Phoenix is one of the hottest real estate markets in the U.S. The Greater Phoenix housing market is booming. The buyer demand refuses to die down despite increasing mortgage rates. The median sales price has reached $350,000, which is an increase of $55,000 or +18.6% from the February of last year. There was a good supply of new listings in January 2021 (up 26% MTM) but the momentum took a dip in February 2021 (+0.1% MTM), according to the latest data released by ARMLS.
As a result the total supply of properties is not enough to meet the demand in the Greater Phoenix real estate market. Infact, the months supply has dropped to 1.14, which is a record low in this housing market. Total inventory has a month-over-month decrease of -7.7% while year-over-year reflects a decrease of -43.8%. February's sales were up by nearly 8.2% from the previous month and +5.2% from the previous year.
A panel of Zillow's economists and real estate experts expect that Phoenix will be America’s second-hottest housing market in 2021. Austin, Texas heads a lineup of sunny and relatively affordable metro areas — Phoenix, Nashville, Tampa, and Denver — that are most likely to outperform the nation in home value growth in 2021. The top-five metros are all relatively affordable options compared to expensive coastal areas that have led to home appreciation ranks in recent years
The pandemic could only pause sales, which in turn created a huge pent-up demand. As we saw Arizona real estate market thriving & becoming sizzling hot in the past couple of years, even the rise in mortgage rates was believed not to affect it. Low-interest rates are helping boost but the inventory is sparse. High demand and low inventory have increased prices, which is a piece of good news if you plan on selling.
The slump in year-over-year sales in April and May impacted the numbers, but the market bounced back quickly. The Phoenix real estate market has not only recovered after a slump due to COVID-19 but the demand has reached new heights. January recorded the highest median sales price and the highest average sales price ever reported. An increase is forecasted in February for both average sales prices and median sales prices.
Despite the rise in new listings, the environment is extremely difficult for homebuyers in the Greater Phoenix housing market. As per the current trends, the Phoenix is all set to remain a seller's market in the next 12 months. The prediction is that the upward price trend will continue for the near and medium-term, making any price reductions in 2021 rather unlikely.
Arizona Housing Market Trends 2021
If you are considering moving to Arizona, Scottsdale, Phoenix, and Tucson are some of the top places to call home. According to Zillow's Home Value Index (ZHVI), since 2012, Arizona housing prices have gone up over 130%, from $137K to $315K. Home values have gone up 16.5% over the past year alone. Most likely they will continue to rise at a similar rate (double-digit appreciation) over the next twelve months. This also raises a concern that in Arizona wages are not keeping up with the rising costs of housing.
Arizona's housing market has over 900,000 renter households which account for 36% of the total number of households. According to a report from the National Low Income Housing Coalition (NLIHC), the rental prices in Arizona have become out of reach for many residents. For too many low-income workers, wages have not kept pace with rising rents and home prices. Workers need to make $21.10 an hour to afford a 2-bedroom rental at a fair-market rate.
In Arizona, the Fair Market Rent (FMR) for a two-bedroom apartment is $1,097. To afford this level of rent and utilities — without paying more than 30% of income on housing — a household must earn $3,658 monthly or $43,892 annually. Assuming a 40-hour workweek, 52 weeks per year, this level of income translates into an hourly Housing Wage of $21.10.
The minimum wage in Arizona is $12.00/hr and the Average Renter Wage is $17.46. Cost-burdened is defined as spending more than 30% of one’s monthly income on housing and utilities. Neighborhoods in west and South Phoenix are most cost-burdened. In some cases, more than 50% of households are paying 30% or more of their income on housing costs, while less than 29% of renting households are housing cost-burdened in the north.
Flagstaff MSA is the most expensive MSA where you need an hourly wage of $24.35 to afford a 2-bedroom rental. The second most expensive is MSA is Phoenix-Mesa-Scottsdale, where you need an hourly wage of $22.56 to afford a 2-bedroom rental.
