What does 2022 have in store for the Arizona housing market and life in general? As we say goodbye and good riddance to another year with Covid in the headlines, we can now turn to the new year and look for new opportunities for growth and development for ourselves personally, professionally, and as a community. After two tough years of the pandemic, contentious political environment, and experiencing things we have not really seen in our lifetime, I think we are all ready for some optimism and hope.
Economic Outlook: Arizona Housing Market
When we talk about the Arizona housing market, let’s start with the economic picture as it ties so closely with housing markets. Arizona’s overall economic outlook is positive compared to most of the rest of the country.
Through the pandemic recovery, Arizona has made great strides in re-establishing pre-pandemic employment levels and has recovered most of the jobs lost in early 2020. We were #3 in the nation for migration behind Florida and Texas. The sunbelt continues to attract new residents for a variety of reasons and that does not seem to be slowing in the near term. Arizona is leading the way in semiconductor manufacturing, biosciences, and health services, which provide great employment opportunities for good-paying jobs.
5 News Stories to Watch in 2022
- Covid -19: Despite our best efforts Covid continues to weigh on our economies and our societies in significant and unpredictable ways. It appears likely that this virus will remain with us in one form or another for a long time, as society adjusts there will be disruptions and normal may remain elusive for now at least.
- Supply Chains and Labor Force: Global economies can be great, and they can be debilitating. China’s zero Covid policy, among other international responses, has shed the light on our interdependence on other nations and created varying levels of chaos in several sectors related to goods and manufacturing. Combined with the number of individuals that left the workforce in 2021 we find ourselves with shortages of both products and labor. Supply chains will likely be a storyline for most of 2022.
- Inflation: Federal spending was off the charts during the pandemic and some progressive goals in the US Congress will likely add to the problem. The Federal Reserve has been criticized for not doing enough about rising inflation and it will be interesting to see what moves the Fed makes this year to slow this sharp rise in prices.
- Interest Rates: The Federal Reserve has at least signaled that they are ready to raise rates in 2022. Perhaps a few times over the course of the year. Rates have been historically low for a long time and before inflation started rising there was little motivation to raise them, particularly during the pandemic and economic recovery period. Now with inflation spiking, rates will have to go up. This will price some shoppers out of the housing market.
- Institutional Investors: This one is particularly important to me. More and more large investment groups or companies are viewing residential real estate as an attractive asset class. As investor activity increases, more and more young homebuyers are being knocked out of the opportunity of homeownership. Phoenix is a hot market for well-funded companies to come in and outbid families and individuals to secure housing as an investment. As an advocate for homeownership, I find this increase in activity distressing for the Arizona housing market.
Each of the topics above will be worth watching in the year to come and each will affect our housing markets one way or another. In the short term, it looks like housing will remain in high demand with limited inventory. Migration, employment, inflation, and interest rates will all be in play and could slow rising home prices. Maybe even balance the market, but we are a long way from that as of today. Today homes sell fast, they sell for top dollar and sellers stay in the driver’s seat.
As always, we are here to help advise and counsel our clients through the processes of buying or selling residential real estate. We have been doing this for nearly 20 years, in all sorts of markets and remain committed to the success of those we serve. We hope that includes you when the time comes.