What will Arizona Real Estate Look Like in 2022?

Submitted Mon, 03/07/2022

If you are keeping up with all the articles about Arizona's Hot Real Estate Market, you are probably reading a lot of articles about the economic growth outstripping the housing inventory.  Arizona has a housing shortage and incredible demand going into 2022.  If your a home buyer, waiting for the prices to go down, or level off, doesn't look like it's in the cards. Last year, in 2021, Arizona saw the highest number of real estate sales since the mid-2000's, and a good 90% of houses for sale were sold in under 30 days.  If you were a seller in 2021, or knew someone who was, you might have even hear the many stories of offers being made the same day as the listing, or sales within a week.  It seemed like for sale signs were popping up everywhere.

Arizona's housing shortage and incredible demand will continue to be the dynamic in 2022.

The sellers market, and bidding wars, that you may have seen in 2021 will continue to be the case in 2022 and homeowners will continue to see home values rise.  In many town council meetings you are hearing discussions, and even warnings, about the economic impact of a housing shortage crisis.  For more on this topic, make sure to read 'The Great Arizona Real Estate Market - The Good, the Bad, and the Ugly!' 

As businesses set up shop in Arizona the sprawl grows.

The housing shortage will continue to incentivize home builders and the construction industry as a whole.  You may be seeing desert landscaping turn into housing all around you with new developments pushing further outwards, increasing commuter time and the need for more infrastructure.  In the already developed inner city areas you may see some tear downs, lot-only sales and revenue-generating flips fueled by the limited inventory and rising prices.  Additionally opportunities for remodels and renovations will likely become a more frequent occurrence.

Arizona's housing prices will continue it's upward trend into 2022.

Homeowners will see this as 'a good thing' for their investment interests, but will likely see a lifestyle hit as the landscape around them changes, with new developments enveloping the scenery, and temporary housing, storage facilities, rentals and apartments will appear to accommodate those priced out of the market.  Property owners will have no problem finding buyers though, as the glut of buyers puts upward pressure on prices - insider estimates range from 8 to 12 percent appreciation this year!  However, homeowners looking to move will face that increased competition as well. 

2022 inflation threatens low interest rates.

The past few years the Federal Reserve dedicated much of it's focus to supporting economy recovery and stability, buying $40 million worth of mortgage-backed securities per month in the effort to keep interest rates low. Rising inflation, its highest in 40 years, will likely cut into those purchases and interest rates will rise, resulting in home buyers getting less for their money, or maybe deciding to not purchase all together. The Federal Reserve has signaled at least three rate hikes this year, with some insiders speculating up to six or seven, with anticipated mortgage rates floating around 4%. Homeowners with low rates already may decide to stay put if they were thinking for selling in the how market and refinancing will look less attractive.

📹 CNN Business: Rising mortgage rates pressure buyers to move quickly.

• January 2022: 30 year fixed rate loans are back up to pre-pandemic levels, at 3.56%.
• Home prices up 17% last year, since 2020, plus low inventory and rising rates ignites a buying frenzy.
• Mortgage rates are going up in anticipation of higher interest rates. Since February a 30 year mortgage rose by half a point.

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📰 March 16, 2022 - Fed raises interest rates for first time since 2018 by a quarter of a point

• Rates still low, but experts say it could still have profound effects on the consumer spending.
• The era of cheap money to come to an end
• “Higher mortgage rates will make homebuying even more difficult than it already is in the current housing boom”

Arizona's monster economic growth

Medical equipment, pharmaceuticals, chemical manufacturing, guided missiles and space vehicles, manufacturing, bio-science, semiconductors and electronics... Industries have been setting up shop in Arizona for the past few years, with a talented labor market in hot pursuit, banking on Arizona's past reputation of livability and advantageous regulatory environment. As dynamics change, that reputation may be a thing of the past. Arizona may become a victim of it's own success if it doesn't handle it's growth competently.

It's all relative; Relocation to Arizona and the draw of a better cost of living

Because of Arizona's past reputation for livability and new economic growth, out-of-state buyers will likely flow in from states like California and Washington where costs and regulations are higher. With the cash differential they will be looking to 'move on up' into more luxurious housing opportunities, more than what their dollars could get them in their own state. Home builders and Realtors my expect to have in more 5000 square-foot plus 'luxury living' requests. Concurrently, the remodel and renovations industry will see inquiries from this same crowd. We are already seeing a movement in themed and cultivated entertainment, retail and restaurant complexes to support this influx.

Arizona was once a state vacationers would drive through, to see some interesting things, on their way to another destinations.  The ones that settled here were doing so in one of Arizona's innovative retirement communities.  The past several decades have seen a state growing into it's own, mirroring a growth and prestige seen by other states, who's young residents are now escaping to the next big opportunity.

Citations and References:

1. Reference: The Federal Reserve
2. Reference: Gilbert Town Council meeting, special study session, held on Tuesday, February 8, 2022.  http://www.gilbertdocs.com/GilbertAgendaOnline/Meetings/ViewMeeting?id=896&doctype=2
3. Reference article: 'Central Arizona Continues To See Great Real Estate Values (and then there's the down side)- The Great Arizona Real Estate Market - The Good, the Bad, and the Ugly!'.
4. News media/broadcasts (general): 12news.com, azcentral.com, cnbc.com, National Association of Realtors (NAR), National Association of Home Builders (NAHB)
5. 📹 HGTV/CNN Business: Working from home. This home was built for the next pandemic. See its defining features.
6. 📰 March 16, 2022 - Fed raises interest rates for first time since 2018 by a quarter of a point
7. 📰 March 18, 2022 - Existing-home sales drop in February, but prices rise. Again.
8. 📰 March 24, 2022 - Beleaguered house hunters are now watching mortgage rates spike - economists had largely assumed that rates had a while to go before they hit 4 percent, let alone come closer to 5 percent..