By Shelley Sakala, Realtor
The good news for local homebuyers is that the real estate market is tapping the brakes on rising home values. Of course, when you tap the brakes while doing 100 miles per hour, you’re still going fast. In 2021 Phoenix led the nation in home price increases with a whopping 32.3%. And those gains seem to be holding steady. Now that we’re in the second month of a new year, we’ve had a chance to reexamine the market, and here’s what we found: Phoenix is still hot. Slightly less hot, but still hot. To give you an idea of what “tapping the brakes” looks like, prices are still increasing but the monthly increases are getting smaller. And homes are sitting on the market an average of 10 days longer than they were at Christmastime. These changes in market conditions are noticeable, but not dramatic.
To significantly halt the growth in home prices, a decrease in demand is needed. The powers that be could make this happen with help from our old friend: mortgage rates. We’ve enjoyed historically low rates since before the beginning of the pandemic, but experts predict rising interest rates this year. The Mortgage Bankers Association is forecasting that rates will reach 4% by December. In theory, this would slow down the growth of home prices. It would also lock some people out of the market as loans become less affordable.
We probably won’t experience a second straight year of 32% home value increases. But demand will remain for existing homes until and unless builders ramp up new home construction. This is easier said than done, as supply chain issues have slowed or even stalled construction projects while builders await delivery of materials, appliances, and paint. The rapid growth of apartment communities in Phoenix may help alleviate some of the demand for housing, but it’s only a partial and temporary solution for those seeking a permanent place in Phoenix to call home.
Shelley Sakala is a local realtor and owner of The Sakala Group Real Estate. Learn more at shelleysakala.com.