PHOENIX — The price of a typical home in the Phoenix metro area is expected to be more than $500,000 by next summer, according to Zillow’s forecasting models.
The company forecasts U.S. home values will appreciate 11.7% in the next year, that’s a slowdown in comparison to the previous 12 months when home values appreciated 17.7%.
Despite demand continuing to outpace supply, Mark Stapp, the executive director of real estate programs in the W.P. Carey School of Business at Arizona State University, said all forecasting modules indicate home prices will trend up.
“We started this with a very low inventory, and we, like the rest of the country, are underbuilt,” he said. “There’s no doubt prices will continue to rise.”
Stapp said a combination of things led us to the current real estate market—millennials hitting their 30’s and begging to purchase homes, the 2008 housing crisis that led to less homes being built during the last decade, on top of the pandemic, labor restrictions, and developer and investor concerns.
“We got so far behind, it’s almost impossible for us to build our way back out of this problem,” Stapp said. “We began the pandemic with a low inventory and currently have pre-pandemic inventory levels.”
Priced out
For the last year, Oscar Solis has looked for the perfect new home for his family.
That new dream property must be a ranch with enough land to house his recently bought horses.
“Every day we’re looking,” Solis said. “But it’s been an emotional roller coaster, we put in offers and then we get outbid.”
Solis and his wife work in the Phoenix area. Their goal was to find a ranch within the city limits, but the out-bid search has proved they must increase their budget or head out of the city.
When Solis was in college 14 years ago, he purchased his current home for about $80,000. His plan was to sell the home with the equity he’s earned and use that as a down payment for the new ranch, but “the way the houses are going up in value, my equity doesn’t catch up to what my new mortgage would be,” Solis said.
Despite having a good credit history, a steady job, and money for a down payment, the fight to get a house requires more.
“There was a time that the seller accepted two offers and the other person that also bid gave $5,000 more than I did as a ‘move out gift’, so they went with them,” Solis said. “That money I was going to use to upgrade the house, paint, buy new furniture, but I couldn’t even do that.”
As a current homeowner, Solis said he can be patient and keep looking until the right opportunity comes up, but said he worries for first-time homebuyers who don’t have the luxury to build equity as they look.
“The last past 12 months have been insane when it comes to showing houses, making offers,” said Alma Chavez, a realtor at Equity Realty Group.
Chavez said although the "craziness" has slightly decreased, she expects the trend to continue despite home prices increasing. With 60% of her clientele being first-time homebuyers, a large majority of them are Latinos.
“They are buying, eager to have a home to call their own and millennial Latinos are a large part of that,” Chavez said.
Home prices in 2022
Zillow expects home values to grow 12.1% between July 2021 and July 2022, with a typical home costing about $517,000 by September.
“I don’t think by waiting you’re going to find a better deal,” said Professor Stapp. “In fact, it’s probably going to become more difficult.”
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