Arizona Housing Market Update
Arizona’s housing market was hit extremely hard during the recession of 2008. Home prices in the Phoenix Metro area fell more than 56%, which is more than most large metropolitan areas with the exception of Las Vegas. Since then, the market has been moving slowly towards stabilization thanks to two factors: a rising employment rate and a declining amount of distressed properties.(from American Action Forum)
At the end of 2013, the average monthly sales price increased over 62% from $152,731 (the lowest in 2011) up to $247,819 at the end of 2013, (from Cromford Report).
The average sales price per square foot also increased steadily from its lowest point of $70.64 sq.ft. to $126.79 at the end of 2013, yielding an increase of over 79%.
From a long term perspective, Arizona average sales prices are almost half as high as they were at the peak of the market in 2005. There is no reason to expect that home prices will ever reach those levels again. While the increases experienced since the recession are a good indicator that things are getting better, it’s also important to recognize factors that suggest the market is slowing. The median sales price in October was 27% higher than the previous year, however it went up by only one-half percent from September, which suggests deceleration. The mortgage sector will also play a large role in the growth of the market as interest rates continue to rise. In 2014 we will likely experience interest rates over 5% and rising.
These and other factors all point toward a continued recovery and increase in Arizona home prices, but at a slower rate than the last two years.
National Real Estate Market Update
In 2013, the national real estate market experienced large gains in home prices. The increase in prices are nowhere near the prices prior to the recession, however they increased year over year by 12.5% as of October 2013 (data from CoreLogic). This year experts are speculating that the nation will experience “a normal market”, which means home prices will not rise as quickly.
“The conditions that led to the robust appreciation experienced earlier this year, including historically low mortgage interest rates, high affordability, low inventory and high demand are waning. In their place, we’re beginning to see more inventory and rising mortgage rates, which will lead to further normalization in the market going forward” – Dr. Stan Humphries, Zillow Chief Economist
There is also uncertainty surrounding a few other factors that might affect the market in 2014, including “boomerang buyers” who experienced a foreclosure, bankruptcy or short sale and want to become homeowners again.
(Are you a boomerang buyer? visit www.YouCanComeHome.com for your options).
We also can’t forget about the younger generation who will likely follow the path of other generations and start buying homes as the economy continues to improve.
“All those young people who moved in with their parents over the past few years and didn’t move out during the recession, there should be pent-up demand for household formation.” – Jed Kolko, Trulia’s Chief Economist.
Even when discussing the Return on Investment, Real Estate holds a healthy lead when comparing real estate with stock investments on the DOW or NASDAQ.
Just recently, The Federal Reserve said that it will begin to eliminate the $85 billion monthly bond program in an attempt to attract private funds back to the mortgage industry. While nobody knows how the financial markets will respond, there is good news out there, despite the rising mortgage rates. Some experts say that this may create a looser standard for potential buyers, making it easier to secure the loans they need.
“We expect single-family home sales and housing starts to be at the highest level since 2007.” – Frank E. Nothaft, Chief economist at Freddie Mac.
So whether you’re interested in buying or selling a home in 2014 there are reasons to be optimistic. Prices won’t continue to rise as dramatically, but as the economy continues to improve, so will the Real Estate Market.
All data is deemed reliable but not guaranteed.