Will Home Prices Drop in Phoenix in 2023?
The Phoenix housing market is still hot, and experts believe that it will remain so. However, it’s not without its problems.
Will Home Prices Drop in Phoenix in 2023?
Home prices are going down, but not to the extent that homeowners experienced during the Great Recession. Several reasons are at play.
The Phoenix economy is projected to grow a bit slower in 2023 than it did in the first half of last year. This is largely due to the sharp rise in interest rates that occurred in 2022, but it will start growing again in the second half of the year as inflation falls off and the Federal Reserve begins to reduce interest rates.
The overall economy is expected to grow at a rate of 2.4% in 2023, and this growth will be driven by both domestic and global events. The economic outlook for the nation, in general, is expected to be good, but it will be affected by a variety of factors, including low wages and the Federal Reserve’s monetary policies.
One of the biggest concerns is that the Federal Reserve has been raising interest rates to combat inflation, but this may be counterproductive. This could lead to a recession, and this would slow the economy and cause consumers to cut back on spending.
This would result in a dip in the national economy and an increase in unemployment, which would hurt job growth in the state. The Phoenix area also faces the challenge of high home prices and a shortage of housing inventory.
As a result of these factors, it is likely that home prices will drop slightly in Phoenix in 2023. However, this may be short-lived as mortgage rates are expected to go down and prospective buyers may return to the market to increase demand.
The Arizona labor market is also undergoing significant change, as it has been dealing with an unprecedented labor shortage in recent years. This has led to a number of layoffs in industries such as technology and media, but it is expected that the industry will experience strong growth again by the end of 2023.
Another concern is that the Federal Reserve may be causing the economy to slow down, which would cause unemployment in Arizona to rise. But if the Fed can control inflation, this will help put the nation on a stronger footing and avoid a major economic crisis.
The Arizona economy has continued to grow at a strong pace, outpacing the national average. Jobs have been added in many industries, including retail, construction, and professional/tech. The metro has also been home to many large employers, such as Intel and Taiwan Semiconductor Manufacturing Co.
The unemployment rate in Arizona dropped to 3.7% in October from 3.9% in September, a significant decrease. However, the labor market remains tight. Job churn is high, and there is still a mountain of open positions.
There were 103,800 jobs added from February 2020 to October, with the strongest gains in trade, transportation, and utilities; education and health services; manufacturing; financial activities; professional and business services; construction; and natural resources and mining. These were offset by losses in government; leisure and hospitality; information; and other services.
In December, Arizona’s labor force participation rate was 61.2%, up 0.5 points from November but down 1.0 point from its pre-pandemic peak of 62.2%. With a statewide population of 3.6 million, the state’s gap between willing workers and the number of available workers is about 81,000.
Overall, the state’s economic strength is attributed to strong in-migration, high labor force participation, and a low unemployment rate. If the Fed begins to raise interest rates and a recession takes hold, Arizona may experience a decline in housing sales, slower job growth, and a decline in consumer spending.
With the labor market so strong and the economy gaining momentum, it’s a good time to consider an Arizona career. If you’re looking to make a transition into a new field or improve your skills, the Office of Economic Opportunity has an extensive list of opportunities available, with tools and handbooks to guide your journey.
In addition, there are a host of industries that are growing fast in Arizona, such as science/technology and manufacturing. These sectors are attracting young people and families who want to work for a company that values innovation. For those seeking a job in these fields, it’s important to have a strong background in the specific areas you’re working in and an ability to communicate with clients effectively.
The Federal Reserve’s tightening policy has made it tougher for buyers to purchase homes. As a result, Phoenix has seen a decline in home sales over the last few years. It’s possible that this trend will continue into 2023, which could lead to a drop in home prices.
The National Association of Home Builders (NAHB) expects mortgage rates to dip further in 2023, which should help potential homebuyers. It expects the average rate on a 30-year fixed-rate mortgage to fall below 6% by 2024.
However, even if mortgage rates fall, it’s unlikely that they will reach pre-pandemic lows, according to Bankrate. And with inflation still high, it will take a substantial slowdown in the economy to see a significant reduction in mortgage rates.
Inflation is a major concern for the Federal Reserve, and it’s expected to continue rising in 2023. This could make it harder for the economy to grow, leading to a potential recession. Fortunately, the Fed’s recent interest rate hikes have kept inflation from hitting its highest level in more than 40 years.
Nonetheless, there are several factors that may contribute to an increase in rates over the next few months. These include a shortage in housing supply, which could keep Phoenix real estate competitive into 2023.
As a result, NAR predicts that the supply of housing in the nation will remain tight in 2023. That will cause prices to rise slightly, but not significantly, NAR Chief Economist Lawrence Yun said.
This will put more pressure on the mortgage market, and it could cause home sales to drop in 2023. This is especially true for markets that are experiencing a tight supply, like Phoenix.
Another factor that could affect prices is the supply of building materials, which have become more expensive. This could also reduce demand for new construction, which will also lead to a decrease in sales.
A lack of inventory has pushed home prices up in Phoenix for many years, but it’s likely that this trend will change over time. This is because more and more homeowners are moving to other states, causing a shortage in housing stock. Hopefully, this will be reversed in the near future so that Phoenix home prices can return to their former glory.
Home prices in Phoenix are rising faster than they have for many years, and they’re expected to continue to rise. However, there are a few things that could start to slow down the housing market. One of the biggest factors is inventory.
As we have seen over the past few years, inventory levels have been low. As a result, homes are staying on the market for longer than they used to. This makes it harder for buyers to find a home they can afford.
Thankfully, supply is starting to grow again. In January 2023, the Months Supply of Inventory in the Phoenix area was 2.2 months. That’s more than double the number of days it took to sell a home in 2021.
This is good news for homeowners looking to sell a home in Arizona. It means that sellers can price their homes more leniently, and they can also negotiate more with potential buyers.
It’s also encouraging to see that the buyer-seller market in the Phoenix metro is finally shifting its favor toward buyers. This is a big change from the last year when most people thought that the real estate market in the area was dominated by sellers.
Another reason why inventory is growing is that more people are moving to the area. In fact, the population in the Phoenix area is growing at an impressive rate. This is causing an increase in demand for both homes and rental properties.
Aside from affordability, another major draw for new residents is the quality of life in the Phoenix area. This includes a strong economy, affordable housing options, and a wide variety of cultural attractions.
This growing population has helped to drive the Phoenix real estate market over the last few years, despite high mortgage rates and low inventory levels. As a result, it’s likely that the market will slow down and start to favor buyers in 2023. It’s not yet clear how this will play out, but we’re hoping that it will.