Arizona Property Market Update and Forecast
With all the recent unrest that the U.S has experienced and the devastation that Covid-19 has brought upon the nation at large, it’s not surprising that the property market has been in a state of ongoing trepidation. So, just how has the state of Arizona fared, and what is predicted moving forwards?
Photo by Ralph (Ravi) Kayden on Unsplash
Arizona property values will continue to rise
Arizona’s home prices have continued to climb steadily for many years now, and Covid-19 hasn’t slowed them down. According to Neighborhoodscout data, the state’s property values have increased by a substantial 128% since 2000, averaging a rate of 4% annually.
So, Arizona’s home values are set to continue rising into 2021, with Zillow forecasting an 8% increase between now and September 2021. Veros Real Estate Solutions have released data revealing that the hottest housing market in 2021 is predicted to be Sierra Vista, with an anticipated 5.8% rise in home values.
The population of renters may increase
As home values continue to rise, affordability will continue to be an issue for residents in Arizona. The rise of values has been pricing some would-be home buyers out of the market for some time now. Despite mortgage interest rates staying low, they won’t necessarily be able to offset the pace of value increases for every buyer.
In addition to this, like most of the country, Arizona is currently struggling to bounce back from high unemployment rates, only adding to the increase in renter population. It is predicted that renting will continue to be a more affordable option than home-buying into 2021 and potentially beyond.
Arizona is not likely to experience a Housing Market Crash in 2021
According to the Housing Market Recovery Index published by Realtor.com, Phoenix-Mesa-Scottsdale (the largest metro in the Arizona property market) is making a strong comeback since the decline of early 2020. This index takes into account Phoenix home prices and housing supply and demand, as well as the home sales pace. The metro passed the recovery benchmark officially back in July and has been continuing on a positive trajectory ever since.
Whilst this is only based on one state area, it is indicative of just how well Arizona has fared in terms of Covid-19 recovery. Based on these insights, experts do not predict a housing market crash for Arizona in 2021.
The 2021 Arizona housing market is set to be a seller’s market
Typically, a buyer’s market is characterized by excess supply and low home prices, and this is not currently where Arizona is sitting. With continued home value increases, the stage is set for eager sellers to capitalize upon their property appreciation gains. Referring back to the Housing Market Recovery Index, we can see that the active listings in the largest metro area are down by over 40% year-on-year, with days on market also down by 18% year-on-year. Demand seems to be high as supply is dropping.
With no major changes to these trends on the horizon, these market insights make a strong case for a seller’s market for Arizona in 2021.
Mortgage rates should stay grounded
The 30-year average fixed mortgage rate has, until recently, been hovering at a 50 year low of just 2.75%, with refinancing rates in the region of 2.45%.
That said, rates have jumped up a little recently, but only to an average of 2.79%. According to a recent report issued by themortgagereports.com, the Federal Reserve is set to preserve its low benchmark rates until 2023 – so, for the foreseeable future, there should be little-to-no change.
Nevertheless, even slightly higher interest rates coupled with more stringent lending criteria requirements could see a subtle change in the market, further bolstering the rent-instead-of-own trend.
Is now a good time to invest in Arizona?
The short answer is, ultimately, yes.
For real estate investors who are competitive and have cash reserves, the housing market in Arizona could be a solid investment, as it is proving long term to be a steady market with very little risk. The Arizona housing market is ideal for stability and long-term gains.
The state’s housing inventory is currently low, especially considering the height of demand the market is experiencing. Whilst this creates a seller’s market, it also makes for a competitive purchasing environment, meaning that some investors could be left behind. For any investors prepared to enter the Arizona market at premium prices and bet for the long game, it’s still an attractive market – there will still be a good return on investment, with plenty of tenants to service rentals.
Ultimately, Arizona has weathered the storms of the last year well. Its property values continue to increase and whilst the low supply has tipped the landscape into the seller’s favour, like the rest of the country, supply may very well start to increase as fears subside and the new administration settles in. The year ahead looks surprisingly bright.