As the world grapples with the devastating effects of the COVID-19 pandemic, one of the areas that it has had a significant impact on is the real estate market. Home prices in Arizona have been drastically affected by the economic downturn caused by the pandemic, and it is important to understand how these changes have taken place in order to make informed decisions about buying or selling a home in the state. This article will explore the impact of COVID-19 on home prices in Arizona, and provide an overview of the current market conditions. We will discuss the changes in home prices and the factors that have contributed to them, as well as what potential buyers and sellers should consider when making decisions about their real estate investments.
The Impact of Job Losses
The COVID-19 pandemic has caused a significant rise in unemployment across the United States. In Arizona, the unemployment rate rose to 11.4% in June 2020, up from 4.7% in February 2020.
This has had a major impact on the housing market, as many potential buyers are unable to secure a mortgage due to their inability to provide employment and income verification. This has had a significant effect on home prices in Arizona, causing them to drop by an average of 5.1% since the start of 2020, according to CoreLogic.
Changes to Mortgage Lending Standards
The decline in home prices in Arizona can also be attributed to changes to mortgage lending standards during the pandemic. Many lenders have tightened their requirements for potential buyers, with some requiring higher down payments and higher credit scores. This has made it more difficult for many potential buyers to secure financing, resulting in fewer people able to purchase homes and driving down home prices.
What to Expect for Home Prices in Arizona
Looking ahead, experts believe that home prices in Arizona will continue to decline until the economy improves.
According to real estate analyst Jonathan Smoke, “Home prices will remain volatile until job growth recovers and consumer confidence returns.” In addition, new legislation could further affect the market. The recently passed CARES Act expanded loan forbearance programs and reduced interest rates on mortgages, which could help stabilize home prices. However, it is unclear how effective these measures will be. In conclusion, the COVID-19 pandemic has had a major impact on home prices in Arizona. Job losses, changes to mortgage lending standards, and new legislation have all contributed to the decline in home prices.
While the future of home prices remains uncertain, experts believe that they will continue to decline until job growth and consumer confidence return.
Changes to Mortgage Lending Standards
Since the start of the COVID-19 pandemic, mortgage lenders have tightened their lending standards in an attempt to reduce the risk of defaults. In Arizona, this has meant that banks and other lenders are requiring higher credit scores and larger down payments, both of which have had an impact on home prices. The higher credit score requirements have resulted in fewer qualified buyers for homes, leading to a decrease in demand and lower prices. Similarly, the higher down payment requirements mean that buyers need to have more cash up front, which can make it difficult for buyers to purchase homes.This has also led to a decrease in demand and lower prices. The changes to mortgage lending standards have had a direct impact on home prices in Arizona. The decreased demand caused by higher credit score and down payment requirements has meant that home prices have dropped significantly since the start of 2020. It is likely that this trend will continue until the mortgage lending standards are eased and buyers are able to qualify for loans more easily.
Impact of Job Losses
The COVID-19 pandemic has taken a drastic toll on employment in Arizona, with state-wide job losses reaching as high as 13.2%.This has had a major impact on the housing market, as individuals and families with fewer financial resources are unable to afford the same home prices as before. The effect of job losses on Arizona home prices can be seen in multiple sectors. For example, in Phoenix, the median home price dropped by 4.3% in April 2020 compared to the same period last year, while the median price for existing homes fell by 3.6%. Similarly, new home sales declined by 7.8%, and the number of building permits issued for new homes plummeted by 24%.The job losses have also had an effect on the rental market in Arizona.
According to Apartment List, rents in the state decreased by 0.5% year-over-year in April 2020, with an average drop of 2.4% for one-bedroom units. This is likely due to an influx of people who have lost their jobs and can no longer afford higher priced rental units. Overall, the impact of job losses on home prices in Arizona has been significant. Although some areas have seen prices remain steady or even increase, many areas have seen prices fall significantly due to a decrease in demand.
What to Expect for Home Prices in Arizona
As the effects of COVID-19 continue to reverberate in the United States, the real estate market in Arizona is no exception. Home prices in the area have dropped by an average of 5.1% since the start of 2020, according to CoreLogic.Despite this decline, there are a few potential trends that could affect home prices in Arizona in the near future. The first trend to watch for is the potential for prices to rebound as the economy begins to recover. The housing market usually follows the stock market, so if the market continues to improve, home prices in Arizona could eventually begin to rise. This could be especially true as people look for more affordable housing options outside of large cities. Another potential trend that could affect home prices in Arizona is the possibility of new legislation. For example, the Biden administration is considering a proposal to provide financial assistance for renters and homeowners.
If this legislation passes, it could potentially help people stay in their homes and prevent foreclosures, which would help stabilize home prices. Finally, another potential trend to watch for is the impact of mortgage rates on home prices. Low mortgage rates tend to encourage more people to buy homes, which can drive up prices. Conversely, high mortgage rates can have a cooling effect on the market and lead to lower prices. Currently, mortgage rates are at historic lows, so this could help bolster demand for housing in Arizona. Overall, the effects of COVID-19 on home prices in Arizona remain uncertain.
However, it is important to be aware of potential trends that could affect the market in the near future, such as a potential rebound of prices as the economy recovers, new legislation that could help stabilize prices, and the impact of mortgage rates. In conclusion, the COVID-19 pandemic has had a major impact on home prices in Arizona. Job losses, changes to mortgage lending standards, and a lack of consumer confidence have all contributed to a decline in home prices over the past year. However, potential trends and new legislation could help stabilize the housing market in Arizona in the near future. Homebuyers should take these factors into consideration when making purchasing decisions.
