Most economists agree that there will be at least another three to five years of growth in real estate across the United States. And although the year will end strong, inventory remains in short supply throughout the country. There are a variety of factors impacting that, but key among them is the increased number of people entering the housing market.
According to Gary Nelson of Realty Executives in Flagstaff and the Arizona REALTORS 2022 president, although builders are responding to the demand and putting more product in the market, “the U.S. failed to adequately prepare for the Millennial generation entering the housing market and we are dreadfully low on inventory as a result.”
“Here in Arizona, as people move in and out of the area and we see more and more of the Baby Boomer generation retiring, our hope is that primary homes, investment properties and vacation homes will slowly enter the market.”
Added to the mix are the influx of “instant buyers” or iBuyers, purchasing residential properties directly from private sellers, bypassing the professional REALTOR, and often paying cash at a higher price than market value.
Based in Tucson, Eric Gibbs, Sr, Arizona REALTORS 2022 president-elect, says these iBuyers will remain a threat in the coming year. “iBuyers may drive up the prices in certain communities, making it difficult for some buyers to qualify for a loan.”
Determining where the real estate market is going from here can be difficult. And some assumptions should be made, including that there is no unforeseen economic disaster in the next several years.
“The U.S. real estate market survived 9-11 and continues to weather the COVID-19 impacts,” said Nelson. “The only negative effect we have seen in real estate markets in the past 30 or so years is the Great Recession which lasted from 2007 through 2011.”
Gary Nelson, Flagstaff-based REALTOR and Arizona REALTORS® 2022 president
In the Greater Flagstaff area and throughout much of Northern Arizona, the real estate market has been as hot as it has ever been. For all residential property types with a Flagstaff address:
• From 2020 through 2021, the median sales price rose 24.7% from $432,000 to $538,700.
• From 2019 through 2020, the median sales price rose 11.8% from $389,000 to $435,000.
Inventory of homes for sale has been the biggest factor leading to these price increases. Inventory from 2019 into 2020 increased by 4%. However, in 2021, inventory decreased by a total of 9% year-over-year. This has led to less than a one-month supply of inventory (3 to 6 months is normal) and is the biggest factor in the prices discussed above.
What will NOT happen is a market crash. There would need to be an influx of thousands upon thousands of homes in Arizona to make any significant impact on current market conditions. Nationwide, that number would have to be in the millions. There does not appear to be any lingering “shadow inventory” and markets could easily absorb an influx of over-extended property owners selling or experiencing foreclosures.
Eric Gibbs, Sr, Tucson-based REALTOR and Arizona REALTORS 2022 president-elect
With low inventory and housing prices continuing to rise into the new year, this will remain a sellers’ market. For at least the first quarter, with inflation and an uncertainty about the economy, buyers may hit pause on the looking for a new home.
Shelley Ostrowski, Yuma-based REALTOR and 2022 Arizona REALTORS first vice president
Yuma, not unlike the rest of the country, will finish strong as it relates to sales, but we are still seeing an undersupply in inventory. It will remain a strong sellers’ market, prices should remain fairly steady. We have nothing to indicate there will be a shift in the market into the New Year.
Sindy Ready, Scottsdale-based REALTOR and 2022 Arizona REALTORS treasurer
Cash has always been king in real estate transactions. If it comes down to it, a cash buyer will almost always end up as the winner in a bidding situation.
The market is all supply and demand driven and I believe this will continue into next year. It is about being persistent and not giving up on the house hunt as a buyer. Buyers will have better luck if they are willing to do a little work and not try to find a fully remodeled home. I often tell clients to see the potential of a home that needs a little work and then go for it!