Here is why experts say Arizona housing market is on a precipice

Here is why experts say Arizona housing market is on a precipice

Article Originally Posted By AZBigMedia On July 22, 2022

Affordability in the Arizona housing market is collapsing expeditiously due to an overall lack of inventory, rapidly increasing prices and rising interest rates, according to a new report.

Economists at the Common Sense Institute Arizona (CSI), a nonprofit research organization specializing in issues related to economic development, found that Arizona’s housing market is on a precipice.

According to CSI Arizona, housing has become less affordable because of rapid price increases and rapid interest rate hikes. And the problem is more severe in Arizona and the Phoenix Metropolitan market; Arizona housing prices have increased by 40% compared to 25% nationally since the end of 2020.

The report also highlights that Arizona’s housing shortage is damaging affordable housing as well. Findings suggest the 2006 housing peak, followed by the 2008-2009 recession, caused fewer homes built over the last decade.

“Simply put, demand is outpacing supply and people are paying more because of it,” said Glenn Farley, CSI Arizona director of policy & research. “Low borrowing costs have been enabling this for months but that is now coming to an end.”

Moreover, Arizona’s population growth is outracing available housing. Consequently, Arizona has an imbalance between availability and demand. Three hundred more people will move to the Valley today alone. Currently, Arizona is on pace to welcome more than 100,000 individuals at a time where few houses are for sale and rental occupancy is 98%.

CSI reports while Arizona is on the cusp of the largest home construction boom in a decade – which could close Arizona’s housing shortfall of 95,000 units within 5 years – it may not survive a weakening U.S. economy and slowing housing market.

The Home Builders Association of Central Arizona (HBACA) supports CSI’s research asserting, “The Arizona housing market is in the midst of a severe supply-demand imbalance which caused prices to rise quickly. For 33 consecutive months, between 2019 and 2022, the Phoenix market led the nation in home price appreciation. But we have now reached an inflection point with affordability. The combination of significant price increases with now rising interest rates leaves many buyers priced out.”