3/2 No Landing
Market Deterioration Continues, Mortgage Rates Remain Above 7%, Multifamily Permits Up
This newsletter is 560 words and should take about 4 minutes to read.
Read 2 weeks ago newsletter here → "2/24 Better Late Than Never"
Bitcoin is on a tear. Beyonce is apparently a country artist now. An “immersive” Willy Wonka experience in Scotland scammed attendees after they posted AI marketing images and their warehouse was mostly empty. A Texas man made more than $1.7M through insider trading by eavesdropping on his wife’s Zoom calls. And March is officially here (we’re already almost 1/4 done with this year).
tl;dr
The Phoenix market is now heavily characterized by its submarkets. While some submarkets are preforming well, others are struggling.
The average mortgage rate is 7.08%
Phoenix
Despite the relatively poor performance of rents over the past year, construction plans for multi-family rental units continue unabated. This is surprising.
The annual rate for multi-family construction permits stands at 21,261 units at the end of January, close to its highest value ever (21,861). This is almost 3 times as high as it was five years ago across Maricopa and Pinal counties.
Where are all the new tenants coming from?
Growth of the existing population through births exceeding deaths (nope).
Inbound migration from other parts of the USA (yes).
Inbound migration from other parts of the world (yes).
Excess housing is not a problem we have had to face as a long-term issue in Arizona, but it is not impossible to imagine. It is already happening in Italy, Japan and in many Eastern European countries. It has even happened in the USA, such as in parts of upstate New York and in economically challenged areas of a few southern states. Through massive over-building, China is estimated to have 50m homes with no-one to occupy them. How this plays out is still unknown, but confidence in real-estate values is now very shaky across China.
Supply is stronger than it was this time last year. It is likely to increase further in 2024 because the number of single-family building permits issued in January was 2,720 across Maricopa and Pinal counties. This is up a massive 147% from January 2023 when we counted only 1,102. The home builders appear to be in an ebullient mood. This is in growing contrast to the re-sale industry which is still struggling with low volumes and weak demand.
The January 2024 count is the highest monthly total since May 2022.
The Cromford Market Index is a gauge of Phoenix’s Supply and demand metrics. 100 is considered a balanced market. Anything higher than the 100-point benchmark is considered a seller’s market. Anything below 100 is considered a buyer’s market.
As of February March 1st, 2024, the CMI has decreased to 116.9. Down 3 basis points from 7 days ago.
Supply has increased by 8 basis points and demand has increased by 8 basis points.
Rates
7-Day rate change: 0 basis points
YoY change: +16 basis points
Average interest rate: 7.08%
S&p500 vibe check
US stocks advanced yesterday after inflation data came in line with expectations
The S&P and Nasdaq closed at record highs, with the Nasdaq recovering fully from its November 2021 decline
All three major indexes capped a fourth-straight positive month
Meme, tweet, & fact of the week
On December 17th, 1991, the Cleveland Cavaliers beat the Miami Heat 148-80, the largest margin of victory in an NBA game.