While we cannot tell the future, we have indications of what the Arizona housing market 2021 like for Gilbert, the East Valley, and all of Arizona. This comes from our 17+ years of experience in the industry right here in the Southeast Valley.
The short version is that unless an unexpected event occurs, the Arizona housing market will keep on keeping on as it did even through the events of last year.
In order to talk about how we got to 2020, we need to look back at the recession of 2008 when the market really fell apart. The first signs of recovery didn’t even occur until late 2012 and early 2013. There was a stagnant two-year period of little to no movement after hitting bottom in 2010. Markets began trending upward in 2012-2013 and have continued in that direction for seven years.
During that time, we’ve seen increased home values and trends in the Arizona housing market tending toward a sellers’ market. While 2019 was active locally with sellers jumping in to get a great price on their houses and builders ramping up production, it simply wasn’t enough. At one point in 2019, it was reported that as many as 250 families a day were moving to Maricopa County! This all leads up to the hyper sellers’ market that leads us into 2021.
Multiple offer situations were common, homes were selling quickly with terms more favorable to sellers, and builders were having a hard time keeping production up with contracts. 2020 started out unusually active for a winter selling season, which was not unexpected given the steam that sellers had coming into the holidays. All expectations were that things would continue throughout the year.
Is it time for an Arizona housing market correction?
In early 2020, I personally saw room for a correction in market values. We had seven years of equity growth and rising prices and at some point that becomes unsustainable. Rising prices will, over time, run out of buyers that can afford homes. Gilbert in particular saw incredible increases in values, increases like we have not seen since 2005-2006. A lot of people were concerned we were creating another housing bubble and may be heading for the same meltdown we had in 2008-2009 but there are notable differences between then and now.
Most importantly mortgage practices were heavily regulated after the Dodd-Frank bill of 2010 which created the Consumer Protection standards that tried to eliminate the risky lending practices that primarily got us into the mess that would become the Great Recession. Also, interest rates were low and the national economy was doing well. Unemployment was incredibly low. Overall the feeling was that if the market tanked, it would be because of an event outside of the housing industry.
2020 was an election year, perhaps the most contentious one we have had in decades, if not ever. In January the United States conducted a military strike against Iran. War and elections can have an adverse effect on housing markets and either of these situations had the opportunity to negatively affect housing, but neither did.
Most remarkably perhaps is that the global health situation surrounding COVID-19 had little to no impact on housing activity or values. This is actually quite stunning and will likely be examined by economists for years to come. Any of these outside events could have toppled our market and no one would have been surprised. Seven years of growth going into a global pandemic is a recipe for trouble.
When the pandemic started shutting down industries like travel, leisure, dining, entertainment people were being laid off in droves, housing was at extreme risk. The stock market tanked and uncertainty was everywhere.
It is still hard to believe that housing in our local market did not take a hit in 2020, instead, after a brief pause of maybe 2-3 weeks, the market took off.
We went from a strong sellers’ market to a hyper sellers’ market. Homes that were well priced were selling in just a matter of hours, usually with multiple offers well above the listing price. Appraisers had a hard time keeping up and buyers were facing extreme frustration as many times they lost out to other bids.
We started to see really, in my opinion, goofy terms being submitted for seller consideration. Appraisal contingencies were being waived, escalation clauses were included, and buyers were doing everything they could just to get their offer considered.
Our brokerage would list a home and have anywhere from 8-20 offers in the first weekend on the market. Not only were we in a historic sellers’ market, but it lasted for the rest of the year and continues today.
Check out our December 2020 message for more on what made the Gilbert housing market continue to grow.
For the time being, sellers remain in the driver’s seat. Migration to Arizona continues, local job markets are better than most of the country and interest rates are historically low. The broken record of 2020, high demand, and low inventory, continue to loop into 2021.
Predicting the future of any market is risky.
How the Arizona housing market will go for the rest of 2021 is up for debate, but this is what I can say with some confidence. As long as Maricopa County remains a destination for people looking for a new place to put down roots, and interest rates remain low, we will likely stay in a market that favors the sellers for the foreseeable future. Great time to sell, challenging time to buy will likely be the landscape of 2021, just as it was in 2020. I still feel that if anything disrupts the trajectory of the local housing, it will likely be a result of some event or events outside of the housing and lending industry.
Please remember that every home, every neighborhood, and every client is unique. If you would like more specific information about your local Arizona housing market, your home value, or your options for buying, selling, or building a home please contact me directly. I am happy to speak with you, or anyone you know, and offer honest and reliable counsel on the markets and the options that may be best for you.