Posted: 2019-12-11 | Author: Richard Simon
2019 has come to a close, and 2020 ushers in not only a New Year, but also a new decade. At this point, no one can accurately predict the economic trajectory of the 2020s, but we do know that we enter the new decade in the midst of one the longest economic recovery in U.S. history. Will this continue in 2020? Or is a recession on the horizon? And if a recession is imminent, what affect (if any) will it have on the Phoenix real estate market?
Numerous financial experts have been predicting a recession in the not-too-distant future. This is not really a difficult prediction as the economy runs in cycles. Whenever you experience several years of robust economic growth, there is bound to be a correction at some point. So, we know a recession is coming, what we don’t know is when it will start, how long it will last when it finally does get here, and how it will impact the housing market.
Zillow, the popular online real estate website, predicted this past July that a recession will most likely start in 2020. Since then, however, we have seen very little signs of this happening. In fact, just this month, we received a November jobs report that far exceeded expectations. This “blowout” report has caused many on Wall Street to rethink their recession assumptions.
Perhaps we still have ways to go before the economic ride of our lifetimes comes to an end. Or maybe some unforeseen event will trigger an abrupt ending and cause our economy to contract in 2020. Either way, Zillow and other experts do not expect the housing market to be that trigger, and it does not look like a recession would significantly slow down the Phoenix market. This may not be true in some other areas, but Phoenix looks to be in fairly good shape.
The Phoenix housing market has a lot going for it compared to other areas of the country. For one thing, it is one of the tightest markets in the nation, with very low inventory and strong buyer demand. Here are some of the reasons the real estate market here is strong:
Given the strong fundamentals, even if there is a recession in 2020 (which, at this point, is probably about 50/50 at best), it is unlikely to have much impact on the Phoenix real estate market. The most likely prognosis is for about a 4% to 6% increase in property values, and a market that will continue to have lower inventories and competition among multiple buyers for many of the available homes.
Bottom line: As long as interest rates remain near record lows and the job market remains strong, look for Phoenix to continue to be a seller’s market in 2020.
Tips for Phoenix Home Buyers in 2020
If trends continue and home buyers in the Phoenix area continue to face a tight market, they will need to adopt a more strategic approach in order to get into the house they want. Here are some things buyers can do to increase their chances of success:
Start Shopping Early
In a market with low inventory, it is a good idea to get started on your home shopping as early as possible. Even if you do not plan to make an offer on a house for a month or two or longer, look around at what is available, go to as many open houses as you can, and give yourself a good idea of what you want in a home. Starting early will also give you a good idea of the process, so you are ready to move more quickly when it comes time to make an offer.
The unfortunate fact about a seller’s market is that the seller is the one with the negotiating leverage. Buyers do not have much room to talk the price down; and making a “lowball” offer will almost certainly be a waste of time in a market like this. But looking at the plus side, Phoenix is a market where home prices are still very reasonable relative to many other parts of the country, and you are still able to benefit from interest rates that are at or near historic lows. Keep all of these factors in mind as you prepare to make an offer on your “dream” home.
In a market where multiple offers are common, you need every competitive advantage you can get. This is why it is best to start working with a local lending specialist as early as possible and go through the process of getting preapproved for a mortgage. With a preapproval in hand, sellers know you are a credible buyer, and they are far more likely to take your offer seriously.