Phoenix home price growth led the nation — until COVID-19 hit
Source: Phoenix Business Journal | Angela Gonzales
Before COVID-19 hit, the housing market in metro Phoenix showed the highest year-over-year price increases in the nation, but now local analysts expect housing demand to rapidly decline by as much as 80%.
For the month of January, metro Phoenix reported year-over-year price increases of 6.9% — the highest in the nation on the S&P CoreLogic Case-Shiller Indices, compared with a 3.9% national annual gain.
Released on March 31, the latest results of the S&P CoreLogic Case-Shiller Indices measured a period right before the COVID-19 pandemic, said Frank Nothaft, chief economist for CoreLogic.
“Home buyer demand was supported by low mortgage rates and rising income, leading to a further rise in home prices,” he said. “The novel coronavirus has placed a cloud over the spring buying season, and home sales will likely be much lower than they had previously been expected.”
Jeff Tucker, an economist for Zillow Group Inc. (Nasdaq: Z), told the Business Journal that the housing market was poised for a hot spring selling season before the pandemic hit.
“Year-over-year price growth was reaccelerating in most of the country, including Phoenix, which took the crown for the fastest-growing prices for the eighth month in a row,” Tucker said.
Phoenix also was remarkable for steady price growth throughout 2019, compared with West Coast markets like Seattle that ricocheted between high growth, a brief price decline and renewed high growth, Tucker said.
“Whatever this year holds, we can confidently say that home prices entered the pandemic months on strong footing, driven by strong demand and limited inventory,” Tucker said.
Demand can bounce back
Jim Belfiore, founder of Phoenix-based Belfiore Real Estate Consulting, said he is projecting housing demand to be down by 80% during the second quarter compared with the second quarter in 2019.
“We think it will take some time for the market to come back,” Belfiore said.
He figures housing demand during the third quarter will be down significantly, but expects to see it come back at a healthy pace during the fourth quarter.
“”I think people recognize this is a short-term Black Swan event, and I think they’re gonna pick up where they left off a few months after the virus has subsided,” Belfiore said.
Some builders are reporting significant drops in sales while other builders are reporting smaller blips, he said.
“Most builders even today still have sales offices open,” he said.
Adam Finkel, founder and principal of Phoenix-based Tower Capital, said he also thinks demand will bounce back.
And who knows, people from California might continue moving to Arizona, especially during this pandemic time, Finkel suggested.
“This might actually accelerate people coming here,” he said. “We’re still gonna be more affordable, more business friendly and all of the reasons people were moving here before. None of that’s changed.”