Between 2010 and 2018, the City of Phoenix’s median income increased by only 10%, while, median rent increased by over 28%, and the median home price increased by over 57% during this time. In 2018, half of Phoenix renters were considered housing-cost burdened, 25% of homeowners were housing-cost burdened and altogether 36% of the entire population is housing-cost burdened. According to a report by Phoenix.gov, 65 % of households that fall within or below the moderate-income range would require some amount of subsidy to achieve housing that is considered affordable at their income level.
Here's the current overview of the Arizona home prices by counties (source: Realtor.com)
|Counties||Median Listing Price||$/SqFt|
Greater Phoenix Housing Market Trends 2021
It is a metropolitan area, centered on the city of Phoenix, which includes much of the central part of Arizona. The source of this report is the Arizona Regional Multiple Listing Service (ARMLS®). It gives the percent change in housing statistics of February 2021 when compared with February 2020.
According to the report, an increase is forecasted in March 2021 for both average and median sales prices due to a huge gap between supply and demand. Months Supply of Inventory (MSI) is a calculation that quantifies the relationship between supply and demand in a housing market.
Generally, a balanced market will lie somewhere between four and six months of supply. If MSI is displayed as less than 4.0, sellers have the negotiation power. If MSI is above 6.0, buyers have the negotiation power. In Phoenix, it was 1.34 months for January 2021 and 1.14 months for February 2021, so it is a seller's market where there is an upward pull on home prices.
Maricopa County Housing Market Trends 2021
Maricopa County is a county in Arizona and consists of 43 cities. It is the nation’s fastest-growing county, home to approximately four and a half million people. Maricopa County is also a seller's real estate market, which means that more people are looking to buy than there are homes available.
Arizona Regional MLS includes Maricopa County and most of Pinal County. Here are the statistics for the Maricopa County housing market for Q4-2020 showing YoY Chg.
- The median sales price was up +16% YTY.
- The average sales price was up +2o.9% YTY.
- Closed sales were up +24.5%.
- Total Active Listings was down – 31.0%
- Months Supply was down – 32.5%.
- Homes sold faster than the previous year as the median DOM was down – 28.0%.
- Even with the number of new homes sold in Maricopa County increasing each year for the last 9 years, only 14.6% of all homes sold in Maricopa County in January 2021 were new builds, approximately half of prior decades.
- The new construction median sales price was only 11.7% higher than the median resale this January compared to 28.3% last January.
Phoenix Real Estate Market Forecast 2021 (Latest Projections)
What are the Phoenix real estate market predictions for 2021? Phoenix is the 5th largest city in the country and continues to grow. New residents are drawn to Phoenix by its strong economy, relatively low cost of living, high quality of life, economic opportunity, and cultural attractions. Since 2000, Phoenix’s population has grown by 20% to included approximately 555,013 households and 1.6 million people.
Let us look at the price trends recorded by Zillow over the past few years. Since 2012, Phoenix housing prices have appreciated by nearly 182% (ZILLOW HOME VALUE INDEX). Last year was the ninth consecutive year of home price gains. Home prices have gone up 18.7% over the past year alone. The Zillow Buyer-Seller Index considers Phoenix a sizzling hot seller’s real estate market.
Similar growth has been recorded by NeighborhoodScout.com as their data also shows that in the past ten years, Phoenix real estate appreciated by 138.53%. This amounts to an annual real estate appreciation of nearly 9%, which puts Phoenix in the top 10% nationally for real estate appreciation.
During the latest twelve months, Phoenix's appreciation rate has been 8.35%. In the latest quarter, the appreciation rate has been 2.39%, which annualizes to a rate of 9.91%. This figure also corroborates Zillow's positive forecast. It tells us that home prices in this region are expected to continue their growth in 2021 in double-digits. First-time home buyers will remain a strong force while younger Gen-Z buyers are expected to play a growing role in this housing market.
Here is the latest housing forecast for Phoenix, Metro Phoneix, and Maricopa County until January of 2022. There's good profit potential for the period of one year if you are looking for homes for sale with good flipping profit. It can be a profitable property investment opportunity if you can find a good deal. A long-term investment in Phoenix real estate will yield even greater profits.
