2018 is a Wrap – Our 2018 Market Predictions vs. Reality

With some fear and a little trepidation I look back one year to see how our 2018 valley real estate predictions turned out.

Here’s what we said and what happened:
We said: Strong population growth has returned to Arizona and the Valley. According to U.S. Census records Arizona is now the 6th largest state population-wise in the country surpassing 7,000,000. Arizona ranks #7 in population growth and #6 in percentage growth. Why? For all our warts, people want to live here — and this will continue to increase… So, the bottom line question is where will all these people live? The bottom line answer is that they will own and rent homes. More will be needed.
And what happened? The influx continues, perhaps more than we thought, though we’re not surprised. The result continues to be a dearth of homes to buy and rent (low inventory).

We said: The new tax law act is passed. Phoenix Real Estate Wins!
There has been a lot of pre-tax law chatter that real estate would be decimated by the new tax act. I see a win – in Phoenix anyway. Because of our lower to moderate home values, mortgage interest will continue to be deductible for most all Arizona property owners. Yes, the standard deduction increases from $12,000 to $24,000 (for married couples) and this may convince some renters to stay renting rather than ownership with a mortgage, but the upside for home-ownership remains strong. And the $10,000 deduction limitation for state and local taxes? This will have virtually no impact for a state that has some of the lowest taxes in the U.S.

And what happened? Phoenix won, benefitting homeowners and landlords alike which will help in the lack of rental supply.

We said: Residential building will continue strong but will build further out. The Phoenix metro market has done an awesome job of doing urban residential infill projects and this will continue, but the question here is affordability. In our downtown areas, the infill projects will be upscale (read: costly!). We will develop more townhomes and the like. Any new close-in townhouse project under $400K will spike. Builders will continue to build west and southeast as long as buyers buy — and they are.
And what happened? New Home Construction has outpaced 2018. What we didn’t see were whole new communities of single family detached communities rising up to be used for renting only. More are currently being planned and built as well.

We said: State and National Economic growth will fuel rising incomes and further lower the already low Arizona unemployment rate. New industry and relocating companies, especially from California, will increase. Consumer confidence continues to rise. When consumers are optimistic, they spend. With rising incomes, higher price ranges will profit, as in the $500K range to $1,000,000. Luxury housing over $1 Million will need more time.And What happened? Bingo! Arizona incomes have risen, which has assisted the 7%+ rise in home values, near the top of national metro areas. Higher incomes are needed to happen to raise home values. What we didn’t see was that the sales $1,000,000+ market was stronger too.

We said: Mortgage Rates will increase but remain affordable. This will be due to the increased national rise in the economy. Mortgage rates in the mid to upper 4% range will probably be reached after the middle of the year. This is good news because it will remain affordable. Yes, it won’t be in the 3% range, but sub 5% is still good and I doubt that higher rates will deter buyers. Oh, and I will add that this prediction about an increase in rates has been so wrong for so long, that I won’t put down much money on this one.

And What happened? We nailed this one! Rates did increase. But as of today, according to Bankrate.com, 30 year fixed rate conventional loans are between 4.3% and 4.75%.

Next Monday, we’ll prognosticate on 2019.

About the Author

     I was born and raised in San Rafael, California, from the mid 50’s to the early 70’s. I had super parents who worked hard to provide 5 kids with a good Catholic education – despite my best attempts to overthrow the knuckle-cracking regime of Sister Mary Anselma. My dad worked as a self-employed butcher until his retirement at 65 and enjoyed many wonderful years until mom passed away in 1992.

     Dad passed away in the fall of 2006 having lived a great and full life into his early 90’s! In California, I attended college in Chico and Sacramento as a “Sosh” major, but like many of my contemporaries, I did not have a clue what I wanted to do when I grew up. Because of my age, I missed the Vietnam War and into my early 20’s I had many typical youthful indiscretions.

     Thankfully, that was a brief period of my life, and with greater thanks, not too much damage was sustained in those early and rebellious years. And by the way, those thanks are due to the answered prayers of faithful relatives who prayed for years that a wayward Michael would turn his life over to the Lord, and in January of 1982 that’s what happened.

     I lived in Sacramento, California in the mid 70’s, and later moved to Truckee, California, which is near Lake

Tahoe and Reno, Nevada. Truckee’s often labeled the “coldest spot in the nation.” Why did I move there?

My father-in-law was a real estate broker in Donner Lake, California, and despite his cantankerous disposition, he seemed very successful in his real estate endeavors. I joined him in sales in July of 1976.

    The Truckee and Lake Tahoe area was a wonderful place to raise a family, but a difficult and cold environment to live in, but we did so for 18 years. In 1994, my wife, Karen, and I visited Scottsdale at a friend’s request, and within 8 months, our family of 5 had relocated to “the valley” – or is it a desert? Whatever it is, it’s warm. At any rate, 24 years have gone by since we made the break from the late great state of confusion, uh, California, and it’s turned out to be a great move.

     As for hobbies, I enjoy family, friends and travel. My kids Robert, Kendra, and Jonathan are now 40,

34, and 31 respectively. I recently became “gramps” for the 4th time as well. It’s a nice time of life. Karen remains as lovely on the inside and outside as the day we were married. We continue to wonderfully grow together as the years advance. As an ordained Christian Chaplain, I volunteer Preaching at Florence Prison with Along Side Ministry. The ministry helps make the formerly incarcerated able to function, even thrive, on “the outside.”

     Should you choose to have me represent you in the sale or purchase of your home, you’ll be receiving my 40+ years of real estate knowledge, counsel, and experience (including negotiation experience).

    Beyond the transaction, I’m always available to you, should you ever need my real estate advice.