One of our favorite posts of the year is our Phoenix Real Estate Market Forecast and today we present our Phoenix Real Estate Market Forecast 2015. As our readers know, the 2014 Phoenix real estate market was timid. Home sellers were gradually entering the market while home buyers were nervously dipping their toes in the water. The overall result was a lethargic market.
Phoenix Real Estate Market Forecast 2015 — Overview:
We believe 2015 will see a more energetic Phoenix real estate market. Why are we optimistic? Simply stated, it has to do with cycles and pendulum swings. The graph to the right shows single family sales over the past couple years. It is easy to see 2014 was a low sales cycle year.
History tells us that when the pendulum swings cuttingly in one direction, it will rebound in the opposite. Thus, we expect to see many “on the fence” home buyers getting a bit more serious about pulling the handle. One can only sit back for so long.
On the supply side, home values have continued to rise modestly. (See chart on left from The Cromford Report) Increasing home values allows more home owners the equity needed to sell their home. Thus, we expect to see more homes come on the market in early 2015… especially with Super Bowl bringing attention to our glorious region.
Will The Market Be Robust in 2015?
We are not expecting a big up-swing in 2015. Several factors will help boost the market while others will not. Let’s take a look at some of these influences:
Push Back Factors:
- Many home sellers are only marginally above breakeven so they don’t have a lot of room to budge on price.
- Loan requirements are tough for a lot of home buyers who have massive student loan debt, not enough time in the same job, marginal credit scores or to high debt to income levels. The recent changes in FHA loans is expected to reduce this push back factor for many first-time home buyers.
- The millennial home buyer pool is still not certain they want home ownership. Renting gives them more flexibility for job hopping and less concern of another market downswing.
Push Up Factors:
- Home values rose modestly in 2014. This allows more home sellers to enter the market since they have a bit more equity to play with. On the flip side, home buyers don’t want to overpay so there may be some incentive to buy before prices go up much more.
- Mortgage interest rates are still quite low. This factor makes ownership more affordable than renting.
- Many who lost their homes to foreclosure or short sale can now qualify for a new mortgage. These are folks who owned homes and are now renting. We are told many do not like being renters and are hoping to have their own place again. Once you’ve tasted good wine, Boones Farm isn’t very satisfying.
- Relocation to the Phoenix market is always a push factor. With millions seeing our amazing State during Super Bowl, the Pro Bowl and Phoenix Open, Arizona will certainly be put on the “places to move” list for many.
- Time.com’s Money says Phoenix is #2 on the best Big City Bargains in American. Many newspapers and magazines put Arizona as a top place to live and our legislature hasn’t done anything to embarrass our State in almost a year. Good press and lack of elected officials damaging our “brand” combine to help improve our State’s image and economy.
Phoenix Real Estate Market Forecast 2015 — Summary
We expect to see a decent increase in new listings coming to market in Q1 2015. According to ARMLS, our current inventory shows (1/3/2015) is at 4162 homes/condos/townhouses for sale in Phoenix. A figure a bit above 5000 is not unlikely as we probe into the 2015 buying season.
Supply is one side of the equation with demand being the other. We expect demand (people buying places) to exceed the low levels of 2014. The problem we see is we come into 2015 at very low buying levels. The good news is it really can only go up from here. The question is, how much?
The low sales of Q4 are, in part, due to the timing of holidays. Thanksgiving fell in a manner that reduced the actual working days to a mere 17 verses a month like January that has 22 business days… do the math and you’ll see a full week’s worth difference.
Our prediction is 2015 will see a modest rise in sales of 8%-10%. In raw numbers this would take Phoenix’s sales from 16,953 (2014) to a tad over 18,500 for 2015.
Advise For Home Buyers & Sellers in 2015:
- If you are currently renting, do the math. Rent verses own calculations clearly show a strong financial advantage to ownership.
- The historically low interest rates will end sometime in the near future. Here is an article from Daily Finance that talks about the subject. Check out our rate calculator to see the difference if rates move into the 5% range. The calculator is located at the bottom of our home page.
- Homes updates do not have to be done immediately in most cases. If you find a home that needs some work, think about if it can be done over time verses right away. Often it is best to live in a home a while before making major changes so you find out what is really needed or important.
- Home values are based on the actual value verses what you need to get out of the home. Often we see people pick a price based on needs verses what the home is actually worth and will appraise.
- A perceived lack of maintenance will often keep buyers from making offers. A neat, clean, well maintained home is often what people are looking to buy.
- Check with your professional Realtor to see if major updates or remodels are worth the price. Sometimes the answer is yes but often it is not.
- When listing your home make sure and hire a seasoned agent or appraiser to give you a realistic listing price. Chasing the market is very frustrating and often ends in a lower price than if you had priced it right in the first place.
We hope our Phoenix Real Estate Market Forecast 2015 has been educational and helpful. We are always happy to answer any questions you have. Just toss us an email at Gene@UrbanTeamAZ.com or Ron@UrbanTeamAZ.com. We can be reached by phone at 602-234-5777 too.
Ron Urban and Gene Urban
The Urban Team at Realty Executives
Connecting people to the perfect place for over 20 years.
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