Peoria’s luxury home market is becoming even more exclusive.
When it comes to this market — the 85383 ZIP code in the northern part of the city — it is increasingly difficult to purchase a luxury single-family home anywhere in the $400,000 range.
And the further north you go, it’s becoming impossible, says Peoria-based Realtor Rebecca Durfey.
As of the end of March, the ZIP code had only one active listing under the $500,000 price point, according to Arizona Multiple Listing Service.
Every other active listing in 85383 is more than $500,000.
Durfey said home prices in the area have never been so high, and people shouldn’t expect a crash, but the home price gains throughout the Valley — and certainly in Peoria — are having a significant impact on affordability.
This, in combination with rising interest rates and rental supply could impact Peoria’s housing market in the future.
Durfey said that up until the last few months, there was not a significant gap between average rental rates and average home mortgages. Conventional wisdom says that if rental rates are similar to mortgage rates, people will want to purchase a home rather than rent.
But interest rates are going up, which could bring down affordability and draw more buyers to rentals.
Although still historically low, the average rate on a 30-year fixed mortgage is 4.58% and the average rate on a 15-year mortgage is 3.84%, the highest since 2019, according to Bankrate.com.
The average rate on a 5/1 ARM is 3.26% and the average rate on a 30-year jumbo mortgage — generally home loans of more than $647,200 — is 4.54%.
Meanwhile, rentals are becoming more desirable in Peoria.
The rental rate homes have dropped by an average of $0.13 a square foot since November of 2021, and the average rent for the active rental market as of mid-March 2022 in the 85383 ZIP code is $2,984, according to MLS.
These adjustments may be an indicator that the fast-rising rental rates in Peoria may be slowing, Durfey said.
“One of the interesting trends, and something I am watching closely, is the rental versus re-sale market shifts in the last few weeks,” she said. “The rental market has been incredibly solid and in favor of the landlords. However, there has been more rental supply in the last month, and we are seeing even more supply suggested with multi-family permits issued over the past two years. If rentals are flat in the coming months, that can change the buy versus rent argument, especially as the home prices and mortgage rates continue to climb.”
The trifecta of rising home prices, interest rates and rental supply could cause a shift in Peoria’s housing market, Durfey says.
“If the rental market becomes more desirable, the housing market could decrease demand, and potentially, increase the paltry number of re-sale options and maybe, just maybe, give an opportunity to those buyers who are ready, willing, devoted and able to finding their perfect Peoria home,” she said.
But she offered a word of caution.
“Housing markets move very slowly. Like a snail’s pace type of slow. It can be moving without the general market even knowing about it,” she said. “These numbers may be a blip in time.”
Philip Haldiman can be reached at email@example.com, or on Twitter @philiphaldiman.
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