Phoenix, Arizona – Economists predict that the housing market in Phoenix, Arizona will face ongoing challenges well into the future. According to experts at Bank of America, the housing market is expected to remain at a standstill until 2026 due to the record-low supply of homes for sale. The “lock-in” effect, where homeowners who secured low mortgage rates during the pandemic choose to stay put, is contributing to the stagnant market conditions.
This trend is likely to have long-lasting effects, with the investment bank estimating that the impacts could last between 6 to 8 years. As a result, housing activity is expected to remain subdued, affecting residential investment that plays a crucial role in the GDP calculation. High interest rates are also playing a significant role in influencing homeownership, with mortgage rates sitting at around 7% despite a recent pullback in borrowing costs.
The combination of low supply and high prices is leading to a competitive market for buyers and sellers. Home prices reached a new record in April, although the growth rate has slowed compared to previous months. Data from Case-Shiller indicates that the market continues to show strength, with Bank of America forecasting a steady growth in home prices over the coming years.
Economist Michael Gapen highlighted the disconnect between home prices and disposable income, suggesting that prices may be overvalued. Despite this, the outlook for the economy suggests a return to normalcy post-pandemic, which could lead to a gradual easing of the current housing market conditions. However, Gapen believes that a significant drop in home prices is unlikely in the near future.