In 2022, North Valley buyers and sellers can expect to see more of what resulted from the pandemic-fueled housing market; skyrocketing home prices, increased competition between buyers, the speed of action necessary to snatch a property off the market, and the reasons people are moving to new cities and buying homes. Demand was high and supply was low, resulting in a hyper-competitive market where more than 54% of homes sold above listing price in 2021.
“We expected to see more inventory on the market at the first of the year and quite frankly, the Phoenix area needs it,” says Founder of Halpern Residential at North&Co. Trevor Halpern, J.D. “Unfortunately, even though housing inventory is slowly improving, new home development isn’t coming online fast enough thanks in part to lingering supply chain issues and skilled labor shortages. So, low inventory is a major reason North Valley home prices will continue to climb.”
Suburban migration to the Phoenix Metro area isn’t slowing down either. A Realtor.com study showed approximately 62% of recent home buyers prefer to work remotely after the pandemic. That means new homeowners will scan homes on the market for space, size, and functionality to ensure they’re suitable for work/life balance.
“This new shift in mindset means city dwellers who are struggling to live in places like New York City, San Francisco, Seattle, and Washington D.C., are moving to more affordable areas and Maricopa County is on that list,” adds Halpern. “North Valley is an extremely desirable location because the houses are large, outdoor space is often abundant, and office space is almost guaranteed to be included in the home’s floorplan.”
Another real estate trend that shows no sign of slowing down is the increased desire for rental properties such as AirBNBs or VRBOs. For those considering investing in a rental property, the time is now. According to recent data from the Cromford Report, which provides detailed information to track the history and current status of the Greater Phoenix residential resale market, rental rates rose 6% across the country in the fourth quarter of 2021. However, Phoenix showed the highest rental rate increase at 14% year-over-year.
“Cromford analysts say there are more people wanting to rent than there are units available, leading to increased investor demand and competition for properties,” says Halpern. “This competition is only going to grow as more out of state investors continue to purchase local properties specifically for income producing reasons.”
Next, mortgage rates have continued to remain low, but they’re already starting to increase. In fact, in 2021, mortgage rates had been at a historic low, motivating a flurry of homeowners to refinance their homes, which is now slowing down as rates begin to rise. The 30-year fixed-rate mortgage (FRM), which is the popular choice for most homeowners, is at its highest level since June 2020, teetering around 3.45%.
“The Mortgage Bankers Association is forecasting that the average 30-year fixed mortgage rate will hit 3.7% by the third quarter of 2022, and 4% by the end of 2022,” says Halpern. “While those numbers are still historically low, they represent a roughly 30% increase compared to what we saw last year, so I’d suggest purchasing sooner rather than later if buying a new home has been on your radar.”
Luxury housing will also continue to be in demand in areas such as Silverleaf, Cave Creek, Troon North, DC Ranch, Grayhawk, and Pinnacle Peak. Large lots, luxury golf courses and boutique shops are just a few of the contributing factors that make these areas so desirable to the snowbirds that routinely flock to the area and now stay longer. The luxurious suburbs that surround Phoenix can expect to see top dollar for their properties.
“On the flipside, as remote work continues to become the norm, some people are going to the office two days a week, while others aren’t going back at all,” says Halpern. “As the commute time factor becomes less impactful to daily lives, people don’t have to worry about where they live as much anymore, which means they can now consider places like Cave Creek, that once seemed too far to commute.”
A real estate trend that might come as a surprise is millennial buyers will continue to be very active. This age group is the driving force of the U.S. housing market because millennials are aging up. The “lost” generation is rising as the new homebuyers. In 2021, millennials applied for more mortgages than any other generation and more than half of home purchase mortgage applications (51%) were submitted by those between the ages of 26 and 41.
“This shouldn’t be too surprising as millennials have proven to be savvy investors who have or who are hitting their professional and financial strides. They’re also starting or thinking of starting families, which creates a need as opposed to a want for a more suitable home,” says Halpern.
It’s clear that the market will continue to move on a similar track throughout 2022 that was seen in 2021, with many of the issues and consumer needs carrying over from year-to-year. These are interesting times, and buyers and sellers need to take into consideration the pandemic-induced socio-economic and environmental factors that are shaking up the market in ways they haven’t before.
“The real estate market is as dynamic as I have seen in my career which means working with a trusted real estate advisor is as important as it has ever been,” says Halpern. “Full time, well-seasoned agents are up-to-speed with what the market is doing today, not yesterday or last month, and those should be the folks you call first to help you navigate this market when considering a purchase or sale.”