Extreme shortages, low mortgage rates to drive Phoenix-area prices skyward

By Mike Sunnucks | Rose Law Group Reporter

The regional housing market is seeing demand increase and faces substantial supply constraints as the economy reopens and navigates COVID-19, according to real expert Jim Belfiore.

Belfiore, president of Belfiore Real Estate Consulting in Phoenix, said there has been a rise in home buyers coming back out since much of the Arizona economy reopened in May. 

This comes after the housing market saw very strong sales in January and February before the Coronavirus pandemic started shutting down the economy in March.

“The fire was put out for a couple of months and now it’s coming back and it’s coming back with verocity,” Belfiore said. “Even a short 60-day period created a significant amount of pent up demand.”

Belfiore said historically low mortgage interest rates, millennials and renters who have rebuilt credit after the foreclosures of the Great Recession are driving the current rise in demand.

“Mortgage interest rates are astoundingly low and historically low,” Belfiore said.

COVID-19 did impact new home sales during the closures in March, April, and early May but not as extreme as first projected. 

Belfiore’s research show a 30 percent decline in new home sales from mid-May to mid-June compared to mid-February to mid-March. The mid-May to mid-June sales numbers were down 28 percent from a year ago. Early projections had home sales dropping by as much as 80 percent.

Belfiore expects new home sales to end 2020 on the same level of 2019 despite the impact of COVID. He points to entry level homes and first and second move ups as strong segments.

The big challenge for the market is supply, Belfiore stressed.

“We have a severe supply shortage of houses,” he said.

Belfiore said there currently 537 active new home communities in the Phoenix region. That is the same level as January 2016 but current demand for new homes is 37 percent higher, he said.

Supply is 25 percent lower than a year ago and Belfiore said extended build times to get new homes on the market will continue. 

“I think we have a long-term supply issue in this market,” Belfiore said.

Resale home listings have dropped with homeowners reticent to put their homes on the market because of COVID.

There are approximately 16,000 homes for sale in the region but Belfiore notes a healthy portion of those have pending sales contracts and are kept on the market for backup offers.

Belfiore said there is still uncertainty in the economy and real estate markets with the rise in COVID-19 cases in Arizona.

Still, Belfiore said prospective home buyers should start their process early because of the supply constraints coupled with low mortgage interest rates and high demand driving up home prices.

“If they are thinking of buying a home they should start looking today,” he said.

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