Once the epitomic example of the housing market crash, the Arizona housing market is now one of the stronger markets in the country. Increases in home construction and sales can be seen throughout the state. Most representative of the health of the Arizona real estate market is Phoenix, which has made a complete roundabout. Instead of investors acquiring distressed properties, owner-occupant buyers are fueling sales. On realtor website Trulia Phoenix reported in May that single-family home sales rose 7% from the same time a year ago, and townhouse and condo sales increased 11%. By the start of the summer there were 21% fewer listings than there were at the start of last summer’s buying season. New construction has also seen a surge this year. Building permits issued for homes in the $200,000-$500,000 range has increased every quarter thus far this year. But a recent report from the U.S. Census Bureau reported on October 26th that home sales as of September had actually begun to drop.
One reason is that another niche market has emerged: detached single-story apartments. What started in 2012 as a short-term solution to provide housing for those who lost their larger homes in the recession has now grown into thriving communities. Builders of these types of apartment complexes expected to see more credit-impaired individuals occupy their spaces. But what they found is what most of the country has come to learn. Large populations of not only millennials, but baby-boomers as well, are attracted to newer housing that offers more flexibility and less responsibility. On one side are young adults looking to be independent while still trying to determine where they wish to live permanently. The other are empty nesters who wish to shed the responsibilities of owning a home and downsize.
Other factors for the recent drop in sales are continued job market problems and the looming threat of interest rate hikes, leaving the housing market predictions for 2015 a little murky. Arizona construction increased 6.3% in the past 12 months by adding 7,700 workers. This ranks 11th most among states in the country, better even than Colorado, Texas, and Utah who all had post recession recoveries that were better than Arizona. But Arizona only added 500 private sector jobs last month and Phoenix actually cut 600, according to the Arizona Department of Administration. Employers aren’t expanding and growing at the rate that is needed to sustain the housing market growth that the state is currently seeing. For example, 20% of the Phoenix metro area office space is vacant. If Arizona can obtain a stronger job market the demand for homes and home appreciation will continue to rise as it has in the past few years. But even if jobs become available, filling these positions has become a challenge in and of itself. Some workers left during the recession to look for jobs, and many Hispanic workers left the state after Senate Bill 1070 and Maricopa County Sheriff Joe Arpaio’s immigration raids. Arizona is facing some uncertainties as the 2015 housing market cycle draws to a close.
Influencing Factors for the 2015 Arizona Housing Market
- The home value index on Zillow has Arizona home prices at $197,800. This is a 6.2% increase in the past year and forecasts have this number rising another 3.4% in the upcoming year.
- Median sale price throughout the state as of September of this year is $207,000.
- Arizona’s delinquent mortgage percentage is 2.7%, lower than the national average of 4.8%. However, the percentage of homeowners underwater on their mortgage is 19.2%.
- Homes spend an average of 75 days listed on the market. This number has been rising in the past few months.
- On rental websites like Craigslist Arizona has an average rental prices of $1,236, just short of the national average.
- As stated earlier, jobs and interest rates hold the key to the future of the Arizona housing market.
Best Places to Live in Arizona
On website Zillow Phoenix AZ is seeing the benefits of home investment confidence returning to the housing market. The median sale price for a single-family home in the capital city had increased 11.5% to $223,000 in May of this year. Condominium prices also rose by the same margin. And although prices are rising homes are still selling. “The market is moving very fast, especially under $250,000. Homes are lasting one or two days on the market. It slows down quite a bit in the higher price ranges,” says Erik Jensen, a real estate agent. The Phoenix AZ real estate market is still forecasted to see a 3.9% increase in home values in the upcoming year despite sale prices decreasing slightly in the past few months. Prior to the recession Phoenix was the #1 ranked city in employment growth. Job growth in the city has been making its way back (it is home to four Fortune 500 companies) and as it does look for the housing market to continue to grow.
One market to keep an eye on is Tucson AZ real estate. There has not been much growth in home appreciation recently (just under 1% in the past year) but this could be seen as a sign that this is an untapped market. And realtors agree. Most projected forecasts predict that home values will rise 4% in the next year. Tucson has a negative equity rate slightly above the state average, which means that investors may have opportunities to scoop up foreclosed homes in the next fiscal year. The city is a leader in the design and manufacturing of optics systems, (earning it the title “Optics Valley”) and the home to the University of Arizona, the second largest employer in the market. This bodes well for the local economy’s sustenance.
Scottsdale AZ real estate represents the most expensive market in the state. Zillow lists the home value index to be $406,800. This represents a 5.4% increase in the past year and forecasts have this increasing another 2.8% by this time in 2016. Scottsdale enjoys low percentage rates in terms of mortgage delinquency and foreclosures, and the average rental price in Scottsdale is a whopping $2,165 (nearly $800 more than the national average). Scottsdale’s downtown metro area is a very sought after commodity, as it is known as the “desert version of Miami’s South Beach,” and tourism is one of the city’s key industries. Whether downtown or on the city’s outskirts the market in Scottsdale is highly coveted.
For those looking to be close to Scottsdale without having the large price tag for affordable living space Mesa AZ real estate offers a solution. Located just to the southeast of Scottsdale, Arizona’s third largest city has a median home value half the cost at $194,600. This is a large increase from just a year ago, rising 8%. And rental prices are right on par with the national average at $1,238. Mesa has a lot to offer to its residents. The city and its outskirts are littered with historical properties, museums, and parks. It is also home to several championship golf courses. And Scottsdale is a short commute, making it enticing for Scottsdale employees.
Home of the tourist favorite Red Rocks Park, Sedona AZ real estate continues to draw a mixed demographic. While young adults are drawn to the area it is also a popular destination for those in the higher income bracket, as seen by the $425,900 average home value and $2,011 rental prices. As of September buyer activity increased and brought down the overall inventory of homes in the $400,000-$600,000 range, bringing a little stability to the market. Sedona has been a sellers market for homes under $400,000 and a buyers market for homes above that. But now the market seems to be favoring sellers in all homes listed under $600,000. This shows that prices are likely going to be increasing, especially since the overall inventory is low (around 339 homes). And for those interested in new construction the city has a number of vacant lots that are available. Another key point to be made is that forecasts have the home appreciation rate leveling off in the upcoming year, which may be beneficial for those looking to enter the Sedona housing market.
Not too far off from the expensive housing and cost of living of Sedona is the Flagstaff real estate market. Flagstaff has a median home value of $314,800. This is a 7.6% increase from a year ago, but like Sedona forecasts don’t have home prices rising much more in the upcoming year. While the homes are expensive, residents in the area are able to hold on to their investments. Flagstaff has a foreclosure rate lower than 1%. Rental prices are high at $1,709, but this is to be expected in a market with such high property values. With its close proximity to Grand Canyon National Park the city also enjoys a thriving tourism industry, as well as an active culture and arts scene.