An Economic Slowdown in Arizona (and what it means)

An Economic Slowdown in Arizona (and what it means) – The hot housing market in Arizona is quickly slowing down. According to the Cromford Report, there are over 11,845 new residential listings added to the Greater Phoenix area. Compared to the average jump over the past few years, this one has seen a 34% leap, all while rising mortgage interest is seeing rates and pricing knock some would-be homebuyers out of the market entirely. An Economic Slowdown in Arizona (and what it means)

What does an economic slowdown look like for Arizona?

There has been too much demand and not enough supply in the housing market in Arizona. The Federal Reserve has raised rates in order to reduce the rate of inflation within the market. In the long term, this is expected to calm Arizona’s hot housing market. Thankfully, this procedure is one that is proving to be useful. Signs of a cooldown in the valley can be seen to be spreading as there is a reduction in home prices. But what does economics have to do with the housing market?
Well, the general rule of thumb is that the housing market is oftentimes a reflection of what is happening within the economy. As the economy slows down, the supply of money may become more restrictive.

Money supply affects housing sales!

A steady flow and supply of money are critical to the health of the housing market. If money is proving to be difficult to borrow, home sales can dry up. With money being too easy to acquire, there are far too many people that can enter the housing market. If this should happen, then the inevitable correction or crash occurs with prices being driven too far up for too long of a time. Home sales and construction should align with economic activity, which is sometimes not the case.

Economic slowdowns slow down home sales!

Housing markets are greatly impacted by economic slowdowns. When the economy slows, history shows us the likelihood of lower mortgage rates for those looking to buy a new home or refinance the one they already own. Under a strong economy, the housing market is healthy. Fewer people may buy if and when housing interest rates rise. Default on loans within adjustable-rate mortgages could lead to a rise in foreclosures. The cycle of economic improvement begins when there is a break, and housing prices begin to reflect consumers’ ability to pay. A fine example of this was the 2008 housing crash, with the improvement of the economy healing alongside the improvement of pricing.

For more information on the housing market in Arizona, visit our website.