To predict 2018, we have to dissect the most critical real estate market stability factors…
1. Supply - Inventory Level, 2. Demand – Buyer Pool, 3. Delinquency and Foreclosure Level, 4. Interest Rate, 5. Population and Economy
1. Supply - Inventory Level – Please see chart on opposit page. In Jan 2014, we had 5.4 months worth of inventory on the market, and since then every year we had a significant drop in inventory. Based on the calls I have received we have more buyer than seller available, I do not see the trend changing much at all. In fact, we will see a further reduction in inventory level in the coming year. (Buyer’s market is when inventory level exceeds 5.5 month supply, healthy market for both buyers and sellers is when inventory level are between 3 to 5.5 month, Seller’s market is when inventory are below 3 month supply. As you can see we have been in the seller market for a while)
2. Demand – Buyer Pool – 2017 showed the 3rd highest volume of homes sold in the last 15 years. Thats more than a 5% increase from 2016, and over a 10% increase from 2015. I foresee another 5% increase in 2018. Based on the current buyer pool, which is large and active (Buyer Pool consists of Buyers who are currently looking to buy a home, buyers waiting for the right home to come on the market, and buyers looking to buy a home in the next 4 month or less). Any home that is nice, in move-in ready condition, and priced accordingly will be sold with-in a 30 day window and will keep the inventory level at a very low level.
3. Delinquency and Foreclosure – In 2010, 15% of Arizona mortgage were paid late, and we had close to 10,000 homes in foreclosure every month. We were one of the worst state in the country in terms of foreclosure. Today we are at 3% in mortgage delinquency and about 500 foreclosure notices per month, which ranks Arizona one of the best paying state in the country, and way below the national average. With most of the bad loans behind us, we will not see any increase in supply anytime soon to negatively effect the Real Estate Market.
4. Interest Rates - We are still at historically low interest rates, 50% below 1999. Any rate below 6.5% should not effect our buying power and I don’t see 6.5% in the near future.
5. Population and Economy - Arizona’s Population was over 7 million in 2017. The Phoenix metropolitan area, meanwhile, is believed to have surpassed 4.66 million in 2017, and it’s now the 12th largest metropolitan area in the country. In 2010, the Phoenix area was 13th, with a metro population of 4.19 million. That’s a 470,000 person increase in 7 years and still growing. Over 54% of the population owns a home in Arizona, which translates into an additional 250,000 home buyers in the last 7 years. Home builders can’t build new homes fast enough, apartment complex are popping up everywhere, and we are not done growing yet. I predict that we will be over 5 million by the end of year 2024. Arizona has no natural disaster to speak of, 300+ days of sunshine, large companies investing in Arizona, unemployment in Arizona is way down, & retiree are moving here by the 1000’s. These facts will only effect our housing market in a positive manner.