While it is not entirely clear (it never is) what will happen with Arizona's housing market in 2016, one thing seems rather certain: it will keep growing. AZ Central reported on slow, steady growth in the upcoming year due to improvements in the state's job market, boomerang buyers preparing to buy again and increasing millennial interest in homebuying.
On Dec. 2, the Phoenix Convention Center held the 52nd annual ASU/JPMorgan Forecast Luncheon to discuss the state of both the Arizona and U.S. economies. Lee McPheters, director of JP Morgan Chase Economic Outlook Center at W.P. Carey School of Business at Arizona State University, spoke on the participating panel. McPheters was confident in the growth of Arizona's economy. While it is slow by historic standards, it is doing very well relative to the rest of the nation.
Next year "will be the best year yet for the economic recovery in Arizona," McPheters told AZ Central. "The takeaway is there's no doom, no gloom but no boom."
The economy will be further bolstered by the state's growing job market. According to AZ Central, personal income in Arizona is expected to rise 5.2 percent, job growth 2.6 percent, and population growth 1.5 percent.
What the state of the economy means for real estate
A growing economy means a growing housing market. At the luncheon, real estate consultant Elliot Pollack said 2015 was the best year for single-family housing since 2007, as AZ Big Media reported. Even more, he said it will keep getting better in 2016. AZ Central explained this growth is in part due to older members of the millennial generation who are starting to marry and have children.
Pollack predicted the Phoenix area will see a rise in building permits for single-family homes, from 15,000 this year to 18,000 next year. He emphasized that while the recovery is slow compared to what the state has experienced in the past, it is still undergoing steady growth.
Besides, slow growth may not be a bad thing. "Anytime you have a housing market that's recovering, what you don't want to see is it recover too quickly," Rebecca Grossman, president of the Scottsdale Realtor's Association told ABC15. If the market grows too quickly, she explained, it could become unstable. Already the demand for housing in Arizona outweighs the inventory available. Builders are struggling to find both financing and labor, and right now a key concern is increasing construction of new property.
Despite the need for more construction, there has still been a huge increase as of late. The Phoenix Business Journal reported a near 77 percent increase in home building permits for the Phoenix area between October 2014 and 2015.
The urbanization of Phoenix
Grossman also pointed out the urbanization in the Phoenix metropolitan area. As it becomes more compact and less oriented toward urban sprawl, people increasingly want to live within walking distance of stores, restaurants and other amenities. As a result, Grossman has called for a huge increase in redevelopment and infill projects to create more compact, walkable communities.
Some of these urbanization-based housing projects have already begun. For example, the Phoenix Business Journal reported that Michael Lafferty of Lafferty Development will soon begin construction on a micro-housing project in downtown Phoenix. Lafferty believes his 190-230 small units, which will each be about 700 square feet, will appeal to students in the area as well as empty-nesters looking to downsize.
Arizona's slow growth is certainly something to celebrate, and economists do not seem at all discouraged by its slow rate of recovery. AZ Central said Arizona will likely remain one of the country's fastest growing states in 2016.