Will The 2022 - 2023 Arizona Housing Market CRASH?

Everyone wants to know if the recent shift in the real estate market is evidence that we’re headed toward a crash! I see three reasons why that question is top of mind for so many these days. 

1. The media is fueling rumors of a market crash in sensationalized ways without considering the necessary factors required for a “crash”
2. A fair amount of PTSD – Post Traumatic stress Disorder – is being experienced by those who lived through, and were negatively impacted by the crash of 2008. The loss of a home and financial security can be traumatic and if you experienced it once, it’s easy to get triggered into believing it’s inevitable that it will happen again.
3. Some people, in particular buyers, are rooting for a crash so they can cash in on bargain basement prices.  

If we look past the media messaging, the psychological trauma and the wish fulfillment of those wanting to score a deal, the facts tell us that a crash is not only NOT inevitable, but extremely unlikely. Here’s why: 

1. We still have a real shortage of homes for sale. While we saw a sharp increase in new listings over the summer, the past month or so has shown a slow down of new listings coming to market. We now have 2.5 months of supply. A balanced market typically shows 4  - 6 months of supply and a buyers market typically exhibits over 6 months supply. Additionally, permit counts from builders have slowed to 2015 levels, down 53% from fall of 2021. This could very well be setting us up for low supply for the foreseeable future. A crash REQUIRES over supply and we’re not seeing any signs of that happening soon. 
2. Mortgage lending guidelines have tightened considerably. Remember hearing about “predatory lending” and “subprime mortgages” back in 2009? The ease with which people could borrow money created artificial demand. driven in large part by investors who had no intention of living in the homes they bought. And many owner occupants  got mortgages in amounts much greater than they could afford. As a result, defaults and foreclosures skyrocketed, adding to the supply which was already high. These days, not only have lenders been forced to become more rational in their lending practices, but most homeowners have an abundance of equity. With that type of homeowner wealth, we will not see a significant rise in foreclosures and short sales. 
3. Arizona continues to be a destination state. We are so fortunate to have a growing economy. Here in the valley, we are making great strides in manufacturing, tech, health care, finance and hospitality. Jobs are plentiful with one of the lowest unemployment numbers in the nation, and we continue to be a desirable retirement locale. 

While the thought of a housing market crash can be scary and cause a paralysis of sorts, understanding the fundamentals should provide some relief and a realistic perspective on what to expect. The numbers don’t lie, it’s a great time to sell or buy! Call us to find out how we can help.