There is a lot of anticipation on what 2024 will bring for the housing market. While many leaders in the real estate industry have mixed opinions for the housing market on a national level, experts are more in agreement on the overall outlook for our local market, and it is all positive. While Phoenix home values did take a hit in 2023 overall, many areas of Phoenix are now flat or starting to see values increase.

While affordability remains a theme in 2024 for Phoenix home buyers, affordability is improving and is expected to continue to improve as the year progresses. While there was a substantial correction in home values after the pandemic, interest rates have more than doubled. This has put many buyers on the sidelines and potential sellers hesitant to list their home for sale, letting go of their low interest rate. The median home price has risen to $460,000 in Phoenix. With interest rates in the mid-sixes, this makes buying a home difficult for many, especially first-time home buyers.

The good news that industry leaders are sharing for Phoenix is this: Phoenix is still more affordable than most metropolitan areas. Job growth and wage growth should remain strong in Phoenix in 2024. Further, mortgage lenders have many lending products available for Phoenicians. Some of these programs include assistance with the down payment, a temporary buy-down of the interest rate or closing costs being credited by the lender. Further, it is expected that the trend for sellers offering credits to buyers to assist them with their costs for buying a home, or to help them “buy down” their interest rate, will continue. Additionally, conforming loan limits for greater Phoenix have increased to 766,550 - $40,350 more than last year. This is all good news, combined with the Mortgage Bankers Association predicting that interest rates may fall slightly below 6.0% by the end of this year.

If you ever want to talk through your options of buying or selling property, please send me a text or give me a call. Take care and have a happy new year!

Last week, Phoenix City Council voted 8-1 to allow Accessory Dwelling Units (ADUs) in the backyards of homes zoned a single-family residence, but with the stipulation that they cannot be used as short-term rentals. An ADU is a term for a secondary house or apartment, like a casita or guest house, that shares the building lot of a larger, primary home. The unit cannot be bought or sold separately, but they are often used to provide additional income through rent or to house a family member. The overwhelming support from City Council did not come as a surprise to many. ADUs have proven to be an effective way to combat scarce housing stock in cities where single family housing is the predominant zoning. Phoenix has had an issue with the number of available houses for sale, or rent, for years. Arizona’s Department of Housing recently reported that Arizona is short about 270,000 residential units. Mayor Kate Gallego said, “These units built in the backyard will help families stay together and offer opportunities for multigenerational living.”

Multi-generational living has been a hot commodity in greater Phoenix for the past few years. The NextGen home (a home within a home) built by Lennar is one of their leading models being sold in greater Phoenix and numerous detached garages or “carriage houses” of existing (historic) homes in downtown Phoenix have been converted to additional living quarters already, most of which not properly permitted. As stated by architect Jake Wegmann, “When people can’t find affordable housing solutions, they make their own affordable housing solutions.” The ordinance passed allows Phoenix to regulate and control building standards for ADUs. It is also one step in the right direction for the City of Phoenix to meet the needs of more affordable housing, for owners and renters, because when housing stock increases, affordability increases as well.

If you are interested in learning more about ADUs, I recommend visiting www.buildinganadu.com or picking up the book, “Backdoor Revolution,” by Kol Peterson. If you are interested in learning more on how to carve out your own space for an ADU based on the existing footprint of your home, do not hesitate to reach out to me, as I have worked on several of these.

What a whirlwind the real estate market has been over the past 12-14 months! As interest rates doubled from what they were just over year ago, sales volume dropped as well as home values. Now, with creative loan products, builder incentives, grants and interest rates trending downward we are starting to see the end of the housing downturn in greater Phoenix. According to ARMLS statistics, at the end of the first quarter, March 31, the average sales price of a home increased for the second consecutive month, rising 3.4% month over month, an increase of $17,600. The median sales price of a home also increased for the second consecutive month, rising 1.9% month over month, an increase of $7,900. April is forecasted to be the third consecutive month in both categories with bidding wars resuming once again for choice homes under $450,000. Bidding wars often happen when buyers demand outpaces supply, homes for sale. Supply has been low in Phoenix for some time but now there is a new factor – interest rates. Many who bought or refinanced their home in the last few years, have no desire to sell and let go of their substantially lower interest rate.

Michael Orr of the Cromford Report, stated, “The balance between supply and demand has been moving consistently in sellers’ favor since mid-November 2022. This confirms we are in the rebound phase of the correction that dominated the second half of last year and created an atmosphere of fear throughout the market. That fear can now be replaced with relief as one market signal after another turns positive and resumes a normal trend. Right now, supply is weakening much faster than demand. Competition between buyers is starting to warm up because there are too few sellers.”

If you were concerned about buying a home because you thought home values were plummeting, that is not the case anymore, at least in greater Phoenix. As always, please call or text me if you would like further information on the market, or to answer a specific question that affects your decision to buy or sell a home.

In a market like we’ve seen over the last year, it is difficult to predict what may happen in 2023 with the residential housing in Phoenix, AZ. Below, I have put together a list of some of the top leaders and real estate professionals, from managing brokers, mortgage lenders, developers and economists, so that you can read their thoughts and prognostications for the year that lies ahead of us. Enjoy!

