The housing market is looking extremely strong for the Phoenix area in 2021. Realtor.com’s most recent forecast predicts home sales in the Valley will jump 11.4% over last year’s levels, which is more than the national average. The combination of beautiful weather, prestigious restaurants and shopping, specialty education options, a reasonable cost of living and now the ability to work from home, continues to draw people from out of state to the area. For residents looking to sell or buy, and for those looking to move to Phoenix, there are several housing market predictions to count on through the New Year.
The first of our housing market predictions is mortgage rates will stay grounded. Currently, the 30-year fixed rate is hovering around an all-time low of 2.75%, which is actually a 50-year low. Refinancing rates are hovering around 2.45%, but these numbers change on the daily. If you’re interested in saving money on your monthly mortgage payments or considering a cash-out refinance, make sure to compare rates from multiple mortgage lenders.
Next, inventory will stay sparse. While the low rates have brought home buyers into the market, high demand and low inventory has increased prices. This is good news if you plan on selling. Buyers have adapted to virtual tours and many who are looking to relocate are comfortable making an offer sight unseen in order to seal the deal. In fact, it’s not uncommon to have a home go under contract in just a few hours because inventory is so low.
First-time home buyers will remain a strong force as well. While younger Gen-Z buyers are expected to play a growing role in the housing market, the largest group of Millennials are now in their mid-30s. This is bringing a wave of demand from renters looking to buy their first homes. Additionally, the oldest Millennials are increasingly contributing to the trade-up market.
This next trend might sound a little crazy, but it’s actually one of the smartest moves you can make right now. Home rental prices are also on the rise, so if there’s any way to hold onto your home and rent it out, do it. There’s a large number of renters who aren’t able to find a place to live because rental inventory is low. Now, if you’re thinking you’d rather not mess with the responsibility of a rental, let’s talk numbers for a second. The average rental home in the Phoenix metro area currently rents for over $2,000 a month and in some neighborhoods, well over $2,500 a month. In many cases, it makes sense to keep your home and rent it out. There are ways to use the equity in your current home in order to buy your next home without selling it.
Lastly, buyers are putting down a lot more cash. We expect to see buyers continue to put more than 20% down in order to avoid paying for mortgage insurance. Buyers will not only have lower mortgage payments and possibly lower interest rates, but sometimes an appraisal isn’t needed which could save an average of $600. Another plus? Sellers see it as a positive move when they’re reviewing multiple offers.
Priorities have changed in 2021 in response to COVID-19 and many buyers aren’t waiting for a return to normal. Instead, they’re anticipating a ‘new normal’ in which they live, work and entertain and their home has become the true definition of a sanctuary. As always, it’s extremely important to hire a real estate professional who will meet your needs and put your interests first.
Asher Cohen is founder of Scottsdale-based BUYAZRE.com,