Number 1 Question
Homeowner’s in Mesa’s number one questions was: Are we going to have a recession next year? And if so, how will it affect the housing market?
Of course, no one can predicate with 100% accuracy what will happen. But we can take an educated guess based on all the information and data that we do have.
Will History Repeat Itself?
On the last recession, especially 2009-2011 housing prices dropped due to an oversupply of homes. Leading up to this time, Investors were purchasing homes to rent or to flip, causing a frenzied demand in the market 2005-2006. But this was not a true demand for housing, as the buyers had no intention of living in the homes. Builders over-built to meet the investors demand, resulting in an over-supply of homes. Rental vacancy rates were high and lending guidelines were very loose. People that typically would not have qualified for a loan were now able to get multiple loans for multiple properties.
Today’s Market
Contrast that to today’s market, we have 1/3 of the typically supply available in the market and a huge demand, with multiple offers received on most homes for sale. We had approximately 90,000 net migration into Arizona last year (people moving here + births (-) deaths and people moving away from here = net migration). The net migration has been consistent the last few years, with no end in sight. As companies continue to move here, and residents from the cold weather and coasts move here, we will continue to see the influx of people and thus demand.
What’s the Differences today compared to then?
During that big recession homeowners did not have many choices. If the lender allowed, they could have a short sale. Otherwise, they went into foreclosure, because they owed more money than their house was worth, and they were not able to rent it for the monthly mortgage payments. Today most people have equity (owe less money than it is worth) and there is more than ample demand. Rents have increased at a similar pace as prices for homes and interest rates are at an all-time low. Therefore, most can rent with a positive cash flow. So, there are many choices!
So, will we see a recession? I am not sure, but if we do, it should not have a big impact on real estate. If anything, it may slow down the pace of increasing prices, but we should not see declines. If you are waiting for prices to drop before buying, you may be very disappointed.
Feel free to reach out if you have any questions or follow this link to get Find Your Home’s Value Instantly
