Recent forecasts for the Phoenix housing market, extending into 2018, suggest that home-price appreciation could be slowing down. And this might actually be a good thing, given the tremendous volatility this market has seen over the last 10 years.
Real estate predictions for 2018 suggest that Phoenix could have a relatively normal year, at least where home values are concerned.
A Poster Child of the Housing Collapse
Phoenix, Arizona was one of the hardest hit cities in America during the housing collapse. This is partly the result of housing speculation and overbuilding. Thousands and thousands of homes were constructed during the heyday of the housing boom, many of which ended up vacant. We know the rest of that story.
But this market could finally be normalizing after a prolonged period of boom, bust and recovery. One recent forecast for the Phoenix housing market suggests that home prices will rise at a more modest, but historically average, pace of around 3.5% over the next year.
Home Price Forecast Through Summer 2018
House prices in the city rose by 9.5% over the previous 12 months, according to the company’s report. That’s much higher than the average annual appreciation for the U.S., going back 30 years or so. Those above-average gains were a response to the tremendous home-price appreciation that occurred after the housing crash.
In short, this market fell a long way after 2008, and then rebounded sharply with above-average annual returns for house values.
But home prices in the Phoenix housing market now appear to be rising more slowly. The economists at Zillow recently forecast that they would rise by a more modest 3.5% between now and the summer of 2018. That’s a more sustainable level of appreciation, compared to what we’ve seen over the last couple of years.
In June, the median home value in Phoenix was around $268,000.
Phoenix Housing Market Still Below Peak Levels
Despite the significant price gains of 2016 and 2017, the Phoenix housing market is still well below the peak price level reached during the last housing boom. But that’s because prices were over-inflated at the time.
According to David Blitzer, managing director at S&P Dow Jones Indices, which publishes the long-running Case-Shiller home price index:
“It should be no surprise that it would take them a long time to get back there [to pre-recession peaks], if ever. There are things that don’t come back, or don’t come back in less than a generation.”
The bottom line here is that homeowners in the Phoenix area probably shouldn’t expect home values to return to those peak levels anytime soon.
Inventory Remains Tight, Fueling Competition
While the 2018 predictions and forecasts for the Phoenix real estate market suggest that prices are slowing, there is still a high level of competition among buyers. This is the result of limited inventory across the metro area.
The supply of homes available for sale in the Phoenix real estate market is currently falling short of demand. And even though there is quite a bit of construction happening right now, it probably won’t be enough to satisfy demand.
“We don’t really have enough new homebuilding going on to satisfy the population increase that we’re seeing,” said Phoenix-based real estate economist Michael Orr.
Given the current inventory situation, home buyers entering the Phoenix real estate market during the latter half of 2017, or in 2018, should be prepared for stiff competition. This is particularly true for choice properties located in desirable areas. The supply of homes in Phoenix is currently falling short of what’s considered to be a balance real estate market. This means home buyers are competing for limited inventory.
With these kinds of conditions, it’s best to enter the market with a solid game plan and pre-arranged financing. Cash buyers should have sufficient funds in the bank with statements to prove it. Home buyers using mortgage loans can benefit from being pre-approved by a lender, before entering the market. Sellers expect these things.
Disclaimer: This article includes predictions and forecasts for the Phoenix real estate markets through 2017 and into 2018. These forward-looking statements were provided by third parties not affiliated with our company. We have collected and presented them here as a service to our readers. As a general practice, HBI refrains from making predictions relating to the housing market or the broader economy.