Phoenix and surrounding areas are still in high demand but we continue to see a slight shift in the local real estate market. What does it mean? Are we in a “housing bubble”? The short answer is NO. Let’s talk about why and what we expect for 2022.
We are seeing more inventory come to market resulting in more buyer options. As a result, we are seeing the number of multiple offers come down. This is a classic example of supply and demand. When there is more supply, buyers have more options so there are less offers per listing. This shift in supply and demand happens seasonally. In the fall (and the closer we get to the holidays) buyers are distracted and many don’t want to move when they expect holiday company or plan to travel. We expect travel to be up significantly for the holidays this year. So, the numbers are not worrisome.
Millennials are a hot topic in the real estate industry. This is the largest generation in the U.S. since the Baby Boomers. This majority of this population is also at the perfect age for home buying with most in their 30’s right now. Take a look at the chart here:
The market and home buildings have poorly planned for the housing demand of the millennial generation. Builders haven’t kept up with demand for a variety of reasons. First, they didn’t want to end up overbuilding and sitting on inventory like they didn’t from the Great Recession in 2008-2010. Also, they have faced challenges of higher land costs, costs of materials and labor and supply chain issues due to Covid-19.
Covid-19 Changed the Market
The onset of the pandemic and the aftermath has changed the landscape of the home buyer market. Millennials and Covid-19 created a perfect storm where new desires pushed demand to new highs. Working from home allowed homebuyers to expand their search areas father out from the cities since they didn’t have a need to commute. At the same time, millennials are starting families so the need for larger spaces both indoor and outdoor is pushing them toward larger homes in the suburbs.
During Covid-19 interest rates have remained historically low and our government has been slow to want to change that. So, while prices have continued to go up, the low interest rates have kept homes affordable.
Forecast for 2022
For 2022 we don’t really see drastic change. We believe that price appreciation will slow and possibly even out in some areas. However, this won’t be because of a decrease in demand. Most likely, slowing appreciation will be due to a rise in interest rates and continued lack of inventory. To put it in perspective, Phoenix saw 16-17% appreciation over the last year. Three of the largest forecasters (Zillow, Corelogic and FreddieMac) all predict appreciation rates of 4-12% for our area.
Now, keep in mind that no one can truly predict the future of the market. There are too many “black swan events” that could hit us unexpectedly (like Covid). However, until we have enough housing to meet the demands of the millennials, the numbers for a “bubble” aren’t there.
Now is the Time
The market right now is the “sweet spot” for both buyers and sellers. For sellers, you have ample appreciation to sell and have options. For buyers, interest rates and appreciation are most likely not going down. Rather, they are both predicted to go up. So, the best time to buy a house was yesterday… the second-best time is NOW.
If you are ready to make a move, call the Fred Delgado Real Estate Group at 602-308-8494.