Too Hot To Handle? Is The Phoenix Real Estate Market Headed For A Crash? 

The Pheonix real estate market is the hottest in the entire country. The lack of inventory and surge of buyers has caused home values to surge and homes to sell in record time. All that being said, homes in Phoenix are still much more affordable than in other large cities. The relatively lower prices attract buyers from more expensive places like California and Washington to move into the Valley.

Many are worried that the influx of out-of-state buyers will make home values too high too quickly and eventually cause the market to crash.

As a top-rated mortgage broker in Phoenix, AZ, summit lending solutions has insight into the state of the current market. While we don’t know exactly what the future holds, we can make predictions based on historical data and trends. 

What Is A Bubble? 

You may have heard people talking about the real estate market is in a bubble and concerns that the bubble will eventually burst. An increase in home values does not always indicate a housing bubble. A bubble starts with home values increasing, but there is more to it.  

Typically, a housing bubble does start with an increase in demand due to limited supply. However, for the market to be considered a bubble, real estate speculators will enter the market and try to inflate values and increase demand even more artificially. Eventually, demand will decrease while supply increases, and that will cause prices to drop at a rapid pace. This is when the bubble bursts. 

What Does Today’s Market Indicate? 

Real estate experts do not consider the Phoenix real estate market a bubble, and prices are not expected to rapidly decrease anytime soon. 

We have seen a very slight decrease in home values in the last month, and homes are staying on the market just a bit longer than they were a few months ago, but that is typical as we head into fall. We would likely see another slight dip if interest rates were to rise, but that dip would not last long. 

It’s essential to note that the conditions are entirely different from those in 2007 when the Phoenix market was hit hard. Since then, Phoenix mortgages have been subject to much stricter lending regulations that help prevent the housing market collapse as we saw over a decade ago.  

In addition to a change in lending practices, we have also seen a slow down of construction since the mid-2000s. Back then, construction was at an all-time high, which led to an oversupply of inventory. 

While it may seem like new home communities are popping up all over the Valley, and new home constructions make up about 22% of all homes sold, it is not enough to fulfill the overwhelming demand for homes in the area. 

Mortgage Moratorium’s Impact

Another fear many real estate observers have is that we will see an influx of foreclosures with the end of the COVID-related mortgage moratorium. So far, that does not look like it will be an issue. The number of Phoenix mortgages in foreclosure is not any higher than usual, and foreclosures are expected only to make up roughly 5% of all real estate inventory.  

Another positive is that since home values have increased so much in the last year, very few homes have negative equity. That means that if a homeowner were in an unfortunate financial situation, they would be able to sell their home on the market and still make a profit. 

What Does The Future Hold?

As of now, all signs are pointing to home values increasing over the next few years. That means if you want to buy a house, waiting is just going to end up costing you time and money. Contact Summit Lending Solutions to schedule an intro call if you’re looking for the best mortgage brokers in Phoenix, AZ. We will go over the mortgage process and provide information on current interest rates and the mortgage approval process to help prepare you to purchase a home. 

We have over 20 years of experience in Phoenix and provide our clients with the best customer service, and are available and ready to serve you.