Hotter than Hot in Arizona

In a post a couple weeks ago, I noted some of the data indicating slowing appreciation at the national level.  I wanted to follow up with some more local examples that further illustrate this trend or show exceptions to it.   We’ll start this week with an exception: Phoenix, AZ.  In the chart below, you’ll see that the Phoenix Zindex continues to outpace both the state-wide and national Zindices.  Phoenix’s Zindex has increased 3.3% in the past month which annualizes to a whopping 48% price appreciation!  That’s more than double the current 30-day Zindex change for the U.S. of 1.4%. 

Moreover, the Zindex growth over the past 12 months is 34% (annualized) which means that the Phoenix appreciation rate is now greater than it has been, on average, over the past year (i.e., the 30-day annualized rate of 48% is greater than the 12-month rate of 34%).  In other words, if anything, Phoenix is continuing to gain steam. 

But can it continue?  While slowing appreciation is not yet being detected in sale prices and, therefore, the Zindex, economists at Fiserv, Inc. seem skeptical about continued bullish growth there.  They predict an annual appreciation rate in Phoenix of only 6.3% over the next year.  Also, inventory does seem to be rapidly increasing in Phoenix according to HousingTracker although this data series is not long enough to determine changing year-over-year trends that would control for seasonality.  Phoenix also appears among the top metro areas in which home prices are estimated to be overvalued according to a new study out yesterday by National City Corporation and Global Insight which identified Phoenix real estate as overvalued by about 43% (full report; summary in USA Today).