Will The Valley’s Housing Market Crash This Year? Here Is What the Experts Are Saying
The Valley’s housing market has experienced an upward growth trajectory and experts are positive that it will remain resilient in 2022 despite the rising prices and mortgage rates. According to Alan Jones the president of the Phoenix division of Lennar Homes Corp, the Phoenix housing bubble will not burst because of the high job growth rate currently experienced in the Metro Phoenix.
In 2020, Moody predicted that the Phoenix marketplace will create approximately 20,000 jobs and this year the number has risen drastically and new forecasts estimates of over 100,000 jobs to be created in the Phoenix marketplace. Other factors that will keep the demand for Valley’s housing market high are the increasing demand for homes in this area and the low inventory of listed homes.
The high number of people who are moving to the Valley from other states means a real estate bubble cannot materialize since there are even fewer homes to meet the current housing demand. Most of the new prospective homebuyers who are expressing interest in investing in Valley real estate are from California, Northwest, Midwest, and even from the Rockies.
- Impact of high mortgage interest rates
According to Thomas Brophy a research director at Colliers International, mortgage interest rates were at an average of 3.96%. In addition, the average sale price for a detached single-family home in Phoenix was $613,000 in December. The average rent for a build-to-rent unit was $2,064. In Phoenix, it’s cheaper to lease a single-family home by $7,500. The demand for multi-family homes in Phoenix has risen with the occupancy rate going up to a record 97.4%.
According to one of the panelists Smith, more California residents are moving to Phoenix homes due to the lucrative 3.96% interest rate on a $400,000 home which is a better deal compared to a $1.1 million home in California. For the luxury real estate market, Rohr observed that the increase in mortgage interest rates will not have any significant impact on homebuyers in this category.
- Impact of home price increase
Metro Phoenix has recorded the highest home prices growth national wide for the last two and a half years. A 32.2% year-over-year home price was recorded in November according to the statistics by S&P CoreLogic Case-Shiller Indices that was released on 25th January. The high cost of land and related housing supplies are expected to continue driving the price for homes in Phoenix upwards. Luckily, we have seen wages also growing thus, making the affordability question reality for now.
- Shortage of labor and housing supplies
Since the demand for a new home is on the roof, homebuilders are working around the clock to deliver. However, most homebuilders are struggling with a shortage of labor and supplies and that’s why we still have low inventory in the market.
Jones noted that labor remains the biggest impediment to having more listed homes. The Phoenix housing demand trend has now shifted to rental homes and experts are projecting 14,000 homes out of the 30,000 expected to be built this year will be rental units. The only best way that homebuilders can overcome these shortcomings is by creating an environment where there is a balanced source of both labor and housing supplies.
- Increase in build time
When there is a shortage of labor and housing supplies, home builders fail to build new homes on time and deliver them on the market to meet the growing demand. During the pre-pandemic period, homebuilders used to take five to six months to deliver a project but that duration has now increased to approximately nine months. Indeed it’s still a challenging moment since the demand for homes is still high compared to the low inventory.
Therefore, according to this detailed analysis by the real estate industry experts, there isn’t any likelihood that the Valley’s housing market is going to crash this year.
The Valley’s housing market has experienced an upward growth trajectory and experts are positive that it will remain resilient in 2022 despite the rising prices and mortgage rates. According to Alan Jones the president of the Phoenix division of Lennar Homes Corp, the Phoenix housing bubble will not burst because of the high job growth rate currently experienced in the Metro Phoenix.
In 2020, Moody predicted that the Phoenix marketplace will create approximately 20,000 jobs and this year the number has risen drastically and new forecasts estimates of over 100,000 jobs to be created in the Phoenix marketplace. Other factors that will keep the demand for Valley’s housing market high are the increasing demand for homes in this area and the low inventory of listed homes.
The high number of people who are moving to the Valley from other states means a real estate bubble cannot materialize since there are even fewer homes to meet the current housing demand. Most of the new prospective homebuyers who are expressing interest in investing in Valley real estate are from California, Northwest, Midwest, and even from the Rockies.
- Impact of high mortgage interest rates
According to Thomas Brophy a research director at Colliers International, mortgage interest rates were at an average of 3.96%. In addition, the average sale price for a detached single-family home in Phoenix was $613,000 in December. The average rent for a build-to-rent unit was $2,064. In Phoenix, it’s cheaper to lease a single-family home by $7,500. The demand for multi-family homes in Phoenix has risen with the occupancy rate going up to a record 97.4%.
According to one of the panelists Smith, more California residents are moving to Phoenix homes due to the lucrative 3.96% interest rate on a $400,000 home which is a better deal compared to a $1.1 million home in California. For the luxury real estate market, Rohr observed that the increase in mortgage interest rates will not have any significant impact on homebuyers in this category.
- Impact of home price increase
Metro Phoenix has recorded the highest home prices growth national wide for the last two and a half years. A 32.2% year-over-year home price was recorded in November according to the statistics by S&P CoreLogic Case-Shiller Indices that was released on 25th January. The high cost of land and related housing supplies are expected to continue driving the price for homes in Phoenix upwards. Luckily, we have seen wages also growing thus, making the affordability question reality for now.
- Shortage of labor and housing supplies
Since the demand for a new home is on the roof, homebuilders are working around the clock to deliver. However, most homebuilders are struggling with a shortage of labor and supplies and that’s why we still have low inventory in the market.
Jones noted that labor remains the biggest impediment to having more listed homes. The Phoenix housing demand trend has now shifted to rental homes and experts are projecting 14,000 homes out of the 30,000 expected to be built this year will be rental units. The only best way that homebuilders can overcome these shortcomings is by creating an environment where there is a balanced source of both labor and housing supplies.
- Increase in build time
When there is a shortage of labor and housing supplies, home builders fail to build new homes on time and deliver them on the market to meet the growing demand. During the pre-pandemic period, homebuilders used to take five to six months to deliver a project but that duration has now increased to approximately nine months. Indeed it’s still a challenging moment since the demand for homes is still high compared to the low inventory.
Therefore, according to this detailed analysis by the real estate industry experts, there isn’t any likelihood that the Valley’s housing market is going to crash this year.