How long will the Phoenix real estate market continue to be in a frenzy! That’s the big question for 2021. Tell me what you think in the comments.
The median single-family house price in metro Phoenix was 15% higher last month compared to December 2019.
Also, notice the huge increase in house prices in December 2019, long before the Coronavirus. The market was strong back then, in large part, because mortgage interest rates had been falling fast for nearly a year by then.
The housing market was fading in the autumn of 2018 and then the stock market tanked and had its worst December since 1931. Things looked bad.
So, the Fed stopped raising interest rates and started cutting rates aggressively which they’ve been doing ever since. The housing market regained its footing in the spring of 2019.
By December 2019, 30-year fixed rate mortgages were down about a full percentage point and the real estate market had upward momentum going into 2020.
2021
Unless the number of houses that hit the market after forbearance ends is larger than pretty much every single housing economist expects, the Phoenix real estate market will continue to be in a frenzy at least through the end of the high season in June. Probably through 2021.
Downside
I don’t like to see house prices increase so fast. After the boom, it makes it harder for future first-time homebuyers. And when house prices are high, people spend less money in the real economy which means fewer jobs and a slower economy.
If the Fed ever increases interest rates, house prices could stagnate for years (unless inflation is increasing even more than interest rates).
We’re not in the danger zone for prices now, but prices are increasing so fast it may very well switch on that mania psychology we saw in 2005. That would be bad.
For U.S. real estate market analysis,
go to Real Estate Decoded.
New Listings
Running higher than last year but it’s not nearly enough because sales are even higher.
For Sale
This is what’s driving the skyrocketing prices. The number of single-family houses for sale is down 59% from last year at this time!
Under Contract
No change in sight.
Solds
These high sales numbers are what’s driving down the number of houses for sales and that low inventory, in turn, is what’s driving house prices higher.
This information can vary a lot in different parts of metro Phoenix. Your real estate agent can find the data for your specific city or zip code at The Cromford Report.
Note. This post was written on January 3, 2021 but the graphs will be continually updated.