Record-Breaking Home Values: Comparing the Tempe Housing Market a Dozen Years Later

Have you heard the news? Record-setting home prices are back. As of June 2018, property values in the Valley surpassed the previous pre-Recession highs of 2006. This, along with renewed concerns of housing affordability, have some people worried that we’re headed toward another housing market crash. This time around, there are a number of important differences that suggest a housing crash is very unlikely, at least on the same scale as we saw a dozen years ago. First, adjusted rate mortgages are all but extinct as home loan vehicles. In contrast, historically-low fixed-rate interest loans have helped a new generation afford homes at higher price points than a decade a half ago. Moreover, and perhaps most important, home building isn’t outpacing population growth like it was a dozen years ago. This means, there tends to be more buyers than sellers overall. Inflation, average rent prices, and wage increases have further risen the floor on how far home prices might drop.

Because, look, we’re not saying that incomes have kept up with the rising cost of living, nor are we saying that Tempe home prices are going to keep going up forever. Furthermore, we personally see something of flattening out of home value appreciation, as housing becomes increasing difficult to afford. To some extent, it also seems like paying a greater percentage of your out-of-pocket costs to housing is the new normal for metropolitan areas with measurable housing shortages and rents that are getting just as difficult to afford. Even still, we do feel confident in saying that there’s little chance that home prices will drop precipitously anytime soon. Moreover, with interest rates poised to keep rising as well, the total cost of homeownership is likely to keep going up in the future.

In one sense, the overall housing picture in Tempe can be feel incredibly stress-inducing, especially for first-time home buyers. In another sense, this type of high-floor, low-ceiling environment can have a moderating effect for the prospective buyer. Look for the home that makes sense for you and your household, and while you may have a ton of new home equity right, you also almost surely won’t regret the decision to buy.

A dozen years later, when we look around at the housing market, we have more concerns about homelessness, housing affordability, and overall cost of living than we do of another crash. The national data is, arguably, even stronger that housing affordability and home prices are not too far out of whack.


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