Home prices in Peoria continue to rise, and our city is one of the strongest seller’s markets in Maricopa County.
It is definitely raising people’s eyebrows.
In fact, as I was sitting with one of my clients in preparation to list their home they asked that question I am asked daily: What if the market crashes?
It’s complex. I am not able to throw out a quick and comforting sentence to allay people’s fears.
However, I said what I always say: This is not the market of 2006 through 2008 and we don’t have any data that points to a market crash. None at all. If the numbers start to look like they are trending toward a shift in the market, I will be out there sharing that with my clients.”
We don’t expect a crash.
But the home price gains throughout the Valley — and certainly in Peoria — are having a significant impact on affordability. It is becoming increasingly difficult to purchase a home anywhere in the 400,000 range, and the more north you go, it’s becoming impossible.
At the end of March, Peoria’s 85383 luxury ZIP code had one home under
$500,000 active. Every other active listing in 85383 was over $500,000.
Up until the last few months, there was not a significant gap between average rental rates and average home mortgages. Naturally, if rental rates are similar to mortgage rates, the market wants to purchase a home rather than pay a landlord’s mortgage. That has been the reasonable approach. With the low interest rates, there was still an affordability factor.
One of the interesting trends, and something I am watching closely, is the rental versus re-sale market shifts in the last few weeks. 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.
Peoria has had a strong rental market. The average rental rate as of mid-March in the 85383 ZIP code was $2,984. The average square footage of the homes is 1,970 square feet. The rental rate has dropped by an average of $0.13 a square foot since November 2021. These adjustments may be an indicator that the fast-rising rental rates in Peoria may be ending.
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.
If that is the case, with our rental market shifting and our housing market continuing to increase and the interest rates make affordability even more difficult, I have to wonder — and I will watch — if the buyers who have strong desires to live in Peoria will stop their search for single-family homes and sign a rental contract.
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.
The trifecta of interest rates, home prices and rental supply could change things.
A word of caution, though: Housing markets move very slowly. Like a snails-pace type of slow. It can be moving without the general market even knowing about it. These numbers may be a blip in time. They could be nothing, but they could be something. I will be watching the data closely
Editor’s note: Rebecca Durfey is a Peoria-based Realtor with Keller Williams Realty Professional Partners.