Lawrence Yun, National Association of Realtors Chief Economist

I predict home prices will go up 1% next year. But it will vary by area, and some metros could see slight decreases. Our best resource for local forecasting is a “bank grade” program called Collateral Analytics. Its five-year forecast suggests more market softening we experienced in Q4 of 2022 to continue through Q1 of 2023 followed by a modest recovery and relative stability. Their forecast uses the CBSA, or Core Based Statistical Area (demographic and economic regional data) weighted heavily to affordability. Affordability is driven in no small part by interest rates, so mortgage rates are the big unknown variable.

Liz Brooks, Executive Vice President of Sales and Marketing, Belgravia Group

While higher interest rates and a fear of economic uncertainty will continue to produce significant market headwinds, there are still meaningful demand drivers and supply constraints that will lead to deal activity. Millennials have surpassed baby boomers as the nation’s largest living adult generation, and they are entering their prime spending years, getting married and starting families. As rental rates have climbed steadily for years, many millennials are now preparing to purchase homes. And, as even more existing homeowners stay put, unwilling to give up their ultra-low mortgage rates, there are fewer homes for sale; supply is likely to remain constrained for the foreseeable future.

Jeremy Collett, Executive Director of Capital Markets, Guaranteed Rate

We can forecast, but nothing is certain. The Mortgage Bankers Association (MBA) believes that housing prices will likely level off, but the higher-rate environment will mean that fewer homes will sell or refinance in 2023. By buying low in a cooled market, once prices heat up again, the steady build in home equity offers many advantages: dropping PMI (if applicable), taking out a HELOC to invest in home improvements or refinancing with more favorable terms. No matter what, I think we will see a return to seasonality, with a focus on home sales in spring and summer when people are more inclined to move.

Todd Menard, Chief Operating Officer, West USA Realty

I foresee 20,000-plus homes in active inventory (Greater Phoenix Metro), 2,200-plus new listings added to market each week, 4%-5% annual appreciation of existing single-family detached homes and 4.55-6.5% mortgage interest rates. I also anticipate Arizona’s population to increase similar to 2022 and possibly by about 10,000 more.  Arizona may be feeling a higher increase in goods since we have been one of the most affordable states for so many years. If prices increase similarly across the country, then the same should remain true. The same things have always attracted people to move here: weather, jobs (including construction trades/bio-tech professionals), affordability, recreation, entertainment, medical availability, etc. Last, neighborhoods that are within a reasonable drive (workforce housing) from business centers. North of Vistancia (NW Peoria) has 5,500 new homes currently under development. Loop 303 in Peoria, Surprise, Goodyear, Buckeye; along Superstition Freeway Gilbert/South Mesa. Casa Grande, as the electric vehicle plant, Speedway, and other major businesses begin hiring.

Monica Monson, Founder and CEO, The Noble Agency

I expect that the housing market will continue to normalize overall. Rates will continue to jump around and while inventory has grown in the broad market, it has remained relatively low in the luxury market. Two areas of the residential real estate market that may continue growth are the luxury segment and new construction. With low inventory in the luxury market and the lag in available new construction, both will continue to be desirable options for buyers relocating to the Valley or moving locally.

Danny Court, Senior Economist, Elliott D. Pollack & Company

I expect to see home price decline another 5% in 2023. The price decline from May – December. 2022 has already been a 10% decline for Greater Phoenix, so that would be roughly a 15% adjustment in total for this housing cycle before we see home prices start to rise again.

If you have any questions pertaining to the insights of the industry leaders above or want to learn more about your immediate market or neighborhood specifically, feel free to contact me at any time.

We hope you are enjoying the cooler temperatures! As most of you know, the housing market has cooled off as well, and we are officially in a balanced market. This means our current housing marketing does not favor neither buyers nor sellers, it’s neutral. While the supply of homes increased dramatically over the first half of the year, additional supply coming onto the market has leveled out at around 21,000 homes for sale. Even though interest rates have spiked considerably, the demand for purchasing homes is still out there.

Some of that has to do with our continued population growth. A recent analysis found that Phoenix had one of the highest ratios of people moving in vs. those moving out during the first half of the year. The data, collected by MoveBuddha, showed Phoenix was No. 8 among major cities with a ratio of 1.19 people moving in for every person leaving from January through June. The analysis also found that state-to-state moves have slowed down during the first half of the year compared to 2020 and 2021, when pandemic-driven relocation was on the rise.

The top 10 major cities, for the ratio of people moving in vs. moving out, according to MoveBuddha, in order are:

Charlotte, N.C. (1.82 to 1)

Dallas, TX (1.7)

Austin, TX (1.49)

Denver, CO (1.38)

San Antonio, TX (1.24)

Houston TX (1.23)

Miami, FL (1.21)

Phoenix, AZ (1.19)

Las Vegas, NV (1.18)

Atlanta, GA (1.17)