The rent of Ashlee Eisenstein's one-bedroom apartment in Phoenix was recently raised from $850 to $1,150 per month, a 26 percent increase.
She scarcely considered looking for a new apartment outside of Phoenix, where, according to Zillow, rents are average $1,911 as of April. They are now 27% higher than they were two years ago."There may be lower rent in other cities outside of Phoenix, but I'd be paying that much more in gas just to get to work," said Eisenstein, 49, a waitress at 5& Diner in Phoenix.Her predicament reflects the times in Phoenix, which recorded the second-largest increase in inflation, at 11%, among the 23 major cities tracked by the Bureau of Labor Statistics. That's approximately three percentage points more than the Consumer Price Index's annual rate of inflation in the United States.
Inflation hit a fresh 40-year high in May, as gas, grocery, and rent prices all increased.
Inflation lessons: In the 1970s, I learned a harsh lesson about inflation that is paying off now that things are getting bad again.
While the regional and national figures aren't quite comparable, they do suggest that the cost of living in Phoenix is higher.
"It's not unusual for inflation in Phoenix to be a little higher than the national average," said George Hammond, an economist at the University of Arizona in Tucson. "What is unique is the degree to which we're surpassing the national rate."
What is the source of inflation in Phoenix? Experts told USA TODAY that it all comes down to home pricing.According to the S&P CoreLogic Case-Shiller Index, Phoenix saw the fastest monthly gain in home prices for the past three years through March. Phoenix home prices grew by more than 32% from March 2021 to March 2022, making it the second-largest year-over-year change behind Tampa, which witnessed a 34% increase.
According to data from The National Association of Home Builders/Wells Fargo Housing Opportunity Index, 68 percent of homes sold in the greater Phoenix area were affordable to households making the median annual income of $78,800 before the epidemic.
Nearly 44% of homes sold in the first quarter of this year were accessible to families with a median income of $88,800. That's a reduction of 35% in house affordability.
BUYING A HOME? Here's How the Housing Market Might Change in 2022.In the first quarter of this year, 56 percent of homes sold in the United States were affordable to families with a median income of $90,000.
These factors may explain why the CPI shelter index for Phoenix grew by 14.8 percent in April compared to March. The CPI shelter index is a measure of how much people rent their houses or would pay if they didn't own one. In May, the national CPI shelter index rose by 5.5 percent.
In an emailed response, Amar Mann, a regional economist at the Bureau of Labor who oversees research on Western states, said that if all other costs (transportation, food, apparel, etc.) remained fixed and unchanged, the housing component alone would yield about a 7% increase in the overall CPI in Phoenix.According to data from the BLS' Employment Cost Index, earnings and salaries in Phoenix climbed by 6.4 percent in March compared to previous March, while not keeping pace with inflation. The BLS tracks 15 metropolitan regions for the ECI, and this is the largest pay and salary growth. Wages and earnings increased by 4.7 percent nationwide in March compared to the same month a year ago.Eisenstein, on the other hand, claims she hasn't received any rises beyond the minimum pay. She is paid $9.80 per hour plus $300 in tips, which are paid every two weeks.
She's reducing her expenditure on coffee and streaming services to cover the rent rise.
"I'm going to have to be a lot more frugal," she continued.
Kevin Gelispie, who runs the Patreon page "Fetti Talk on Steroids," which offers financial advise to young adults, considers himself "lucky" to have a 3 percent fixed-rate mortgage on the property he and his wife own in Chandler, Arizona, just outside of Phoenix. He pays a $2,700 monthly mortgage payment, compared to a $2,000 monthly payment for Phoenix residents.
According to Bankrate data, homebuyers are currently paying more than 5.46 percent on a 30-year fixed mortgage payment.When Gelispie, 38, arrived to Chandler six years ago, the average property price in the Phoenix area was less than $230,000. According to Zillow data, prices have risen to almost $466,000 since then, a more than 100 percent increase from 2016.
Most of his Phoenix friends are paying "anything from $300 to $1,000 more per month in rent than they were last year," he said.Why are so many people from California relocating to Phoenix?
According to Adam Kamins, a senior economist at Moody's Analytics, before the epidemic, Americans in San Francisco and other parts of Southern California were being priced out of homes and began flocking to Phoenix, where the cost of living was substantially lower.
Individual companies recognized the trend and relocated to Phoenix, "where costs are lower and the weather is pleasant compared to other regions of the country."
According to data published by Redfin, Americans living in Los Angeles, the least affordable city in the United States, experienced the second largest population loss of any major city in the United States behind San Francisco in the first quarter of this year, as the pandemic accelerated the shift to working from home.
According to Taylor Marr, deputy chief economist at Redfin, the shift to Phoenix from areas like Seattle, Los Angeles, and San Francisco is happening in part because consumers discovered they could save money if they could keep the same job and pay."Because so many other individuals are following the same approach, prices of homes and other products and services in popular locations are skyrocketing, whereas inflation in places where people are leaving is much lower."
Home price increases in Phoenix has also been fueled by rising labor costs and home building materials such as lumber, according to University of Arizona's Hammond, who also runs the Eller College of Management's Economic and Business Research Center. Despite the fact that Phoenix building permits are at their highest level since 2006 in order to satisfy the record housing demand, "those homes are going to be coming up at higher price points than they were before the pandemic," he said.Homebuyers were paying 20 to 30 percent above the asking price during the recent housing market frenzy in March and April, according to Dylan Bucknavich, a self-employed house inspector in the Phoenix area. According to him, his firm suffered as a result of so many purchasers opting out of home inspections.
Despite the fact that he is not a contractor, one of the most common questions he received at that time was, "How much would it cost to fix this?" Bucknavich, 45, expressed his thoughts. "I'm sorry, but I'm unable to respond. [Inflation] took away my capacity to truly assist clients in setting their expectations for the home they're buying."
He told USA TODAY that the bidding wars subsided when interest rates rose, making mortgages less affordable. As a result, fewer people skipped home inspections.Bucknavich, like Gelispie, was fortunate in his dwelling circumstances. He signed a rent-to-own deal for the home he, his wife, and their two children live in roughly two years ago, with a purchase price of $425,000. They'd only been in the house for six months when they decided to sell. His home would have been listed for upwards of $560,000 if he hadn't signed the rent-to-own deal, he added, based on its recently evaluated value.
"I'm not sure if we'd be able to buy the house we live in if I had to start now," he added.In 2023, will there be a recession? In Phoenix, the chances of one occurring are higher.
In a May analysis for Moody's, Kamins said, "Arizona is the only state with a greater than 50% likelihood of slipping into recession by next spring." "This suggests an inflated housing market, but one in which prices are beginning to level off as job growth picks up."
He described the city's housing market as "beginning to feel a little bouncy." "You may see home price increases not just fall but a small-scale version of what happened in 2008 if consumers and homebuyers withdrew out soon."
Gelispie, who also founded the Building Back the Community Foundation, a non-profit that helps victims of natural disasters across the country as well as people facing severe financial hardships, primarily in Arizona, said that donations have "dramatically decreased" even as demand for their services has risen.
"I've been personally devoting funds from my own pocket to assist folks who, at the end of the day, are bearing the brunt of inflation."
According to a point-in-time count undertaken by volunteers and reported to the US Department of Housing and Urban Development in January, more than 5,000 people were homeless in the Phoenix metropolitan region. This is up 33% from the time before the outbreak.
"Phoenix's downtown is morphing into something akin to Los Angeles' Skid Row." These are the people we attempt to assist "According to Gelispie.
[zombify_post]
0 Comments