- Phoenix-Mesa-Scottsdale Metro home values have gone up 17% over the past year and Zillow predicts they will rise 14% in the next twelve months.
- In the city of Phoenix, home values have gone up 18.7% over the past year and they will continue to rise in 2021.
- Maricopa County home values have gone up 17% over the past year and they will continue to rise in 2021.
The chart below, created by Zillow, shows the growth of median home values since 2011 and their forecast until Jan 2022.
Here is another short and crisp Phoenix housing market forecast by LittleBigHomes.com for the 3 years ending with the 3rd Quarter of 2021. They estimate that the probability of rising home prices in Phoenix is 74% during this period. If this price forecast is correct, the Phoenix-Mesa-Scottsdale, AZ home values will be higher in the 3rd Quarter of 2021 than they were in the 3rd Quarter of 2018.
The change in home prices for Phoenix-Mesa-Scottsdale, AZ is shown below for the three-time periods (data up to 3rd Quarter, 2018). The Phoenix Home Price Index has increased for the last 29 consecutive quarters. The highest annual change in the value of houses in the Phoenix Real Estate Market was 41% in the twelve months ended with the 4th Quarter of 2005. The worst annual change in home values in the Phoenix Market was -23% in the twelve months ended with the 4th Quarter of 2008.
The highest growth in home values in the Phoenix Real Estate Market over a three-year period was 81% in the three years ended with the 2nd Quarter of 2006. The worst performance over a three-year period in the Phoenix Market was -43% in the three years ended with the 2nd Quarter of 2010. For the upcoming updates, you can visit LittleBigHomes.com.
|Time Period||Metro Phoenix Real Estate Appreciation|
|Last 5 Years||50%|
|Last 10 Years||30%|
|Last 20 Years||139%|
The question now is what happens moving forward. These numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller? It is quite evident that the ongoing pandemic has not had any major impact on Phoenix's housing market. However, it was quite expected that social distancing, higher unemployment, and lower overall economic activity would constrain real estate activity in the near term. And it did happen from May onwards. The shutdown has already resulted in 546,900 unemployment filings.
At the same time, the industry is adapting to the current environment by conducting business using technologies such as virtual showings and e-signing to help buyers and sellers with their housing needs in the face of these challenges. COVID-19’s impact on the Phoenix housing market was not that extreme. The Metro Phoenix housing market is extremely strong and has been hitting several new records in the last few days.
We can see that supply remains very low indeed (1.34 Months). Total inventory has a month-over-month decrease of -3.3% while year-over-year reflects a decrease of -41.0%. However, the sellers have shown great zeal by putting up new listings last month. New inventory was up +26% month-over-month while still down -15.5% from Jan 2020's figures. This increase in new listings appears to be setting in for the long run, which is a little bit of good news for buyers.
What does it mean for homebuyers in Phoenix? The biggest mistake buyers make is sitting around waiting for sale prices to decline while their potential mortgage payment plummets. Mortgage rates have been on an upward journey for the past four weeks, and they continue into the 3% range as we write this. The average rate on a 30-year fixed-rate mortgage has hit 3.05%, the highest it’s been since July 2020. This is the time for buyers to take advantage before they are increased again. Properties purchased today are expected to strongly appreciate by more than 10% over the next 12 months.
We have already discussed above the latest housing market report for the Phoenix area. It shows no sign of cooling off in 2021. The entire Greater Phoenix area is breaking records over records in sales prices. The start of 2020 was like a nightmare for regular homebuyers of Phoenix due to tight inventory and an increasing rate of price appreciation.
It's still a seller's real estate market in Phoenix, but January is the traditionally slowest month of the year for sales. Still, year-over-year, active listings are down 58%, sales volume is up 11.8%, and the median sales price is up 17.28%. The Phoenix entire metro housing market is
experiencing moderately strong demand but the supply of resale homes is so poor it crashes below record lows almost every week.
In a balanced real estate market, it would take about five to six months for the supply to dwindle to zero. In terms of months of supply, Phoenix can become a buyer’s real estate market if the supply increases to more than five months of inventory. And that’s not going to happen. We can conclude that demand has not only recovered from the COVID-19 pandemic but has reached heights that make it very strong by any historical standard. Hence, Phoenix real estate market remains strong and skewed to sellers, due to a persistent imbalance in supply and demand.
