Monday, April 20, 2020

2020 TO 2035 REAL ESTATE AND RENTAL MARKET PREDICTION IN PHOENIX METRO AREA



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Payam H. Raouf, Designated Broker

There are two arguments. 1) this shall also pass soon 2) It’s going to linger around for a while.

Short term: we have had a big shortage of homes for sale. Inventory is rising slowly as the result of COVID-19. Quite a few deals have already been canceled and are going to in the near future adding to the inventory. Banks have started tightening up their lending practices, they require more down payment and higher scores and down payment assistance programs are seeming to have dried up.  

On the other hand, buyers are digging into their savings to get through these tough days and are uncertain about their jobs and ability to pay a mortgage with all that goes with it, tax, insurance, HOA, upkeep, PMI etc.

Some sellers are getting into a panic mode. I have seen on MLS one dropped the sales price from $300,000 to $275000 to $229000 in two weeks’ time. That is most likely one that might have some other circumstances to do that. I am hearing a couple others calling our office to sell their homes $25000 to $30,000 below the comps. Some seem to be very anxious and are offering tenants generous incentives to buy the house if they qualify.

This month, in April we have received 99% of our rents and I believe we receive a few left by the months end.  We have a selective process to rent our homes and our homes are well kept and maintained.

Not everyone is in the same situation as us I hear though. I have heard up to 30% of their tenants have yet not paid or cannot, especially in the apartment complexes.

There are some good deals to be made in this uncertain time … how long is that going to continue? Not for long. Demand is still there. I would say it goes on to June and July before we know where we exactly are.

In August through the end of the year we are going to see the real affect of this virus specially when the cold whether comes upon us again. If we have not found a cure or vaccine by then, its going to get really ugly if COVID -19 hits in large numbers again. You don’t need to be rocket scientists to know that.

However; the reverse is possible but slowly as buyers solidify their positions to get back on the market.
By then we are going to have a healthier market, a more balanced one like in the 1998 -2003 in Phoenix Metro area.
Builders are not going to stop building, they have got the permits and are building non stop while they can and before offering bigger incentives to entice buyers like in the 2006 through 2008.

Remember the days homes were going up $5000 a week in 2005? We were about to reach that point in time again but COVID-19 brough it to a halt.
We have literally gone up from the normal prices in 2003-2004 at 3.5% to 5% increase year over year to where we are today. Here is an example: If you bought a house in most Phoenix Metro area in 2004 for $185000, it should be worth around $315000 to $335000 today. Its normal.

We are not going to see the crazy price drops of 30% to 50% this time around. Different circumstances. Aside from a short-term panic, like buying toilet paper, market will stabilize at 3% going forward for a couple years. As cost of labor and material rises which is going to sharply .. to cope with $5.5 trillion infusion to the market now and even more in the years to come,  the rate of increase in prices will accelerate to the levels you have not seen … The same house we talked about earlier could triple in value in 15-20 years to potentially $900000 to $1000000! 

What a wise man should do now. Look for deals. At these interest rate, you be out of your mind to question that.

As rents increase, you can pay off even faster. Buy a few as you go along and as many as you can while you can. Retire young and fat or you be skinny and poor before you know it.

Good Luck all.


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These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements.

2020 TO 2035 REAL ESTATE AND RENTAL MARKET PREDICTION IN PHOENIX METRO AREA

Call For a Free Property Management Quote: 888-777-6664 CLICK HERE TO A GET A FREE PROPERTY MANAGEMENT QUOTE Payam H. Raouf,...