PHOENIX (3TV/CBS 5) – Interest rates are sky-high, while overall affordability in the Valley is at record lows. Now that the housing market is beginning to cool off, a major investment firm is giving an ominous look at Phoenix’s housing market.
The New York Post first obtained the memo from Goldman Sachs that said four U.S. cities, including Phoenix, could see a “seismic” crash like the 2008 Great Recession in the coming year. The three other cities include San Jose, CA; San Diego, CA; and Austin, TX. While most experts, including Goldman Sachs, agree that the housing market is beginning to normalize after pandemic-driven demand, there is still a lot of uncertainty.
Arizona’s Family got the report which forecasted 2023 and 2024 housing prices to fall the most in the West, where many mortgage payments claim half or more of a monthly income. Cities like Chicago and Philadelphia should see increases instead, although they’re expected to be nominal when comparing income. A Consumer Price Index from November showed prices increased 12.1% year-over-year.
Fortunately, it’s not all bad news. Goldman Sachs is calling for a “gradual return of affordability” as part of the report. Firm researchers say that households should experience higher incomes, outweighing any effects that high mortgage rates are having on the housing market. “While higher mortgage rates weigh on affordability, we expect strong nominal income growth,” the report detailed. Right now, metro Phoenix is dealing with the highest inflation rate compared to any other developed area.
Local real estate experts disagree with the outlook from Goldman Sachs, saying this year could bring a collapse similar to 2008. “That crash in our market was driven a lot by practices of the lending institutes,” Arizona Realtors vice President Sindy Ready said. “They weren’t verifying income, and people could buy multiple houses. “That just can’t happen now because of regulations in lending. They’re much stricter.”
Ready says the market in Arizona is leveling right now. It’s allowing buyers to get back into the market. She says while the prices have dropped, they won’t crash like they did 15 years ago. “We’re seeing a market adjustment everybody agrees with that, just not to the speculation of 2007-2008 and what we dealt with then,” she explained.
She adds the high-interest rates have also pushed investors out of the market. As a result, people buying a home to live in have less competition as the investors sit out and avoid buying houses to flip or rent for profit. “We feel like we have a very strong market in Phoenix and in Arizona in general,” she said.
Declines are also being seen by Valley home builders as …….