by Troy Miller
As we begin preparing for February’s AZREIA meeting “ Prescriptions & Predictions”: Expert Panel Discussion on the 2020 Greater Arizona Investor, the one thing that sticks out across the board from most predictions is this… “slow and steady!” And if the market is static and the pace of changes is gradual, we may hardly feel the change, but they are happening, even if subtly. And while we look at the market updates and news each month, to the untrained eye it may seem futile to keep a watchful eye. But it was one of AZREIA’s Subgroup leaders, who said, “If I had not been paying attention in ’08, I might have had to file for bankruptcy!” While this was an extreme case, we know just how important it is to stay tuned in to market stats to notice when those trends change in volatility.
And no, we’re not predicting much change in the market, but we are keeping an eye on trends, specifically when the market changes from a buyers’ market to a sellers’ market, and how investors shift and adapt their investing strategies. And we could drone on and on about the lack of inventory and the rising prices across Metro Phoenix and the state of Arizona, but we’re not. Instead, we want to focus straight from the horses’ mouth! We’re gathering some of Arizona’s most active investors to chime in on what is happening by the numbers, what major media outlets are predicting, and probably the most important factor, where does opportunity exist in this market?
So, let’s spend a moment to look at predictions for 2020 in Arizona Real Estate:
1. Recession Talks Will Increase: Big real estate entities like Zillow predict that the housing market recession will hit hard in 2020. While most people don’t have as pessimistic of a view as Zillow, you can expect conversations surrounding housing recessions to pick up pace during the year and to come to a boil in 2021.
2. Young People/First Time Home Buyers Will Drive Sales: If you’re selling a house next year, expect to see a lot of young couples walking through your doors during open houses. Today, the average millennial is pushing into their late 20’s which means that they’ve got money in their pocket and the urge to start building families. Consequently, we’ll see millennials driving the housing market more than any other group.
3. Lower Interest Rates Will Help Demand: Interest rates are historically low on home purchases in the United States. As of right now, they’re below 4%. Compare that to 14% in the 80’s. When interest rates are low, home buyers can earn discounts on houses without needing to inconvenience sellers. Th at’s great news for both parties and compels more inventory to hit the market and more buyers to purchase that inventory without aggressively negotiating.
4. Multifamily Market: Phoenix has one of the top rent growth markets in the country. One area of concern, which will have an impact on the amount of new inventory added to the market, is the increase in construction costs. Th is will slow down the inventory growth, as it will be harder to get the new deals to pencil
5. Impact of a Strong Economy: Metro Phoenix was hurt badly during the housing and economic meltdown in the latter part of the 2000s, which led to a delayed and muted housing recovery. However, job growth has been vigorous for the past few years while single-family building permit activity has been relatively modest. We believe that all of this bodes well for 2020 and beyond. Phoenix’s more reasonably priced housing, lower cost
of living, available workforce and stable climate forecasts a growing economy and stronger housing growth in 2020, provided interest rates don’t rise too quickly.
As Don Murphy, division president, Shea Homes stated best, “I expect more of the same in 2020 with a very solid housing market with moderate growth and moderate price appreciation. There might be a slight pause in the market in 2020 or 2021, but our market did not experience the tremendous run-up in pricing that others did so I wouldn’t expect a precipitous fall either.”
Join us at AZREIA’s February meeting to hear from your peers on predictions and prescriptions, on where they are putting their focus to navigate and forage for opportunity in the 2020 Arizona real estate market.