John Karadsheh
Normally, we write our New Year’s real estate predictions in mid-December to be published in January, but in mid-December we were looking at the craziness of the stock market, the decline in housing sales, and wondering where things were headed next.
As we sat down to write this piece in early January, the government shutdown had no end in sight and we paused again. As we write this in mid-February, things finally seem to be normalizing again, and we have a better feel for where things are headed.
The Boom and The Pause
We have to start by acknowledging that the first three quarters of 2018 were pretty darn impressive and returned us to the pre-recession glory days of real estate—low inventory, multiple offers, robust prices and low interest rates. Consequently, in 2018, home values increased by more than 8.5 percent. Now, looking back, the data shows that values peaked in June when the median sales price (as tracked by the Arizona Regional Multiple Listing Service) reached a new all-time high of $268,000 (the previous record was set in June 2006 at $264,800).
By early October, the stock market started to get jittery and that, coupled with the intensity of the midterm elections and talks of a tariff war, led to a great pause. Quite suddenly, our lively market went eerily quiet despite the fact that locally, our housing inventory was low, unemployment rates were low, and Maricopa County continued to be one of the fastest growing counties in the United States.
While the volume of national home sales began to slump, prices stayed level (or rather they stopped increasing). By the end of 2018, we saw the number of buyers decline and those buyers who were in the market started coming in with lower offers. Sellers, by contrast, were convinced their homes were worth a certain price and dug in. Often, the gap between the seller’s minimum and the buyer’s maximum was not insurmountable, but the psychological divide was vast.
2019 Predictions
The Standoff Will Continue
The standoff between buyers and sellers likely will continue until either buyers feel more comfortable spending their money or sellers adjust their prices to reach more buyers. It is hard to tell who will blink first—but right now, I would say it is 60 percent to 40 percent, with sellers forced to concede a bit more, simply to get their properties sold. During the spring busy season, sellers may get back some of their leverage for a period of time in certain segments of the market.
Rates and Financing
On the plus side, mortgage interest rates currently are at the lowest point they have been since March of 2018, but it is expected they will creep back up as we move through 2019. The drop in rates definitely has stimulated some activity, and there has been a flurry of buyers on and off since the second week of January. Down payment assistance continues to be available, along with more creative lending options for buyers in all segments of the market.
Continued Local Growth
As we frequently note, the Greater Phoenix Area has diversified its economy since the recession, and is experiencing the fruits of years of enthusiastic economic development. Our local economy is no longer exclusively tied to construction, and we are seeing a broad range of companies expand locally or relocate to the Valley. In Mesa, Phoenix-Mesa Gateway Airport, the Elliot Tech Corridor and the Falcon Field District all are booming with countless new projects.
Arizona economist Lee McPheters predicts Arizona will add 71,000 jobs in 2019 and continue to rank among the top five states for job growth in manufacturing, construction and professional and technical services. Furthermore, it is expected Arizona will add another 100,000 residents in 2019. While the economy and housing market will soften nationally in 2019, this time, Arizona’s strong, smart growth will provide us with a layer of protection.
The Nutshell
On the whole, we predict that 2019 will see a lower volume of home sales, with a 0 percent to 2 percent valuation increase (completely dependent on where you live and what kind of home you are selling). Low maintenance, turnkey homes, especially those suited for retiring baby boomers, will continue to fare well. We expect to see the normal seasonal spurt this spring followed by a slowing on the back half of the year. If you are buying (especially if you are paying cash), there will be deals to find if you look hard enough—but expect those deals to come with some deferred maintenance. The remodeled and upgraded properties will, as always, get top dollar.
All in all, we really have so much to be grateful for in the Valley. Housing values have increased year over year, investors have made money, most homeowners are no longer under water, foreclosures mostly have gone away, homeowners have the equity to remodel, and the Valley economy truly is thriving. The real estate market is just becoming balanced again, and that stability truly will support the longevity of our local economy.
John Karadsheh is the Designated Broker for KOR Properties. He has been a Multi-Million Dollar producing agent for more than 16 years, and is an Accredited Buyers Representative (ABR) and Certified Residential Specialist (CRS). In 2014, John was voted the No. 1 Real Estate Agent in Arizona by Ranking Arizona.
You can reach John at (480) 568-8684, or visit his website at KORproperties.com.
KOR Properties is a boutique real estate brokerage serving the Valley of the Sun and the creator and founding sponsor of Mesa Food Truck Fridays.