Source: Catherine Reagor | azcentral.com
Metro Phoenix home prices hit new record. Sorry buyers, no slowing in sight
Metro Phoenix home buyers hoping the market will slow and prices will dip shouldn’t expect a break anytime soon.
Valley home prices are poised to hit a new record. Sales continue to climb, and the supply of houses for sale keeps shrinking, leading to more bidding wars.
Low mortgage rates, rising rents and a growing number of people moving to metro Phoenix are fueling the housing market.
Despite talks of a looming recession or at least an economic slowdown, housing market watchers don’t see the market cooling in 2020.
“I don’t see any signs of the market slowing like some people thought it would this year,” said Arizona Housing expert Tina Tamboer of the Cromford Report. “Pending sales show it is going strong, and prices are bound to climb.”
Prices, sales and supply
Metro Phoenix’s median home price climbed to a record $290,000 last month, according to The Information Market, owned by the Arizona Regional Multiple Listing Service.
Valley home sales on the MLS climbed to 95,000 in 2019. That pace is only lower than the boom years of 2004-05 and the bust year of 2011 when investors snatched up cheap foreclosure homes.
Millionaires are buying more Phoenix-area homes too. In 2019, a record 2,132 houses with seven-figure price tags changed hands Valley-wide. That’s up 7.6% from 2018, according to Cromford.
Demand for new homes is up as the supply of existing homes for sale falls. During 2019, 21,561 new homes sold, according to RL Brown’s Phoenix Housing Market Letter. That’s up nearly 7% from 2018.
The shortage of houses for sale is also driving the price increases. The number of Valley houses on the market is down about 30% from January 2019.
Forecast calls for more construction
Veteran Arizona economist Elliott Pollack said metro Phoenix has one of the most significant imbalances of supply and demand for housing in the U.S.
And another million people are expected to move to Phoenix during the next decade.
Pollack said the housing shortage and expected growth will drive more home construction. He forecasts 25,000 to 28,000 new houses will go up annually during the next few years.
Strong housing demand could push up the Valley’s new home prices 8% this year, said Arizona housing analyst Jim Belfiore.
Metro Phoenix’s overall median home price climbed about 11% in 2019.
National housing analyst John Burns is calling metro Phoenix the “hottest” housing market in the U.S. for all of these reasons.
Is Phoenix-area housing market too hot?
When metro Phoenix was last called the hottest U.S. housing market in 2005, it wasn’t a good thing. Home prices skyrocketed 50% in a year then.
That housing boom, spurred by speculative demand and bad mortgages led to the devastating crash of 2008-11 when Valley home prices plummeted and foreclosures soared to record highs.
It’s been more than a decade since the economy, stocks and housing bottomed out.
The long upward ride has most economists looking for a downturn or even a recession this year or next.
Pollack said the next economic downturn won’t be a repeat of the boom and bust.
“Now the demand for metro Phoenix housing is real,” he said. “Then it was an aberration.”
Rising prices are an issue for the Valley’s hot housing market as fewer people can afford to buy.
The area’s growing affordability problem could slow sales and price increases.