With all of the real estate questions caused by COVID-19 and the economic slowdown we’re experiencing across the country in 2020, many are asking if the Arizona housing market is in trouble. For everyone who remembers 2008, it's logical to ask that question.

Many of us in Arizona experienced financial hardships, lost homes, and were out of work during the Great Recession – the recession that started with a housing and mortgage crisis. Today in 2020, we face a very different challenge: an external health crisis that has caused a pause in much of the economy and a major shutdown of many parts of the country.

Let’s look at a few things the experts know about today’s Arizona housing market that were different in 2008.

1. Annual Home Price Appreciation

When we look at home price appreciation in the visual below, there’s a big difference between the 6 years prior to the housing crash and the most recent 6-year period of time. Leading up to the crash, we had much higher appreciation in Arizona than we see today. In fact, the highest level of appreciation most recently is below the lowest level we saw leading up to the crash. Prices have been rising in 2020, but not at the rate they were climbing back when we had runaway appreciation.

Annual Home Price Appreciation

 

2. Mortgage Credit and Equity

The home Mortgage Credit Availability Index is a monthly measure by the Mortgage Bankers Association that gauges the level of difficulty to secure a home loan. The higher the index, the easier it is to get a loan; the lower the index, the harder. Today 2020, we’re nowhere near the levels seen before the housing crash in Arizona when it was very easy to get approved for a mortgage. After the crash, however, lending standards tightened and have remained that way leading up to today.

Historical Data for the mortgage credit availability index chart

 

3. Number of Homes for Sale 2020 Inventory compared

One of the causes of the Arizona housing crash in 2008 was an oversupply of homes for sale. Today, as shown in the next image, we see a much different picture. We don’t have enough homes on the market for the number of people who want to buy them. Across the country, we have less than 6 months of inventory, an under supply of homes available for interested buyers.

Months of inventory of homes for sale Buyer/Seller Market

 

4. Use of Home Equity and Refinances

The chart below shows the difference in how people are accessing the equity in their Arizona homes today as compared to 2008. In 2008, consumers were harvesting equity from their homes (through cash-out refinances) and using it to finance their lifestyles. By Now in 2020, consumers are treating the equity in their Surprise AZ homes much more cautiously.

chart of home equity cashed out in billions

 

5. Home Equity 2020

2020, 53.8% of homes across the country and in Surprise AZ have at least 50% equity. In 2008, homeowners walked away when they owed more than what their Arizona homes were worth. With the equity homeowners have now, they’re much less likely to walk away from their homes.

Pie chart of all homes in Arizona and US that have equity

Bottom Line

The COVID-19 crisis is causing in 2020 is causing different challenges in Arizona than the ones we faced in 2008. Back then, we had a housing crisis; 2020, we face a health crisis. What we know so far in 2020 that housing is in a much stronger position today than it was in 2008. It is no longer the center of the economic slowdown. Rather, it could be just what helps pull us out of the downturn.