Real estate market forecasts given in this article are just an educated guess and should not be considered financial advice. Real estate prices are deeply cyclical and much of it is dependent on factors you can’t control. Many variables could potentially impact the value of a home in Phoenix in 2021 (or any other market) such as big changes in the distressed, new-construction, or luxury home segments. There are also a wide variety of economic and political factors that can and do impact real estate markets. Most of these variables are difficult to predict in advance.
Impact of Covid-19 on The Phoenix Housing Market
Let’s discuss a bit about the Phoenix metro area and do a quick recap of how its housing market got impacted by the pandemic.
Phoenix remains the biggest city of Arizona and the state’s capital. It is a minimally walkable city in Maricopa County with a population of approximately 1,442,530 people. However, Phoenix itself is massive. It is the only state capital with more than a million people. It is the fifth-largest city in the country.
The Phoenix housing market is much larger than Phoenix itself – it encompasses the entire Valley of the Sun, Phoenix’s sprawling suburbs that are home to another five million people. That makes the Phoenix metro area the twelfth largest in the country.
The favorable living conditions have, furthermore, comforted real estate investors and buyers to invest in Arizona real estate market. The Phoenix housing market was a headline in the news a decade ago when the housing crisis of 2007 and 2008 caused home values here to fall by as much as half. The slow recovery of the national housing market has taken a decade.
Since 2006, the population has grown faster than housing. This growth fueled by job growth has finally consumed the glut of re-sale housing created during the bubble years. Now the market is facing a shortage of homes for sale. Phoenix home prices were up by roughly 7% over the last twelve months. Despite the increase in property prices, the Phoenix real estate market remains much more affordable than other places.
Single-family homes continue to drive the Arizona real estate market. As compared to 2018, single-family homes grew by roughly 4% in 2019. Particularly, previously-owned single-family houses compromise the majority of residential sales in the Arizona real estate market- approximately 80% of all sales. Annually, the number of previously-owned single-family homes is three to four times greater than new single-family home sales.
The Phoenix real estate market is of the top-performing, not only in the Arizona real estate market but nationwide as well. Phoenix has a mixture of owner-occupied and renter-occupied housing units for sale.
According to Neigborhoodscout.com, a national real estate data provider, three and four-bedroom single-family detached are the most common housing units in Phoenix. Other types of housing that are prevalent in Phoenix include large apartment complexes, duplexes, rowhouses, and homes converted to apartments. Single-family homes account for about 60% of Phoenix's housing units.
Impact of Covid-19 Pandemic
Phoenix housing market 2020 started so strong that only something as drastic as the ongoing pandemic could have impeded the real estate sector. The year 2020 started with an extreme shortage of houses for sale, and an increasing number of sales over the asking price of property owners.
In January, many experts expected moderate growth and moderate price appreciation in 2020. In March, Metro Phoenix’s median home price hit a record of $302,500. The median sales price in Maricopa County for Q1-2020 was $309,990, up by + 12.7% from last year. Even in the times of the Covid-19 pandemic, the sales prices in the Phoenix housing market are not declining.
In March and April, there was a year-over-year increase of 13.2% and 11.1% respectively in the reported median prices. In short, Phoenix remains a sizzling hot seller's real estate market in the current cycle. However, it is taking longer for sellers to sell their homes under these conditions. The good thing for buyers in the housing market of Phoenix is that while supply remains at historically low levels, the price growth rate has slowed down a bit.
Also, as some investors are pulling out of the marketplace, the regular homebuyers are getting in a better position to scoop up properties left by them. That's because homebuyers don't have to enter into a bidding war with real estate investors. For sellers, this is the best time to sell for a profit as housing inventory is reported to be at an 8-year low.
In July & August, the Phoenix was a hot seller’s real estate market, which means there were roughly more buyers than there were active homes for sale. The demand for housing has completely outpaced the supply. It also means that the market is very competitive and difficult for buyers.
