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Real estate expert: Valley housing prices likely to continue increasing in 2024

When it comes to the metro Phoenix housing market, 2023 was a slog of a year. The year before began with a frenzied rise in prices, bidding wars and exhausted realtors — until it was all put to a stop by rising interest rates. 

2023 then saw fewer listings and the lowest number of home sales since the Great Recession.

So, what are experts watching for in 2024? For that, The Show spoke with Mark Stapp, Fred E. Taylor professor of real estate at Arizona State University. 

MARK STAPP: Good morning Lauren.

LAUREN GILGER: OK. So give us first your top line predictions for the housing market in 2024. We've seen this kind of steady and then very sometimes very sharp rise in prices. Are we going to see them go down at any point here?

STAPP: No, but probably not for all those who are hoping that prices are going to plummet or fall drastically, that's not likely going to happen. In fact, they're probably going to continue to go up just at a much more moderate pace. 

GILGER: So what drives that? I know interest rates have been a big part of the conversation but also it's just the lack of housing, right. We still have a shortage in housing, it seems, 

STAPP: Yeah, ii a significant shortage in housing and you know, some of this was driven by the fact that for more than a decade we under built and then a couple of factors took over which constrained the inventory. One of which was all of those people that were able to get relatively low interest or not, relatively, very low interest rate loans get locked into their home. Right, and so you don't have this fluidity in the market that you would want to have in a turnover of existing home inventory.

GILGER: You don't want to get a higher interest rate and buy a new house.

STAPP: Yeah, exactly. So you've got 61% of all mortgages are 4% or below. In 82% of all mortgages or 5% or below. So, until you get the current mortgage rate down closer to that, the trade-off is too big. And, and it's gonna keep the inventory relatively low. I think we have about four months of existing home inventory in the market right now, which is better than it was, but it's about what it was in this time last year.

GILGER: So we continue to see people move here too. Like this population growth to the Valley is going up and up and up. Does that contribute to the problem here? Are we building enough to keep up with it.

STAPP: Well, people would say it's a problem but it contributes to the fact that there is more demand than there is supply and you know, the so the additional supply has to be made up, not from people moving out of their existing homes but by homebuilders building new homes. And those aren't always in the place you want them to be. And it's also been harder for homebuilders to build the number of homes that we need to make up the for the demand that's growing.

GILGER: Let's talk about affordable housing, Mark. I know the affordable housing crisis is like a phrase we have talked about ad nauseam here for many years that continues. There are some specific pockets where that is worse. Are we doing anything though or are we anticipated to do anything in this new year to try to ease that crisis?

STAPP: Well, we're always trying to do something that isn't warm but it's hard, you know. So affordable housing that there's, there's not a singular definition for it, right? So there's two I think important words, one of them is attainable housing and that's housing that people can afford. And then there's affordable housing and that adds into a whole different group of the population that has trouble affording anything. So what you don't want is people being burdened by their home. The cost to occupy a space either rented or owned, but there's people that can't afford anything. And we've got both problems in the valley and it's a surprise to a lot of people that we have an affordability issue here because we were always known as a very affordable place. But that, that was the result of the same factors that have created the short supply that we have. So prices kept going up, wages didn't go up, it exacerbated matters. And the money that's available for true affordable housing is a relatively small pot compared to the demand. So we're always behind the curve in trying to supply the necessary number of units to meet the demand that we have for truly affordable. That's I would say 80% of area median income and below and when you get to 60% or 40% then there's a real dearth of available units.

GILGER: This is a bigger problem even when it comes to seniors, affordable senior housing is a problem, right?

STAPP: It is, it's an increasing problem. So the the leading edge of people, 80 years old is for the baby boomers is just beginning. By 2035 we will have doubled the number of people 80 years of age or older, compared to where we were in 2016, right? So we have about 24 million people in this country that are that age and they have to live somewhere, and they're typically on fixed income and it becomes increasingly difficult for them to find a place to live. This also goes back to this fluidity of the existing home market. So you have about 68% of people over the age of 70 are mortgage free. So the cheapest place for many of them to live is in the home that they're in, rather than giving that home up and putting it back into the inventory for a younger family to move into. It may be that it's cheaper for them to stay in that house. And that just again, exacerbates this matter of having a fluid marketplace.

GILGER: Last 30 seconds or so here. Tell us what you're looking forward to seeing happen this year. Are there programs in place new ideas coming, things that you're looking forward to hoping things might, you know, ease some of those issues. 

STAPP: So I think overall you've got both cities and towns and on the state level, people focused on trying to make sure that we have adequate supply of affordable housing. It's very important for us as a place, right? So it's an economic development issue in addition to being a social issue and I see a lot of progress being made through cities and towns ordinances programs, money is available that are gonna at least help, but we're going to see the same kinds of conditions persist throughout this year. There's not gonna be a significant change.

GILGER: All right, we'll leave it there for now. Mark Stapp, Fred E. Taylor professor of real estate at ASU joining us. Mark, thanks so much. Appreciate it.

STAPP: My pleasure. Happy New Year.

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Lauren Gilger, host of KJZZ's The Show, is an award-winning journalist whose work has impacted communities large and small, exposing injustices and giving a voice to the voiceless and marginalized.