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 – Digital Editor, Phoenix Business Journal

Phoenix homes are overvalued.

That's according to the latest CoreLogic Home Price Index, which this week pegged Phoenix's housing market as one of many across the country as being overvalued.

From February 2017 to February 2018, home prices in Phoenix grew 6.7 percent.

The biggest reasons for the assessment seem to be population growth combined with a lack of desirable housing inventory in the neighborhoods people want to live.

That's good news for sellers in those desirable areas, who likely can expect to net higher prices. Heck, look at the region's high-end market, where the record for highest-priced home sale was set and broken twice in a matter of weeks last month.

But don't expect this to be the start of a new bubble. Frank Nothaft, chief economist for CoreLogic, told the Phoenix Business Journal that overvalued markets are expected to see price growth slow in the coming year.


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 – Senior Reporter, Phoenix Business Journal

Phoenix is among the top U.S. markets when it comes to migration trends and demand for apartments along with Dallas, Houston and Charlotte, according to new research by CoStar Group Inc. (Nasdaq; CSGP).

CoStar looked at population gains between 2016 and 2017 along with apartment demand. Trends show some workers and households are being priced out of expensive coastal cities and big markets such as Los Angeles, New York and Chicago and going to less expensive second- and third-tier inland regions such as Phoenix.

CoStar Research Analyst Michael Petrivelli said the numbers show which markets are gaining and which are losing, with the latter driven by high costs.

CoStar also looked at population growth comparing the third quarter of 2016 and 2017.

“Phoenix was second,” Petrivelli said, adding it was beat by Dallas. Atlanta, Houston and Orlando.

Metro Phoenix gained about 80,000 new residents during that time frame with the region’s total population approaching 4.7 million.

Los Angeles, Chicago, New York and Southern California’s Inland Empire lost the most population during the same time frame. Those are big, expensive markets where rents and housing sometimes drive middle-class workers to look for cheaper living accommodations.

Phoenix ranks third in apartment demand, according to CoStar and its sister company Dallas and Houston top the list with Charlotte fourth.

San Francisco, Los Angeles, Chicago and New York rank at the bottom of the apartment market list, according to Petrivelli. They have high rental costs, limited space for new construction and high cost and regulatory barriers for new projects.

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Petrivelli said apartment search data shows Los Angeles accounts for most of the out-of-market searches rental housing in Phoenix. Chicago is second followed by New York and Denver.

Dallas is drawing relocation interest from Houston then Chicago and New York. Some of that stems from jobs and companies moving to Texas.

“The most notable recent relocations include Toyota moving to Plano from Torrance, California, Liberty Mutual consolidating a large workforce in Plano, and Charles Schwab opening a large corporate hub in 2019 in Westlake,” said CoStar Research Analyst David Kahn.

Liberty Mutual and Schwab also have operations in metro Phoenix.

Charlotte — which is seeing significant new housing in its downtown — is drawing new residents from Atlanta, Raleigh and New York.

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 – Editorial Intern, Phoenix Business Journal

Despite moderate price increases, the city of Phoenix still is the least-expensive place to rent in the Valley, according to current findings by Apartment List.

Renters in Phoenix can expect to pay around $830 a month for a one-bedroom and $1,030 a month for a two-bedroom, according to the company’s April 2018 Phoenix Rent Report. The price points hold steady from last month.

Current average prices for cities in metro Phoenix range widely. In Gilbert, $1,120 a month is the median price for a one-bedroom, and $1,390 for a two-bedroom. Mesa is seeing the fastest year-over-year growth, with 5.1 percent growth, although it is still proving less expensive than other cities in the metro area. A two-bedroom averages $1,060, and one-bedroom for $850 in the East Valley city.

Chris Salviati, housing economist for Apartment List, said while the Phoenix market is growing slightly faster than the national average, it's not a cause for concern.

"Phoenix is a market with a good economy, strong job growth and it's adding a deep amount of new supply," Salviati said.

Phoenix holds out the lowest rent in the metro area on average, despite moderate increases of about 2.9 percent in year-over-year prices. This is just under the state average of 3 percent.

"Any type of price increase is going to be a cause of concern for renters," Salviati said, noting the growth is not large overall for rent. For example, he said someone paying $1,000 in rent a month, a 3 percent increase would add about $30.

"It's not where people would like to put their money, but it's not going to break the bank for most people," Salviati said.

Nationally, Phoenix sits on the lower end of major city prices. One-bedroom rent in Phoenix compares to prices in Houston or San Antonio, whereas rent for the highest-priced city — San Franscico — soares to $2,440 a month for a one-bedroom. By comparison, the national average for rent currently on a two-bedroom is $1,170 a month.

Jim Belfiore, a real estate consultant at Belfiore Real Estate Consulting Phoenix, said he expects the rental market to start flattening more because of increased inventory. He said many of the new units that have been added recently have been Class A. He expects the new unit options to begin to create more competition in the market.

"It's slowly softening, rents are starting to flatten out over the last few months and over the last year," Belfiore said.

Belfiore said it's still a difficult market for people renting homes. He said it could be better financially for many people to buy rather than rent.

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 – Senior Reporter, Phoenix Business Journal

Permits taken out by home builders for construction dipped in July compared to a year ago.

That is according to Scottsdale-based RL Brown Housing Reports latest report on the Phoenix region’s all-important real estate sector.

RL Brown researchers also dug a bit deeper to show how July’s 1,408 home builder permits in the Phoenix metro compared to recession and pre-recession levels as well as the month of July the past two decades.

RL Brown President Greg Burger points out July is usually a less active month for home builders who often get moving on new builds in June in hopes of getting homes sold by year's end.

“June is typically a fairly strong month,” Burger said.

Burger said July usually sees a drop off in permit volume after the June rush.

There were 1,939 builder permits in June in the region. That was up 15.5 percent from June 2015.

But the permit volume came in at 1,408 for July. That is down 11.6 percent from the 1,592 permits taken out in July 2015.

It’s also one of the slowest Julys for permit activity in the last 23 years, according to RL Brown’s July numbers which came out today.

In July 1992, builders obtained 1,730 construction permits. In 2000, that number was 2,377.

And in July 2004 — before the recession and during the height of the last real estate bubble — builders took out more than 6,600 permits, according RL Brown’s data.

That last figure is 79 percent more than the number of permits builders obtained last month.

New home permits went as low a 548 in 2010 during the recession and housing collapse.

Some other housing metrics from RL Brown show:


• New home sales were up 26.3 percent in July compared to a year ago (1,231 new homes sold versus 975).

• The median new home price in July was $307,574. That is up 2.5 percent.

• Year-to-date builders have taken out 10,766 permits for new builds in the Phoenix region. That is up 14.4 percent from the 9,413 permits taken out by home builders during the first seven months of 2015.

• Existing home sales were down 4.4 percent in July compared to July 2015 but are up 4.7 percent for the year compared to same time frame in 2015.

• The median home prices in the Valley came in a $215,000 in July down 2.3 percent from a year ago.