In July, the median sales price — up 3.3% in a single month, and up 12.5% for the last 12 months. According to ARMLS, the lost sales of late March, April and May began to surface in June and then with greater frequency in July. Sales in the Metro Phoenix housing market have fully recovered and posted a year-over-year increase of almost 13% in July. The 10,303 home sales were not only the highest number of sales ever in July, but one of the highest monthly totals ever.
***The most recent trends for Greater Phoenix & Maricopa County have already been discussed above in this report***
Phoenix Real Estate Foreclosure Trends
Here are some foreclosure statistics of the Phoenix real estate market. The distressed seller's market is becoming a non-factor in this region. According to ARMLS, for the 11th straight year, the number of properties entering the foreclosure process and the number of homes that were foreclosed has declined. In 2020 the number of foreclosures was the lowest in history. Of the 469 residential foreclosures in Maricopa County in 2020, 73% were purchased by third-party investors and 27% reverted to the beneficiary (bank). By the numbers, 343 were purchased by investors, and only 86 reverted to the lender.
The new federal government has signed a bill to extend an eviction and foreclosure moratorium on federally backed mortgages. After that, the U.S. Department of Housing and Urban Development also announced that they extended the moratorium through March 31. Even if the moratorium is lifted in April, actual foreclosures would not occur until the second half of 2021. The good thing is that homeowners with equity have options. The amount of equity a homeowner has is the number one determinant in deciding whether their property is lost to foreclosure. The current rapid rise in equity will be the largest deterrent to future foreclosure activity.
Jan 2021 data released by ARMLS shows that Distressed sales accounted for 0.3% of total sales, down from the previous month by 0.5%.
Short sales dropped -62.5% YTY while lender-owned sales dropped -66.7% YTY. Foreclosures pending month-over-month showed a
decrease of -2.3% while the year-over-year figure was down -48.4%.
NEW FORECLOSURE FILINGS FOR PHOENIX, AZ (On Realtytrac.com)
|Foreclosure Type||Prior Month||Prior Year|
|Pre Foreclosures||No Data||No Data|
|Auction||+ 7.1%||– 49.2%|
|Bank Owned||0%||– 93.5%|
- 85034 – 1 in every 542 housing units
- 85009 – 1 in every 4797 housing units
- 85014 – 1 in every 4836 housing units
- 85037 – 1 in every 7692 housing units
- 85035 – 1 in every 7826 housing units
Phoenix Real Estate Investment: Should You Invest?
Should you consider Phoenix real estate investment? Many real estate investors have asked themselves if buying a property in Phoenix is a good investment? You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2020. If you are looking to make a profit, you don’t want to buy the most expensive property on the Phoenix real estate market and expect to make a good profit on rents. Perhaps you are looking for a slightly different hold-over, an investment property in Phoenix that you might move into or sell at retirement in the future. Either way, knowing your profit potential and purpose is the first thing to consider.
Top Reasons To Invest In The Phoenix Real Estate Market
Let’s take a look at the number of positive things going on in the Phoenix real estate market which can help investors who are keen to buy an investment property in this city. We’ll address the biggest factor pulling people to the Phoenix housing market next.
Relatively Affordable Real Estate Market
While California and Florida are seen as hot real estate markets, one of the major attractions of the Phoenix real estate market is affordable real estate. During 2018 and 2019, Arizona was one of the top three states in the nation for population growth. Only Texas and Florida outpaced it, in terms of year-over-year growth.
Population growth is particularly high within the Phoenix metro area. Homes in the Phoenix housing market are approaching the 2006 record. Home-price appreciation appears to be slowing a bit in the Phoenix area and most experts agree that prices will continue to climb for the foreseeable future.
According to data provided by the U.S. Census Bureau, the population for the city of Phoenix rose by nearly 15% from 2010 to 2019. That’s well above the nation’s growth rate for that same timeframe. Population growth increases the demand for housing on both the purchase and rental sides. With all other things being equal, steady population growth tends to put upward pressure on home prices.
