By Louisa Ward
“Is it a good time to buy real estate?” This is a question I get asked almost daily. Thousands of buyers are unsure if they should make the move and are questioning the future. They see prices increasing at a pace that they will soon be unable to afford. But, at the same time, they are concerned about the media-driven hype of an impending crash. I spend a large portion of time everyday talking buyers off the ledge. I am going to share with you “The Ugly Truth.” Spoiler alert: it is actually good news for buyers (and sellers)!
First you must understand why we are in such a housing frenzy. The main reason why we are in a high-appreciating sellers’ market is due to a housing shortage. For the past 13 years, we have been underbuilding for our steady population growth.
Not only do we have a housing shortage for our typical population growth, but the growth has turbocharged, bringing over 300 people a day relocating to the Phoenix Metro area, and the housing demand became insanity.
The Greater Phoenix Economic Council (GPEC) says that a large portion of this growth is due to upward economic momentum. “We saw record-breaking growth in FY20 (fiscal year 2020) with 42 new businesses creating 9,776 new jobs. Currently, GPEC has 221 active prospects in the pipeline with 28 FY21 prospects to-date. These prospects represent more than 4,377 potential jobs,” according to GPEC.
Housing developers are working hard at adding more housing to the supply. This is causing the market to cool just a little. We have moved from an insane market to a frenzy. If we remain on this same trajectory, we will be in a balanced market within the next six to 12 months. (A balanced market is a normal market with appreciation at 2-6%.) But before we get there, the prices are going to continue to increase alongside a possibility of interest rate increases as well.
Now there is one other idea that buyers must overcome: forbearance. In real estate, forbearance is described as, “A special agreement between the lender and the borrower to delay a foreclosure.” The media has hyped this issue to be a looming doom of mass foreclosures that will cause the housing market to turn and prices to plummet. But, it’s not all doom and gloom. Once the forbearance ends, there will be a small uptick in foreclosures. Most of the homeowners in forbearance have so much equity in their home that the owners have figured out a way to catch up and get back on track with their payments. Those that can’t catch up are selling their homes and pocketing the equity. Most of those homes have already been absorbed into the market. There will be such a small number of homes foreclosed on that it will make no noticeable difference in the market. There is no evidence that any housing crash is in our future.
What does all this mean for homebuyers?
The biggest mistake buyers can make is to sit around waiting for sale prices to decline while their potential mortgage payment increases. Mortgage rates have been on an upward journey for the past few months, and they continue into the 3% range as I write this. This is the time for buyers to take advantage of homebuying opportunities before the prices and interest rates increase to a point that it becomes unfeasible for the average buyer. Properties purchased today are expected to strongly appreciate by more than 10-15% over the next 12 months.
It is a great time to buy a house whether it is your dream home, a starter home, or even an investment property. Buyers should jump in and take advantage of the potential high increase in appreciation and low interest rates. Just be sure to connect yourself with a knowledgeable Realtor who can give you current and accurate advice for your situation.
Louisa Ward is a senior partner at My Az Realty Team and RE/MAX Excalibur. She is part of the Top 2 percent of Realtors in Phoenix and Scottsdale with 25 years of experience. Louisa is also an active member of the North 32nd community, serving as a local real estate expert, member of the PV Village Planning Committee, and a Mountain Preserve Block Watch leader. To learn more, visit MyAZRealtyTeam.com, call 602-769-6699, or e-mail [email protected].
