By Holly Henbest, Realtor
The housing market is continuing to thrive. Demand is outpacing supply and bidding wars are expected when a home is listed for sale. All of this leaves some people concerned for the future of real estate and memories of the crash loom in their minds. I’m here to remind you that this market is vastly different than what we saw during the last crash, so don’t let the rumors scare you. While I’m not an economist and I don’t have a crystal ball, I think it’s important to understand some of the key differences and facts that are creating a completely different real estate landscape than what we saw happen from 2005-2011.
First, there are some people concerned that there will be a flood of distressed properties hitting the market at the end of forbearance. The Cromford Report recently reported that while there may be an increase in supply, it would be unlikely to reach any level that could impact the Greater Phoenix market.
Second, foreclosures and short sales caused the housing crash. Again, economists are quick to point out that excess supply was the primary cause and foreclosures and short sales were the consequence. Too much supply drove prices down, and as people lost equity in their homes, they walked away. We are in the opposite situation now; there is too much demand and not enough supply.
Third, the lending requirements are vastly different for buyers. Prior to the crash, many buyers were getting zero down or low down payment loans and that created a population of buyers that didn’t have any “skin in the game” or equity in their home at the time of purchase. There were also loans available that didn’t require income or financial ability verification and that created a population of homeowners that weren’t truly financially stable enough to own homes. Without any “skin in the game” it was an easy decision for people to walk away from their homes, hence the short sales and foreclosures. With the current lending requirements, buyers are more financially capable of homeownership and they are putting more down at the time of purchase, so they have instant equity.
Fourth, not only do buyers have instant equity, but as prices continue to rise for everyone, that means added equity for all homeowners. So, if a homeowner did become financially distressed, they could sell their home and walk away with some profit. There wouldn’t be a desire or need to foreclose.
Lastly, Arizona is the number one state in the country for net population growth. More people are moving here due to our great weather, affordability, property taxes, and job growth. We are also a highly desired business hub for several reasons, including availability of transportation, lack of natural disasters and available land. These factors suggest that our population growth will continue to rise, so our supply and demand situation will continue until new construction catches up to demand. New construction definitely has some catching up to do, since builders basically stopped construction during and after the crash.
We are currently in the midst of what is typically the busiest season for home sales in Arizona, so we are also combining the already high demand with our high demand season. Normally, we would anticipate things to slow down a bit when temperatures climb over 100 degrees, but we anticipate this pace to continue, with frankly no end in sight.
Regarding pricing, in February alone, the average price per square foot for closed listings rose almost 5 percent. Additionally, unit sales are up 7.4 percent and sales prices are up 23.1 percent compared to a year ago.
If you have any questions or need assistance with any real estate matters, please give us a call at 480-266-8785.
Holly has been a Desert Ridge resident since 2000 and has been a realtor since 2006. She is the leader of The Henbest Team with Realty One Group. Holly is ranked in the top ½ of 1 percent of Realtors in Arizona and is a Certified Luxury Marketing Expert. She was also ranked #24 in 2019 by the Phoenix Business Journal and recognized by So Scottsdale! magazine as a Real Estate Superstar for 2019.