In the rapidly-growing Phoenix metropolitan area, the real estate market may look like a bubble that’s poised to burst. With home prices going through the roof, home buyers could be tempted to wait for prices to cool off, and owners might be eager to sell as quickly as possible. But are these strategies truly wise? And will they pay off in the long run?
To find out, we spoke with Phoenix-area realtor Russell Shaw, an associate broker and branch manager at Realty One Group. As a Phoenix native and a 42-year real estate veteran, Mr. Shaw has witnessed the growth and transformation of his hometown. Shaw has ranked among the top 1% of real estate agents in the US since 1991.
EM: You’ve said that the Phoenix area is the fastest-growing real estate market in the country. In your opinion, what is driving the current dynamics in the market?
Russell Shaw: It’s a combination of extremely low housing supply (about 22% of normal) coupled with huge net in-migration to the Phoenix area. Then add in low, low interest rates, and you’ve got a housing shortage.
EM: Many people think that we are experiencing a housing bubble and that it’s going to pop. What do you think is going to happen and why?
Russell Shaw: There is no bubble here. Prices will keep rising until they are so high that the price level dampens demand. I would expect a 40% total increase in prices in 2021, and I expect the dampening to occur in the 4th quarter of 2022. Prices will not go down as the number of people who live here is not going to go down.
EM: What do you suggest that Phoenix home buyers and sellers should do based on the current market?
Russell Shaw: If you want to buy, do it now. The prices will not be lower later on. I suspect that the same is also true of interest rates — so the buyer advantage is now. And if you are a seller, sell when you actually want to move.
EM: What else should buyers and sellers know?
Russell Shaw: Interest rates affect house payments much more than most people realize. A 1% difference in the interest rate is a greater difference in the monthly payment than a 10% difference in the price. Remember that when you’re looking to buy.
This article is opinion and not a substitute for professional advice. Disclaimer