PHOENIX — A sharp rise in housing costs is hitting Arizona families hardest, according to Sean Ewen, research economist with the Seidman Research Institute at Arizona State University. The economist said home prices have climbed between 40% and 50% since the COVID‑19 pandemic, making the increase one of the largest in the nation.
Inflation and mortgage rates add pressure
The Consumer Price Index this week rose to 3.7%, driven by higher energy and gas prices and ongoing conflict in the Middle East. While the Federal Reserve lifted its benchmark rate to 4% in February, 30‑year fixed‑rate mortgages are now averaging about 7.4%.
Ewen explained that higher rates are expected to cool demand and eventually bring down home prices, but the effect on mortgage payments shows up faster than the drop in sale prices. “When rates come down, prices should cool; it’s just a question of when,” he said.
Wages keep pace, but buying power is strained
Arizona’s median household income sits around $85,000, and Ewen noted that earnings at the 25th and even 10th percentiles have largely kept up with inflation. “We do see quite a bit of increase in wages at the same time, maybe not as much as they otherwise would have without the inflation,” he said.
Nevertheless, many residents feel the pinch. “Maybe you finally get that raise, or you finally get that new job and the salary doesn’t go quite as far as you expected it to. That’s disappointing,” Ewen said.
No recession on the horizon, according to the economist
Despite the high cost of housing and rising prices for groceries, gasoline and new cars, Ewen does not believe the United States is in a recession. He cited former Fed Chair Ben Bernanke’s observation that economic expansions “don’t die of old age, they’re murdered,” emphasizing that recessions are caused by specific shocks—not by a gradual slowdown.
He pointed to past downturns—COVID‑19 in 2020, the financial crisis in 2008, and the dot‑com bubble in 2000‑2001—as examples of events that triggered recessions. “Those things are hard to predict,” he added.For Arizona homeowners and prospective buyers, the outlook suggests patience. Higher mortgage rates are likely to temper home‑price growth, but the market will need time to adjust. In the meantime, steady wage growth offers some relief, even as families navigate higher everyday costs.
What residents can do
Local experts advise homeowners to review their mortgage terms, consider refinancing when rates dip, and explore affordable housing options offered by city programs. Prospective buyers are encouraged to save for larger down payments to offset higher loan costs.
As the state’s economy continues to expand, the combination of modest wage gains and a cooling housing market may eventually restore balance between incomes and living expenses.
Original reporting: azfamily KTVK/KPHO Phoenix (news) — read the source article.