The median home’s value has crossed $300,000 but that’s still cheaper than a starter home in coastal California. Don’t forget that the large retiree market means there is strong demand for one and two-bedroom houses and condos here, and those units are a fraction of the cost of a three-bedroom home.
High Rate of Appreciation Due To Short Supply
Although Phoenix has experienced consistent population growth, the housing market has not grown at the same rate. An Up for Growth study found that between 2000 and 2015 Arizona underproduced 505,134 housing units. This underproduction has caused a housing shortage in Phoenix.
For example, in the last 30 years Phoenix produced approximately 220,000 new housing units, however, the population has grown by 820,000 people. Phoenix’s housing production has not kept pace with population growth. This underproduction was magnified when construction virtually shut down during the recession of 2008.
Since that time, construction has slowly increased but has not reached the level of production achieved before the recession. The current shortages of housing supply, relative to demand, is a primary reason housing costs are increasing. A significant increase in housing supply is necessary to keep pace with current and projected housing demand.
Highest Appreciating Phoenix Neighborhoods Since 2000 (List by Neighborhoodscout)
- E Indian School Rd / N 50th Pl
- N 14th St / E Fillmore St
- N 40th St / E Glenrosa Ave
- E Camelback Rd / N 56th St
- Lariat Tra-Tel Trailer Court / Phoenix Seminary
- E Camelback Rd / N 32nd Pl
- W Glendale Ave / N 7th Ave
- N 7th St / E Mckinley St
- E Mcdowell Rd / N 14th St
- Paradise View Mobile Home Park / Shady Ranch Trailer Lodge
The Growing Phoenix Rental Market
There is always going to be high tenant turnover in student housing markets. The presence of universities also influences local home prices and rents. The capital of any state will be home to its flagship university, and Phoenix is no exception. Phoenix is so large that it doesn’t just host the flagship Arizona State University campus in Tempe.
There are secondary campuses in downtown Phoenix, northwest Phoenix, and neighboring Glendale. These schools alone have more than seventy thousand students. The Arizona Summit Law School, Grand Canyon University, and several others are located here. There are easily 100,000 college students renting in the Phoenix housing market. You could invest in large single-family homes or multi-unit buildings to rent to students at any of these campuses.
Phoenix Rental Trends: 36% of the households in Phoenix are renter-occupied while 64% are owner-occupied. The rents are rising and it makes sense to keep your home and rent it out. In some neighborhoods, the average rental home may rent well over $2,500 a month.
According to Zumper, as of March 12, 2021, the average rent for a 1-bedroom apartment in Phoenix, AZ is currently $1,065. This is an 11% increase compared to the previous year.
- Two-bedroom apartment rents average $1,299 (an 8% increase from last year).
- Three-bedroom apartment rents average $1,825 (a 14% increase from last year).
- Studio apartment rents average $945 (a 15% increase from last year).
The Zumper Phoenix Metro Area Report analyzed active listings in January 2021 across 13 metro cities to show the most and least expensive cities and cities with the fastest-growing rents. The Arizona one-bedroom median rent was $1,091 last month. Scottsdale was the most expensive city with one-bedrooms priced at $1,500 while Glendale ranked as the most affordable city with one-bedrooms priced at $910. Phoenix was the second most affordable city with the median rent at $1,010.
The Fastest Growing Cities For Rents in Phoenix Metro Area (Y/Y%)
- Prescott had the fastest-growing rent, up 26.0% since this time last year.
- Surprise saw rent climb 14.7%, making it second.
- Peoria was third with rent jumping 11.6%.
The Fastest Growing Cities For Rents in Phoenix Metro Area (M/M%)
- Mesa rent had the largest monthly growth rate, up 5.2%.
- Peoria rent increased 2.5% last month, making it the second-fastest-growing.
- Flagstaff ranked third with rent increasing 2.3%.
These are some of the most affordable neighborhoods where the rent prices are way below the average Phoenix rent of $1,065/mo.
- Garfield, where the average rent goes for $665/month.
- Papago Vista, where renters pay $690/mo on average.
- La Mancha, where the average rent goes for $695/mo.
