2019 Predictions for Phoenix Real Estate Market Part 2

Last week we started to look at real estate projections for the Valley (Phoenix Metro) for 2019. We began with sales and home prices; you can read last week’s article here.  Following this we will look at mortgage rates, rentals and new home construction.

Mortgage Rates: Up! As I indicated last week, no one on planet earth can make any ironclad prediction on anything, let alone economic issues. After all, the same people who laugh at fortune tellers take economists seriously. Another good one-liner I borrowed is that economics is the only profession where you can gain great eminence without ever being right. Therefore, I can guess with the best.

Long term mortgage rates rise and fall with what “the market” thinks will happen with inflation. If the market believes that inflation will be moderate, rates will remain moderate which right now are in the mid 4% range. If the market thinks the economy is slowing and maybe heading towards a recession, rates tend to drop. And vice-versa if the economy is running strong on all cylinders, prices and wages are rising, this would be an indication of higher inflation which will affect long term investments.

Believing (guessing) that the economy will continue to hum, and that wages will also rise, I think that mortgage rates will head north to near or at 5% later this year.

Rental Supply and Pricing: Down and Up! Our state and Valley population continues growing. New home construction (see below) is not adding enough supply of homes for the demand. Homeowners seem to be holding onto their homes longer as well. Since I think that home prices will keep rising this year, along with mortgage rates, it follows that rentals will remain in high demand and scarce supply. Rents will continue to increase!

“Rents will continue to increase!”


New Home Construction and Pricing: Up! Over the past 7-8 years, the Valley has seen tens of thousands of multi-family properties developed, especially in urban areas. This has enabled Phoenix metro to somewhat contain single family detached housing prices at a strong but reasonable level. Builders have bought up much infill land and developed much needed rental supply. This will continue unabated through 2019.

Michael Orr of the Cromford Report reported that December’s new home sales (single-family, condo, townhouse) totaled 1,544 which is up 10% from December 2017. The median sales price of a new home in December was $349,990, up 6.6% from a year earlier. Nothing seems to suggest this trend will change.