent or mortgage. More than 44 percent of all renters are cost-burdened.

Those factors contribute to the growing wave of evictions in Maricopa County. The county has seen an 18 percent increase in evictions from January 2020 to July 2022. Most have come since the federal eviction moratorium ended in August 2021. The news is even worse for people with a median income of less than 65 thousand dollars. Seventy-two percent of all evictions are people who fall into that category.

Those statistics concern many people, including Martin Harvier, President of Salt River Pima-Maricopa Indian Community. “If something doesn’t change, I just see there will be more stress on city governments and tribal governments with the issue, and I am speaking about homelessness because that is where it is leading,” he said.

Evictions and homelessness encampments

Big Challenges

First-time homebuyers are facing several significant challenges today that didn’t exist before. Bagley says it is partly due to the rental market activity with investors buying homes. Supply chain issues have also contributed to the problem.

“The supply chain issues have restricted the number of units that could have been built,” said Bagley.

Scott Wilken, MAG Data Advisory Program Manager, offered several other reasons for the challenges facing homebuyers today.

“Until a few months ago, historically low-interest rates were one of the factors driving up prices. As interest rates have gone up the past few months, there are fewer buyers in the market because the cost to buy has risen, but less competition among buyers is also one of the biggest factors explaining why prices have gone down and the number of days available houses spend on the market have gone up,” Wilken said.

Published September 14, 2022