Phoenix's Growing Short-Term Rentals
There are more than 200 golf courses in Arizona, but most are located in and around the Valley of the Sun. There are several sports teams located in Phoenix and a wealth of tourist attractions. What makes Arizona unusual is the state’s open relationship with rental sites like Airbnb. A law that went into effect in 2016 made Arizona a leader in Airbnb rentals.
The sites are required to collect taxes on the rentals, simplifying revenue collection for the state and the landlords. That probably explains why Airbnb guests grew by 150% in 2016 alone. The Airbnb market has exploded in Arizona during the past five years. In late 2014, Phoenix only had 687 properties for rent listed on Airbnb. By March of 2019, that number had grown to 4,224 listed properties.
This makes Phoenix a great place to buy a single-family home or condo to rent out to tourists (as a short-term rental). However, there are some restrictions on short-term rentals. In May 2019, the state government passed a bill allowing for more regulations of short-term rental operators in the state of Arizona.
In the bill, municipalities were allowed to restrict rentals to overnight stays and prohibit events that otherwise would require a permit, like weddings. Under the new law, owners of short-term rentals should have a sales tax license and they must list the sales tax license number on any advertisements (online/offline) for the property.
Although, Phoenix’s short-term rental industry was hit hard by the COVID-19 pandemic the industry has shown resilience with relatively fair returns as owners implement safety measures to curb the spread of the virus and encourage guests to feel safe.
Phoenix is Landlord Friendly
If you want to invest in real estate, you typically want to do so in a market where you can quickly evict people who don’t pay their rent or damage property. You’ll be glad to know that the Phoenix real estate market is among these compared to surrounding states. Arizona, unlike California, allows landlords to serve an unconditional quit notice.
If the tenant violates the rental agreement or doesn’t pay rent, they can be evicted quickly. Renter-friendly rules like requiring a landlord to return a rental deposit within two weeks are not a burden. Conversely, laws that say you can evict a tenant within ten days for lying on a rental application are a definite plus.
The Massive Snowbird Market
The snowbird movement is somewhat different than the conventional tourist market. Arizona has long attracted retirees who couldn’t afford Florida or wanted a cleaner, allergy-free air that never included storm clouds. Quartzite, Arizona in particular draws two million snowbirds and tourists.
The city stands out for its sixty-plus RV parks. An estimated 300,000 people stay all winter before returning home. Some own second homes in Arizona communities restricted to active adults, while others stay in trailer parks. This creates an unusually diverse opportunity for those considering investing in the Phoenix real estate market.
Growing Retiree Market
The same things attract many people to Phoenix as snowbirds cause many to retire here permanently. This means that many snowbirds end up staying permanently in the Phoenix housing market. Sun City stands out as a mecca for seasonal and year-round retirees, but it is far from the only retirement community in the Phoenix real estate market.
The aging of the U.S. population makes investing in communities catering to older adults an excellent idea. Suppose you buy a house to renovate and rent out. Phoenix deals with a large retiree population, both permanent and seasonal. To accommodate aging in place, they’ve loosened the rules on building “accessory dwelling units”, commonly known as mother-in-law suites.
The city also recognizes the need for affordable housing, and they allow people to build and rent out ADUs as affordable housing, especially if the property is within walking distance of public transit. Buy a house, rehab it, and build a granny flat, and you have two rental properties for not much more than the price of one. And the city is almost certain to approve it because they want denser development.
Low Taxes in Arizona
Kiplinger listed Arizona as the 8th most tax-friendly state in the U.S. in 2018. The state income tax is 2.59% for low-income earners, 4.54% for wealthier families. The median home is worth around $177,000 and came with a property tax bill of around $1400, well below what you’d pay in Texas. Arizona has been lowering its capital gains tax rate, as well. The state has a relatively low transfer tax on deeds or land contracts, too.
The Major Wave of Renovation in Downtown Phoenix
The section of Phoenix wedged between Seventh Street and Seventh Avenue is undergoing a wave of commercial redevelopment, fueled by more than five billion dollars invested to date. High-rise developments and mixed-use projects have been built, and several more are underway. Public transit in this area is significantly improved. That is making this area and neighborhoods bordering it an excellent place to invest in the Phoenix housing market.
