January 2022 Market Stats
Should You Rent Instead of Buy a Home?
What's Phoenix Metro, including the Goodyear area, real estate market like? Today we are taking a look at the annual changes from January 7, 2021 to January 7th, 2022 (the date the stats were released from Cromford Associates).
2021 was a strong year for housing prices, the Median Sales Price increased a whopping 28%! Check out the infographic below for the market stats. If this market continues at this pace, it will, unfortunately, be harder and harder for first-time buyers to be able to afford to buy a home in the Phoenix Metro area. Some buyers are wondering if it would be better to rent than buy a new home? I have included some commentary from Cromford Associates addressing renting vs. buying in 2022 down below the infographic.
Homeowners are sitting pretty as the Greater Phoenix area, including Goodyear, move farther into a seller's market. Although it appears that the income levels in the area can not sustain another year of 28% annual appreciation, there doesn't appear to be relief in sight for the low housing inventory levels, leading most to believe prices will continue to increase. This is good news for Goodyear area homeowners as their equity continues to grow! (Are you a homeowner? Read below to sign up for a FREE tool that helps homeowners keep track of the equity in their home.)
Decreasing inventory, huge annual median sales price increase, and only .6 months worth of inventory. And interest rates so far remain low. With these market conditions, it doesn't appear that prices are going to drop drastically any time soon, however, the rate the sales prices are increasing has slowed down.
Let's take a look at the numbers in the infographic above. As you can see, the number of Active listings decreased by 2.5% from January 7, 2021 (which was already historically low). The number of homes under contract decreased 7.6% from last year. In one year the median sales price increased by 28.4%.
We are seeing fewer homes hit the market. There are not enough homes for sale to meet the buyer demand so prices should continue to at the very least hold steady, but most likely will continue to increase. This low inventory is causing the Goodyear area housing market to move farther into a seller's market.
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Is it better to rent or buy in 2022?
January commentary from Cromford Associates:
"As the cost of purchasing a home increases in Greater Phoenix, the question of whether to rent or buy becomes harder to answer for some buyers. The overall median cost of a home is currently $425,000, and for a typical 1,500-2,000 square foot home, the median cost is $420,000. The estimated payment, assuming 10% down and including principal, interest, taxes and insurance, is $2,123. The median monthly rental rate for the same size range, recorded through the Arizona Regional MLS, was $2,195 in the 4th quarter of 2021; just $72 per month more.
Some buyers might question the advantage of purchasing a home in order to save $72 per month. However, the financial advantage of owning vs. renting is typically realized for those who own their home for at least 3-5 years.
Let’s assume, hypothetically, that a buyer purchased a home today for $420,000 with a $42,000 down payment (10%). Over the next 5 years, their home’s value fluctuates up and down and in the end doesn’t appreciate. That may sound horrifying, however during this time the loan principle has been paid down to $336,000. The homeowner’s equity has doubled from $42,000 to $84,000 without their home appreciating a dime, and with 20% equity they no longer have to pay private mortgage insurance. Their payment declines $200. Still a win.
Now let’s assume, hypothetically again, that while our homeowner is paying down their loan, the home value fluctuates up, down and sideways, but still averages a 6% appreciation rate over 5 years (close to the current rate of inflation). The home would then be worth $562,000, an increase of $142,000.
After 5 years, this hypothetical homeowner went from $42,000 to $226,000 in equity, and their monthly cost was nearly the same as what they would have paid in rent anyway. For this reason, even when the monthly payment required to buy is close to that to rent, buying still wins in the long game."