2020 Market: Phoenix Stays Strong
November 1, 2019
Founder and CEO, Tru Realty
It’s hard to believe we’re already nearly through the year and looking to 2020. As a smart investor, it’s crucial to keep a pulse on the current trends and how they might impact the future. In 2019, The Valley continued on the path of growth and it shows virtually no signs of slowing down in 2020. Even if a ‘slow down’ occurs, it’s likely to bring Arizona to the national averages, rather than sitting above average as in years past.
The Phoenix Metro Area has been fortunate enough to continue seeing the employment rate stay well above the national average of 1.7%. The Bureau of Labor Statistics report shows the employment rate of increase of 2.9% from July 2018 to July 2019, the most recent data available. According to Arizona’s Economic Business and Research Center, the vast majority of job growth was seen in four major industries: construction, professional and business services, education and health services, and leisure and hospitality. These segments accounted for 67.8% of net job gains over the year. Forecasters are expecting similar results in 2020 with new construction continually in progress.
With employment rates continually on the rise, it should come as no shock that Phoenix continues to be one of the hottest seller’s markets in the state. This is due in part to the housing supply available. The Valley currently has around a 2-3 month supply, compared to what the market deems a more comfortable supply of 5-6 months. According to MashVisor, selling prices are expected to rise at a rate of 0.9% in 2020. Although still an increase, it is slightly down from recent years. This slight decrease in selling prices and the recent dip in mortgage rates could mean more first-time home buyers chomping at the bit to purchase their first home. Fittingly so, National Mortgage News (among others) put Phoenix as a top 10 contender for first-time home buyers.
A strong seller’s market brings forth an even stronger rental market. This is great news for rental property investors because very few home buyers have hundreds of thousands of dollars on hand to purchase a new home. Consistently higher selling prices have converted those looking to buy a home to instead rent and wait out the storm, creating strong demand. The average rental in The Valley costs around $1,000 and the price continues to rise. This is roughly an increase of 8% since last year. It seems as if the rental market in Phoenix will stay at an upward trajectory in 2020.
Keep in mind that although some economic forecasters are predicting a recession in the near future, they’re also saying it isn’t likely to be caused by the real estate market, but rather the stock market. A recession on the horizon shouldn’t come as a surprise to smart investors, as we’re currently on the tail end of the longest economic expansion in U.S. history, beating the previous record of 120 months from 1991-2001. A Yahoo Finance panel of more than 100 leaders in the economic and real estate industries were surveyed and roughly 70% of the panel said the housing demand is expected to continue until Fall 2020, with roughly 30% believing the recession would come in 2021. If there is a recession in 2020, the real estate market shouldn’t be impacted nearly as much as the last recession which was directly caused by the mortgage crisis.
All signs point to continued growth for the country’s fifth-most populous city in 2020. With the median home value roughly at $260,000, a strong employment rate and construction projects, all of which steadily rising, Phoenix real estate continues to be a strong investment.