2020 was anything but a typical year. From the worldwide pandemic to the heated election season, to the stock market drop in March. The Phoenix housing market exploded. We saw a lot of surprises and unexpected turns last year. Despite all of these events, the real estate market in the United States held strong and even saw record-setting numbers.
Due to buyer demand and low mortgage rates, it’s clear that the real estate market in America is looking bright. How about the Phoenix housing market in particular though? Well, if the housing market for the United States is looking bright in 2021 then the Phoenix market is looking like it’s going to be on fire. In fact, experts have predicted that Phoenix, Arizona is going to be the second hottest housing market in 2021! It’s no wonder when you take into consideration Arizona’s sunny climate, world-class dining experiences, and accessibility to the housing market for first-time buyers.
Why Is the Phoenix Housing Market Going To Be So Hot In 2021?
There are many reasons that the Phoenix market is going to be hot in 2021. One of the main reasons is because people from all over the United States are flocking to the sunshine state. The pandemic has started a worldwide trend of people analyzing their current living spaces. Those living in more expensive coastal cities such as New York, San Francisco, and Los Angeles are starting to realize that their dollar could go a lot further outside those markets. This is where Arizona comes in.
With the increase in time spent at home over the last year, people are starting to find it harder and harder to make it work in tiny inner-city living spaces. Arizona provides relief in this area as a dollar earned in Phoenix will go much farther than a dollar earned in New York. This factor is significant when you consider the upgrade in living space that can be afforded with this change of location. Not only that, but your dollar will also stretch farther in the grocery, transit, and shopping departments as well. No wonder large crowds of people are migrating to Phoenix.
On top of that, Phoenix provides an upgrade in the weather for people moving from colder climates on the East coast. But if you’re moving from Western coastal climates, like in California, Phoenix weather still does not disappoint. It allows people moving from California and other similar climates do not to have to compromise on the weather they enjoy while still paying lower living expenses.
In fact, the top five housing markets for 2021 are all sunny locales (excluding Denver). These sunbelt destinations are huge magnets for people moving from all over the U.S. This is especially true for the many millennials entering the housing market for the first time over this year and last year. These locations, like Phoenix, boast increased living space and record low mortgage rates in addition to their sunny year-round weather.
What Does the Phoenix Housing Market Look Like For Sellers?
The Phoenix housing market is looking… well quite spectacular for home sellers. Home sales are predicted to increase by 11.4% in Phoenix from last year’s numbers. This is one of the largest increases in home sales in the country. Placing Phoenix at the eleventh spot for the top 100 metro areas in the United States. Clearly, locking Phoenix in as a hot seller’s market in 2021.
In addition, home prices in Phoenix have also shown growth over recent years that’s not expected to slow down. Just since 2012, the house selling prices in Phoenix have shown 160% growth, making 2020 the eighth consecutive year of increasing home prices. This is good news for those selling their homes as it means they could get a much nicer return on their investment.
Phoenix real estate has also shown a rise in appreciation. Growing its appreciation rates over the last ten years by a total of 139.72%. This places Phoenix in the top 10% for home appreciation in a nationwide statistic. Which is, in turn, causing a predicted rise in home prices by 8-10% over this year.
Metropolitan areas in Arizona are also predicted to increase in home value across the board. The Phoenix area is expected to experience the most growth in home value with an increase by 8.5% over the next year. However, Maricopa County and the Phoenix-Mesa-Scottsdale Metro area are not far behind with expectations of 8.3% and 7.7% growth in these respective areas.
A big influence on this growth, especially during last year, has been the low supply of listings on the market. We’ve seen this shortage in-home supply all across the United States increasing buyer demand. In fact, the home supply in the U.S. fell to 2.2 months last year when the average supply is usually around 5-6 months worth. This supply fell even lower in Arizona as the home supply is currently at 1.48 months worth. Making 2021 the perfect time to put your house on the market for sale.
What Does the Phoenix Housing Market Look Like For Buyers?
What if you are planning to enter the Phoenix housing market as a home buyer? In that case, be prepared to enter a competitive buyers market in 2021. As mentioned earlier, the home supply in Phoenix is low, even lower than the national average. In fact, home supply in the market would have to increase by at least four months’ worth of supply in order for the market to even get close to being a buyers market again.
This has no doubt made buyer demand in the area shoot up. Yet, people from all over the country are still flocking to Arizona to try and snag a good deal. This is because even with the rising home prices and the relentless demand from buyers Phoenix is still one of the most affordable markets you can buy into. Hence the reason that the homes listed for sale in Arizona are only staying on the market for an average of 16 – 30 days before being snatched up by an eager buyer.
One of the main contributing factors in Phoenix’s housing affordability has been the record-setting low mortgage rates over the last year and continuing into the beginning of this year. If you’re looking to buy a home in Phoenix in 2021 don’t put off your house hunting in expectation for home prices to drop. Phoenix is forecasted to be a seller’s market for the foreseeable future until home supply and buyer demand stabilizes. So, experts are advising that you take advantage of these low mortgage rates before they inevitably start to rise again as the year progresses.
This prediction is also confirmed by Arizona REALTORS® First Vice President Eric Gibbs when he stated, “I expect the resale inventory to remain low forcing the sales prices to continue to rise, which will keep the market strong into the first half of 2021. As we move farther into the year, we may see those low-interest rates move slightly from the 2% range into the upper 3% range.”
Throughout 2020 and into the current year we’re seeing mortgage rates at historical lows dropping below even 2.5% interest. However, by the end of the year, we’re forecasted to see mortgage rates closer to 3.3% like the Arizona Realtors vice president mentioned.
Even the Arizona Association of REALTORS President-Elect Gary Nelson has this to say about the market in Northern Arizona, “Most would say vibrant is an understatement and that the market is downright hot. For instance, right now there are only 65 active residential properties for sale in the Flagstaff area. In a city of 75,000 that serves a total area of 125,000 people, to say that we have a lack of inventory of homes is an understatement.”
Don’t panic too much, though, as home supply is going to slowly increase throughout the year. This will provide a slight reprieve for home buyers as an increase in supply will slow down the rising home prices. Still, supply in the housing market will be trickling in, not gushing in. So, don’t hold out on entering the buyer’s market for too long.
Phoenix Housing Market Conclusion
It’s evident that the housing market in Phoenix is not going to crash in 2021. The market in this part of the country has shown immense growth even through the pandemic and whole year of uncertainty in 2020. Phoenix, along with the rest of the country, is going to continue to experience a seller’s market throughout 2021. Making this year the ideal time to list your house on the market. Increasing home prices, as well as the steady rise in home value, will likely give you a tidy sum to walk away from your home sale with.
If you are a buyer in the Phoenix housing market, 2021 is going to be a competitive year. Most house listings only even stay on the market for an average of 20 days. This is due to lack of home supply and record-breaking low mortgage rates that are causing buyers to snap up their dream homes much faster than usual. But don’t be afraid to get your feet wet and jump into the buyers market as now is still expected to be the best time to buy. So, whether you’re a seller or a buyer in the Phoenix housing market, now is the best time to enter and snag a great deal on your new sunshine state home.
So, in short, the housing market in Phoenix, Arizona is not going to crash in 2021. In fact, it’s going to do quite the opposite, it’s predicted to soar.