Zillow’s housing experts predict that while the Phoenix market will slow a bit from 2021 — the hottest year on record for housing — it will be anything but cool. Sellers will remain firmly in control, and buyers should be prepared for rising prices and the possibility of a bidding war when they find the right home.
Phoenix home values soared in 2021, ending the year at a whopping 32% higher than where they had started. Among large U.S. metros last year, only Austin saw home values rise higher. That jump put pressure on all buyers, but especially on first-timers who need to save for a down payment and haven’t had the benefit of equity gains from a previous purchase.
The good news for those angling for a move this year: 2022 is setting up to be a tad less competitive. But that shouldn’t be mistaken for a buyers market. Zillow expects Phoenix home values to rise about 20% in 2022 — still an incredible pace, but a steep drop from the hottest-ever conditions of last year.
Phoenix has dropped from the second-hottest market in 2021 to the eighth-hottest in Zillow’s 2022 forecast, falling behind Tampa and several other metros in the red-hot Sun Belt. Home buyers continue to be drawn to Sun Belt markets, which allow them to enjoy the outdoors all year long, and that slight shift may be a result of affordability-conscious buyers turning their attention to less-expensive areas after prices rose so quickly in places like Phoenix.
Impact on rentals
Many Phoenix households will decide to sit out the competitive for-sale market and continue renting instead. And plenty of those, especially millennials who are entering their early 30s, will be on the lookout for bigger rental homes that have an extra bedroom for a home office or gym, or a yard for their new dog or for building a play set for their kids. Expect that dynamic to add pressure to Phoenix’s single-family rental market.
Renovations are still booming
A huge number of Phoenix homeowners will undertake home improvement projects this year. Some of them will be recent buyers who had to make a compromise or two in the ultracompetitive pandemic housing market; others will be longtime owners who are opting to upgrade their current home rather than trade up.
Zillow research finds that 72% of homeowners will consider at least one home improvement project in the coming year, which makes sense given that more than 80% of buyers in 2021 had to compromise on the home they purchased. A bathroom renovation is the project the most homeowners are considering tackling this year, followed by a kitchen remodel. Homeowners also want to create more livable space, including adding or improving an office space or finishing a basement or attic.
Zillow’s advice for home buyers
There are certainly hurdles to clear for home buyers this year, but there are also new opportunities. Flexible work options are opening up possibilities to buy a home in a more affordable area than where your workplace happens to be, and it’s never been easier to shop for homes virtually from your couch. Zillow even has a new feature that helps identify available down payment assistance programs.
Buyers in Phoenix will need to be prepared and patient. Those who want a leg up should get pre-approved for a mortgage; they will also want to create a clear list of essential features and absolute deal breakers so they can be decisive and move quickly when they find a home that is right for them. As competitive as the Phoenix market will continue to be this year, buyers should consider looking at homes listed below the most they are willing to pay, in case of competing offers that drive up the price in a bidding war. Winnowing options online by using virtual tours and other tools can save valuable time. Most importantly, working with a trusted agent who knows the Phoenix market will help a buyer confidently navigate the ups and downs of buying a home in this area.