Phoenix isn’t just redeveloping downtown to create a dense, walkable urban core. It is cultivating fifteen complete walkable communities across the metro area with strong public transit, denser housing, and locally provided services. This is a radical shift from the suburban sprawl the area has long been known for.
Phoenix, Arizona Real Estate Investment Markets
Investing in Phoenix's real estate can be a worthy investment due to a steady rate of appreciation. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold. The Phoenix housing market is one of the hottest markets for 2020. Don’t let memories of the Great Recession bust that cut home values in the Phoenix housing market keep you away.
There are plenty of reasons to invest in the Phoenix real estate market, only ten of which we’ve provided above. Have a look at the Phoenix real estate investment prospects we have provided from various real estate sources and make the best possible decision for yourself. Good cash flow from Phoenix investment properties means the investment is, needless to say, profitable.
The three most important factors when buying real estate anywhere are location, location, and location. The location creates desirability. Desirability brings demand. There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your Phoenix investment property and you should be able to get a good return on your investment over the long term.
The neighborhoods in Phoenix must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools, and shopping malls. A cheaper neighborhood in Phoenix might not be the best place to live in. A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio.
Some of the popular neighborhoods for buying a house or an investment property in Phoenix are Vistancia, Laveen, Deer Valley, South Mountain, Biltmore, DC Ranch, Arcadia, McDowell Mountain Ranch, Anthem, North Scottsdale, Cave Creek, Old Town, Litchfield Park, Trilogy at Vistancia and North Phoenix.
Phoenix real estate prices are well above average cost compared to national prices. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals such as duplex and triplex in Class A neighborhoods. The inventory is low, but opportunities are there.
Even as Phoenix home prices have reached new heights, the market remains attractive to residential real estate investors. As they continue to compete for potential investment properties at the lower end of the market, the challenges for first-time homebuyers will remain. The homebuyers won’t be able to outbid real estate investors and would end up renting.
As with any real estate purchase, act wisely. Evaluate the specifics of the Phoenix housing market at the time you intend to purchase. These prices are from Realtor.com and can vary from time to time.
The super-hot housing market in Arizona has many other places for real estate investment. The Tucson real estate market is good for investment. Tucson like Phoenix sees a massive influx of snowbirds, retirees who flock here during the winter. That creates a large, seasonal rental market.
The need for many retirees to sell their second homes when they can no longer travel or live independently provides an opportunity to snap up properties at a bargain rate. Better yet, a large number of those properties don’t have a mortgage on them. Other snowbirds sell their condo and move into a single-family home when they decide to stay in Tucson year-round.
Similarly, if you are an investor, Scottsdale has a track record of being one of the best long-term real estate investments in the nation. The area contains a mix of families, young professionals, and retirees. There are several reasons to consider investing in Scottsdale real estate. You’ll see better than average returns on the average Scottsdale real estate investment property, and its value will be bolstered by a variety of factors.
The Scottsdale housing market has a more diverse rental market than just catering to those who can’t afford to buy a single-family home. For example, the area is famous for its snowbirds, retirees who come for the winter before returning home. This makes Scottsdale a good place for real estate investing.
Chandler is bordered by the cities Tempe, Mesa, and Phoenix. It is home to about a quarter-million people. There are not suburbs to Chandler, because it is a suburb of Phoenix surrounded by other cities of similar size. However, Chandler has several points in its favor that make it a better choice for real estate investors than surrounding cities.
The Chandler area offers strong market fundamentals in addition to a favorable tax and regulatory climate. This is in addition to a plethora of high-paying jobs that attract new residents and niche markets that are willing to pay higher rents in exchange for convenience and proximity to amenities.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Phoenix.
Consult with one of the investment counselors who can help build you a custom portfolio of Phoenix turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best neighborhoods of Phoenix.
Not just limited to Phoenix or Arizona but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Phoenix turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.
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Remember, caveat emptor still applies when buying a property anywhere. Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.