A recent forecast for the Phoenix real estate market suggests that home prices could continue to climb at a steady pace through 2022 and into 2023. This forecast follows two years of record-breaking price growth within the local housing market.
Tight inventory conditions and strong demand from buyers continue to push home values north, all across the Phoenix-Mesa-Scottsdale metropolitan area.
Big Home-Price Forecast Stretching Into 2023
Last year brought unprecedented price growth to the Phoenix, Arizona housing market. According to the real estate data company Zillow, the median home value for this metropolitan area rose by a whopping 30.7% in the past year. (This was reported in early March 2022.)
That was the largest year-over-year price gain ever recorded for this area, when this article was published.
The company also issued a strong housing market forecast for the Phoenix area, extending into 2023. In March, the company predicted that prices in the Phoenix area would rise by more than 20% between now and March 2023.
The chart below shows the median or typical house value in the area, going back several years. Zillow’s forecast, extending into early 2023, is shown in green.
Of course, that’s just one company’s prediction based on current trends within the Phoenix housing market. It’s the equivalent of an educated guess, not a foregone conclusion. So we shouldn’t get too wrapped up in the exact numbers being projected here.
Some experts point to migration patterns as a primary driver behind the hot housing market. Kaylee Smith, the Arizona division president for Landsea Homes Corp., recently told the Phoenix Business Journal:
“We continue to have large migration from California, Texas, Illinois and Washington. We really are restricted on supply. We can’t build houses for the demand, and you can’t have a bubble pop if you don’t have enough to sell.”
The key takeaway here is that economists expect home prices to continue climbing within the Phoenix real estate market, through 2022 and into 2023.
Buyers Challenged by Phoenix Real Estate Market
Over the past 18 months or so, we’ve heard many stories of home buyers in the Phoenix real estate market struggling to find a house to purchase. It’s the same story in many major cities across the country.
The coronavirus pandemic led to a surge in home purchases, shrinking an already-tight real estate market. Today, most cities across the country do not have enough houses for sale to satisfy the demand from buyers. This is particularly true within the highly competitive Phoenix market.
According to a recent report from a national real estate brokerage, the Phoenix metro area housing market had about a 1.2-month supply of homes for sale in February 2022. (Note the all-important decimal there.) That’s well below historic norms, and it helps explain why home prices have risen so much within the Phoenix area.
The bottom line here is that a stark imbalance between supply and demand continues to put upward pressure on home prices. This partly accounts for the somewhat bold Phoenix real estate market forecast mentioned above.
Good News: Inventory Grew Over the Past Year
Current reports and forecasts suggest that the Phoenix real estate market remains highly competitive in 2022, largely due to an ongoing supply shortage.
But there’s a bit of good news for home buyers in the area. Another recent report showed that housing market inventory within the Phoenix metropolitan area grew over the past year or so.
In March, analysts from Realtor.com published a real estate update with data for the nation’s 50 largest metropolitan areas. According to that report, Phoenix was one of the only metro areas that experienced inventory growth over the past year.
To quote the Realtor.com report:
“Realtor.com also reported an increase in the number of active property listings over the past year. The total number of active listings within the Phoenix Metro area rose by 5.6% from February 2021 into February 2022.”
If this growth trend continues, the Phoenix real estate market could become more buyer-friendly later in 2022 and into 2023.
Granted, it will probably continue to be a seller’s market for the foreseeable future, given the lopsided supply-and-demand situation. But it’s nice to see that more homes are coming onto the market. This is a positive development for Phoenix-area home buyers.
Could Higher Mortgage Rates Cool the Housing Market?
Mortgage rates play a role here as well. Over the past couple of years, rates hovered at historically low levels. This is one of the factors that led to a surge in home-buying activity nationwide. But rates have climbed a bit over the past few weeks.
According to the weekly survey conducted by Freddie Mac, the average rate for a 30-year fixed mortgage loan rose to 3.85% this week. That’s a significant increase from the end of last year, when 30-year loan rates were averaging around 3.1%.
If rates continue to climb, it could cause a general cooling trend within the Phoenix real estate market. But the ongoing supply shortage would likely “override” such a cooling factor, ensuring that the Phoenix metro area housing market remains competitive well into 2023.
Of course, there’s a lot of uncertainty in the air as well. From rising inflation to the war in Ukraine, there are many variables that could rattle the economy going forward. So it’s hard to make accurate predictions for the Phoenix real estate market, or any other U.S. metro for that matter.
Disclaimer: This article includes housing market predictions issued by third parties not associated with the publisher. The Home Buying Institute makes no claims or assertions about future economic trends.