2022 Housing Market Predictions

Phoenix, AZ

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If January is any indication, which it usually is, the housing market is going nowhere but up in 2022. Low supply continues to drive the narrative and control the market regarding price increases. Above-average demand remains for both resale and new-build residential properties. If you’re waiting for the housing market to crash, you can anticipate waiting for a long time. This is not 2008.

Although trends across the nation are similar to those in Maricopa County, Phoenix has outperformed every other market over the past two years and it continues to be one of the most desired places to live in the nation.

According to the latest Cromford Report, “The market continues to strengthen in favor of sellers with extremely low supply and demand well above normal.” This is not what those on the sidelines asked Santa for this year, but it is what most experts anticipated, including the banks and hedge funds who continue buying thousands of properties every year.

Interest Rates

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Worried about rising interest rates affecting home prices? The Cromford Report states, “Even if higher interest rates suppress demand, the situation is unlikely to change dramatically unless supply starts to build much higher than it is now. There is no signal from the first week of January that such an event is likely. Perhaps the next few weeks will show some new trend, but right now we are looking for more price rises over the coming months.”

Most people are looking at the interest rate issue from the perspective of their home value decreasing when the Fed hikes rates. I look at it differently. I compare rising interest rates to throwing gas on the fire to our already massive housing affordability crisis.

Rising interest rates are going to make it more expensive for buyers, but at our current supply and demand levels, interest rates would have to increase significantly before housing price trends are reversed and negatively affect sellers. In fact, the minute the Fed increases rates, I anticipate demand to go up even more out of buyers' fear the Fed will keep raising rates.

Inflation

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Worried about inflation affecting home prices? Since there are so many economic factors at play, it is easiest to isolate housing in order to understand how inflation affects housing prices. This example from Joseph Nguyen at Investopedia explains it well.

“To illustrate, consider an economy that has a money supply of only $10 and five identical houses in the whole economy. Each house would be priced at $2 (assuming no other goods in the economy). Now, suppose the central bank decides to print more money and the money supply expands to $20. Now each house would be priced at $4. In this simplistic example, increasing the money supply causing inflation and house prices to increase.”

Obviously, housing is not the only economic factor, but this example makes it clear that housing prices rise with inflation. More gas on the fire in the housing affordability crisis and another reason I anticipate prices will continue rising in the near term.

Over the past year, I’ve often stated that the only thing able to stop the housing market boom in Phoenix would be price alone. Since 2008, the Phoenix market has been significantly undervalued compared to other major metros. It’s also been one of the fastest-growing metros during this time. Even with 30–40%+ gains in some neighborhoods last year, it doesn’t appear we’ve reached that point yet.

If you have any questions about the Phoenix housing market or real estate in general, please visit www.fastjetrealty.com or email me at aaron@fastjetrealty.com

Disclaimer: This article is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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