2016 Phoenix Real Estate Market Update

OLYMPUS DIGITAL CAMERA2016 will see buyer demographics shifting slightly. Foreign buyers will be fewer due to the strong dollar and Chinese investors focused on coastal states. The majority of Canadian sales activity in Arizona has been sellers rather than buyers through 2015 and that is not expected to change until there is an economic shift. Millennial buyers are expected to become a stronger force in the market, particularly in entry level home prices, and baby boomers will drive increased activity in adult communities. While interest rates are expected to rise slightly, no significant impact is anticipated in terms of buyer demand related to these incremental increases.

 

What we’ve seen in housing supply over the past few months indicates that in many areas demand is exceeding supply in the under $250,000 market and competition increases as the price range decreases. Those looking under $200,000 may find homes snapped up in a matter of days and the possibility of bidding wars is significant. Supply loosens up in the $250,000 – $400,000 range and there is expected to be more balance in that market between buyers and sellers at least through the first quarter of 2016. The second half of 2015 showed a decrease in demand in the luxury market and with what we’re seeing in the stock market since the beginning of 2016, it is not expected to show much improvement.

Michael Orr, Director of the Real Estate Center of the WP Carey School of Business of Arizona State University reports that population and job growth continue to move in a positive direction in the valley, and that a major factor in market activity will be lenders willingness to loosen qualification standards allowing more buyers to participate. Fortunately, much of the transition to new lending protocols is now behind us since implementation in October, 2015 so that will should not be a factor in slowing sales in 2016.

Overall, the general consensus is that 2016 should be a very good year for real estate. The market will continue to move in a positive direction both in terms of price appreciation and activity. Interest rates will remain significantly lower than the long term average, and with on-going improvements in the economy, we should continue to see rates of home-ownership increasing.

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