In Phoenix, a red market for homes has grown so strong that it has overtaken Covid. “It started before the start of the pandemic, and he ignored the pandemic,” says John Cabezas, who has invested and sold houses in Arizona for over 20 years. “We literally had our highest paying year during the pandemic. ”
House prices have risen dramatically, causing shortages and bidding wars in many parts of the country. The average price of a home in the United States has increased 13% in the past year, according to Zillow. Cabezas and his wife, Lynn Janson, own real estate brokerage LIV AZ in Phoenix, which has seen a 23.5% increase in the past year. This follows a decade-long upward trend in house prices, exacerbated by the Covid-19 pandemic, which coexisted with a decline in housing supply over a decade. On top of that, some states are experiencing an influx of foreigners who are settling in and further stressing the housing market.
The housing market is just one sector of a national economy caught between wild fluctuations in supply and demand caused by a pandemic. To better understand this unprecedented period, Barron has conversations with traders in different pockets of the scarcity economy. After several tries, Janson responded to a call on her personal cell phone number, which she provides as a testament not only to their customer service, but also to their busyness. Janson then handed the phone to Cabezas, who had a moment to speak.
Cabezas and Janson are in the midst of such a steep real estate boom the only time they’ve seen anything like it was right before the 2007-08 crisis. What’s different now, Cabezas said, is that he believes the ramp-up won’t be followed by an accident.
“Before the Great Recession, if you could shade a mirror, you could get a mortgage,” he said. Today lenders expect more from buyers so there is nothing wrong with the market.
Although LIV Realty has been able to keep up with demand, inventory is surprisingly low. Cabezas said that at worst there were about a quarter of the usual rosters.
An influx of people moving to the Phoenix area from other states is pushing up prices. More than 60,000 Californians moved to Arizona between 2019 and 2020.
“They move in and come with the money because they sell these $ 2 million houses in Los Angeles. That same house here is $ 500,000. They are driving up prices and picking up inventory, and there has been a serious housing shortage here for some time.
Phoenix’s housing problems are part of a nationwide slowdown in residential construction, driven by shortages of lumber and even of appliances, windows and doors. Some people were also hesitant to list their homes during the pandemic.
“I think people didn’t want to list their homes because they didn’t want people to walk around their homes during the pandemic. “
On the demand side, mortgage rates are historically low, prompting people to buy now, if they can afford the price hikes. Cabezas describes the bidding wars he witnessed as crazy. Some neighborhoods in Maricopa County have seen a 50% increase in just one year, he said.
It is a big victory for the people who have a house to sell. But the real estate boom is excluding some people from the market. “The losers, unfortunately, are the people who cannot buy and are forced to rent. The rent in Maricopa County has gone crazy. Cabezas says those who want a new starting home should be prepared to go up to $ 300,000, a sum of money based on Arizona salaries.
And if you’re trying to take advantage of government-backed Federal Housing Administration loans, which help many low-income home buyers buy their first home, well, good luck.
“You might as well not bother. [Sellers] are going to want to take out a conventional loan on FHA. And of course, money is king.
Cabezas expects above-average prices to last until 2023 or 2024. But developments in Arizona’s economy will likely keep demand high. Tech companies are moving there at an accelerating pace, building what he called “distribution center monstrosities”: “These are the things that drive people to Arizona. This is one of the reasons the economy here keeps a little more stable than in other places, and why real estate is like that. “
The state of the current real estate market can be good for business, Cabezas said. But he had a difficult message for the younger generations, who will find it difficult to buy in a hot market.
“I’m sorry for you. You look young. You’re not going to live the same lifestyles as us.
Do you know anyone caught up in the scarcity economy that we should talk to? Write to us at [email protected].