What We See for Phoenix Area Real Estate in 2020

In the next two weeks we’ll be looking ahead to view the 2020 Phoenix Metro residential real estate market. This prophetic stuff is risky. The test of a genuine prophet in the Old Testament is simple. If any of the prophet’s prophecies are wrong, the prophet is to die. (Deut 18: 20-22) Therefore, I am claiming no such title for myself. I’m just an amateur hack that won’t dare predict how the next 10 minutes will turn out.

It’s interesting however, to look back at last year’s Phoenix Metro real estate predictions. All in all, we were close. Let’s take a look:

After all, the same people who laugh at fortune tellers take economists seriously.

Our 2019 Projection for Home SalesThe same or up slightly.

2019 Comments: Honestly, it’s hard to see where new inventory (listings) will come from. Homeowners seem pretty set to hang out. Large rental holding companies who are managing tens of thousands of Phoenix metro single family homes, are happy to see rents continue to rise so there’s little need for them to liquidate, which is where the greatest source of new supply could come from. Result? The number of sales grew 3.5% over 2018.

2020 Projections for Home Sales: The Same Number of Sales Give or Take: Demand will remain hugely high, while listing supply will remain very low. It’s possible we could see a reduction in sales due to such low home inventory, and our expected rise in prices which could be the highest in 6-7 years. (See below) The key again will be the number of new listings coming on the market to satiate buyer demand.

Our 2019 Projection for Home Prices: Up!

2019 Comments: Home prices slacked off a little last month, but the continued pressure from valley newbies migrating from other states will increase even more. Red Fin States Phoenix is America’s #1 Relocation Destination. Quoting from their recent report: “Sizzling Phoenix is known for low humidity, which can make the searing heat almost bearable. Costs are low, too, helping to make the Phoenix metro area America’s No. 1 relocation destination.” Result? 8.8% Average Sales Price Increase. 6.6% Median Price Increase.

2020 Projections for Home Prices: Double Digit Price Increases. This will be the main story for 2020. Sadly, it will be the year many first time home buyers will not be able to afford a home anywhere near where they want to be, or perhaps at all. With an increasing influx of migrating wealth, we’re also anticipating a jump in the higher price ranges (Over $500,000) which will naturally increase the average sales price overall.

Our 2019 Projection for Mortgage Rates: Up!

2019 Comments: 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. Result? Current Rates are 3.5% – 3.75% for a 30 year fixed rate mortgage. Missed this one by a bunch.

2020 Projection for Mortgage Rates: Remain low! Few economists are expecting inflation to increase significantly which will be the determinant of where mortgage rates go. However, the same people who laugh at fortune tellers take economists seriously. (My friend Mike is responsible for reminding me of this excellent quote.) We thank the Cromford Report for the above Real Estate data.

Next Week we prognosticate on the New Home and Rental Markets.