Phoenix Housing Market: 2019 Forecast

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First, I would like to note for this post I researched the findings from Arizonarealestatenotebook.com, sibbach.com, and the numbers reported by Zillow, MLS, and Trulia. I compiled the information here in an easy to access, easy to read format! I hope you enjoy!


Alright let’s first dive into the year over year trend for the greater Phoenix area. Home prices have increased by a whopping 9.5% in the Phoenix area as a whole and 17.8% in two years! That is absolutely wild! It is certainly safe to say the market is hot right now. With these high numbers also comes the inevitable and reasonable question, “When is the bubble going to pop and send us crashing back down?” Insinuating that history will repeat itself. While I cannot argue the hopeful belief that it will never happen again, I do know that based on market indications and numbers, it will not be happening soon.

Supply and Demand

This largely dictates our market value prices. We saw from 2005 to mid 2007, across the board, supply when up (homes available), while the price stayed the same. In most markets, prices increased exponentially with no reflection on scarcity. Prices finally began to fall in 2007 and due to the two year lag period, they fell in a tremendous way.

Right now, there are just over 19,000 homes on the market in the entire Phoenix area. Last year this time we were a little over 21,000. This is a great indicator as we are still dropping in inventory which helps support the market value increase. So, based on these numbers and the fact the supply hasn’t gone up, we are a good ways away from any kind of market crash IF history does indeed repeat itself.


Lending

Maybe you saw the movie “This Big Short”. It was a great illustration of how bad the mortgaging practices were that went unregulated for a long time. If you did not see the movie or you are unaware of the laws set in place at the time… here is a run down. At the time before the recession and things turned ugly, people could simply state their income, state their assets, and state many of necessary requirements that could easily get them approved for loans they had no chance in repaying. This was a massive contributor to the consequences we all suffered after the crash.

Today’s mortgage and lending laws are much for strict and straight line. As noted by Sibbach, over the last 18 months, the loan to value ratio, debt to income ratio, and FICO scores have stayed flat. Meaning the regulations have stayed the same. No bending to the rules. In fact, Sibbach noted that the average FICO score for secured loans last year was 726. This was the highest number on the chart that looks back over the year and a half period. These numbers and facts again indicate that if the market was to turn, it would not be because of bad mortgaging and lending practices.


Cash on Hand

Cash reserves. This is the cash we have ready and able to use if investments were to present themselves. Last recession most Americans were caught with no extra money to take advantage of all of the incredible investment opportunities that presented themselves. That is not the case today. It seems as though history is a great teacher. According to marketwatch.com and FDIC numbers reported, the amount of cash we have in reserves now in comparison to 2005 is almost 300%. Across the board, more folks are sitting on cash and are prepared for whatever may come.


Maricopa County Population GROWTH

Well this one may be no surprise to you but Maricopa county has been the fasting growing county in the entire United States since 2016. Number one in 2016, number one in 2017, and most likely top 3 again for 2018. This amount of new folks moving into the area helps drive up demand while keeping supply down and the market healthy! So take a deep breath, you are in a fantastic area here in Arizona.


What does this mean for you?

As far as the immediate forecast, the market looks like it will continue its tear into 2019 at a steady pace. I wouldn’t expect another 9 percent increase, but I would certainly believe that there will be another healthy rise this year. If you have not bought a home yet, this is a great time as there are numerous programs available to first time home buyers and other special programs to fit your needs. 2019 could be your year to become a proud homeowner!


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