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Phoenix Real Estate Booming: The Valley Expected To Be The #1 Housing Market In The US

Hats off to Phoenix

According to the latest Realtor.com forecast, the top housing market in this country for 2017 is Metro Phoenix.

This distinction is not only welcome news, but it’s long overdue. A constant increase in sales and escalating housing prices has put buyers on alert: Act now! Another fact that increases Phoenix’s healthy real estate market is that today there are fewer foreclosures than ever before.

National real estate website, Realtor.com, has already predicted a rise in Phoenix area home prices of nearly six percent with sales very likely to top seven percent by 2018.

In this unique city where the Wild West, Modern America, and Old Mexico blend smoothly together, it’s not only the encouraging price increases but the fact that 2017 promises to be one of the top home sales years for the Greater Phoenix Area.

This is fantastic news for the Valley thanks to the typically more affordable home prices in the West.

Los Angeles, along with Sacramento and Riverside, California also made it into the top five list for rising home prices in the West, all with higher prices and a general lack in many of the amenities Arizona offers. Even good neighbor Tucson, at this point ninth best hosing market, can expect a real bounce in prices this year.

Interest Rates are Rising

Unfortunately, the great news for the Arizona housing market is not without its downside: Interest rates are rising again, and of course, rising interest rates never help the real estate market.

Sales forecasts for this year are predicted by Realtor.com to drop in all areas of Arizona as higher interest rates go into effect. This applies not only to Arizona but to the entire nation.

Only a few years back, Phoenix went through a boom and bust making it more important than ever for potential buyers to keep their focus on the facts rather than pay attention to all the hype.

In 2006, when Realtor.com told that Phoenix was at the forefront in U.S. home price increases, no one cheered. This notable increase was primarily driven by buyers on a speculation spree that, as we know, turned into a dark morass of bad loans that resulted in the crash.

Experts appear to believe that the rising interest rates come from the anticipation of job growth and higher wages. Realtor.com predicts that interest rates may climb to 4.5% by next year.

Overall, most investors believe the sudden spike in interest rates over the past month results from the election jitters felt by investors.

Can Phoenix Live Up To Rising Real Estate Investment Expectations?

Phoenix is projected to be ranked as top housing market by realtor.com in the year 2017.

Brad Hunter, the chief economist with Colorado-based homeAdvisor Inc, also said that Phoenix should be expected to see better gains in the year 2017 as compared to other competitive real estate markets.

The last recession and crash that hit the real estate market in the US saw other markets have a better opportunity of recovering as compared to Phoenix.

Regarding prices, Phoenix has a greater chance of improving than the rest of markets such as the Denver and Coastal market. According to Brad Hunter, Phoenix began its recovery later than many other markets, as they had to start from the bottom to ensure that there is a good strategy to help in attaining healthy gains in the year 2017.

Realtor.com estimated Phoenix to increase 5.9 percent in price and expects a sales growth of 7.2 percent by the end of 2017. Other people who see the prosperity and healthy development of Phoenix are Andrew Glenn and Bryce Lugo who are agents with my Homegroup Real Estate LLC. Glenn stated that there would be a continuous growth of year over year of up to 5 to 6 percent in Maricopa County Arizona.

Therefore we can boldly conclude that a lot of people have faith in the survival and growth of the Phoenix market. The market had its best-selling year in 2016 since 2006, and the sales of the existing as new homes are worth 115,837 as stated by RL Brown Housing Reports.

For existing homes, the sales from the year 2015 went up by 99,955 dollars which is estimated to be 7.2 percent increase, while new homes went up to 32 percent from 2016 and closed with an increase of over 15 thousand dollars.

According to RL Brown, Phoenix needs to come up with a new pricing structure so they can be able to catch up with the rest of the United States. This is because the median resale of the existing homes in Phoenix market was estimated to be 216000 dollars and had a percentage increase of 0.23% which was quite small in the earlier year. After increasing their prices to 315,157 dollars, the percentage sales rose from 0.23 to 1.38 percent which is good markup. Lugo stated that the high increase of rental prices might also lead to people opting to buy homes instead. If the rental prices shoot to 1600 dollars to 1700 dollars per month, the incentives to rent a house goes down.

The Metro Phoenix Apartment Market’s Promising Outlook

The Phoenix metro rental market continues a two-year ascent, showing no signs of stopping anytime soon. What really could be the reason behind the increasing demand for rental property in Phoenix?

An aerial of recently developed areas in the Phoenix valley. Photo courtesy of the International Space Station.

According to Stephanie McCleskey who is the vice president of Research for Axiometricks, outstanding job growth is the most important factor. McCleskey asserts that with over 3% annual Phoenix job growth rate, the huge demand for accommodation is consuming a huge portion of new property supply.

According to his organization, Phoenix businesses created 56,800 in 2015. The data provide evidence that real estate companies are in a rush to add another 4612 housing units in 2017, after supplying 7093 units in 2016. Looking at 18 submarkets with over 1000 units, the 2016 data ranked the valley cities with the most growth as follows;

  1. South Glendale—11.0%
  2. South Mesa—9.1%
  3. Sunny Slope—8.2%
  4. East Mesa—7.9%
  5. North Glendale/Peoria—7.3%

Despite mortgage rates currently being at their historic lows, Phoenix remains one of the most promising property markets across the nation. The cost of rent has gone higher for the 23 of the past 24 months so is the apartment occupancy.

Nathan Pierce—principal at Strong Tower Realty in Scottsdale advises tenants to consider low or no down payment programs and acquire homes rather than rent. He believes that renters are spending more than they would on a mortgage payment. “In our market, you could save 25% by buying a house outright instead of renting,” says Nathan. He goes ahead to point out that people are spending more when they sign a lease and they are missing out on tax breaks like interests, property tax as well as mortgage insurance by not choosing property acquisition over rental.

Arizona Real Estate Will Be An Excellent Investment In Coming Years

If you are looking to purchase a home in the Phoenix, Flagstaff, or Prescott areas in Arizona do it now. In the next couple of years, the prices are expected to increase. A single family home is a significant investment in the Phoenix area. Apartments also have a real potential in this area. Homes are also being split into different rental units. Mortgage, as well as construction loans, have a lower risk to lenders than before. Rentals are great investments in Phoenix as well as Tuscon and Prescott.

Investing in Arizona provides many great opportunities. This is like the Florida of the west where people go to retire only without the swamps. There are so many opportunities for investors. In addition to the proximity to the major cities, Prescott has a lot of offer retirees. Flagstaff has a younger population, and Yuma is a location where immigrants tend to start off. Each of these cities have different housing needs.

The need of homes will increase as the economy increases in a city. Phoenix sees the development of new jobs at twice the national rate. These jobs are in the healthcare industry, retail, and finances. Prescott also sees job growth and development. They need people to work in healthcare and retail to serve the elderly population. Tuscon sees a decrease in growth. Flagstaff relies on the tourists for most of their industry.

Home prices in the state of Arizona rose and then drastically fell. The prices in Phoenix and Prescott went up again when people purchased properties that have been foreclosed. There has been a spike in sales again in the cities of Phoenix, Flagstaff, and Prescott. The sales have been weaker in Yuma and Tucson. Over the next three years, home prices in Phoenix are expected to increase by 25 percent. Now is the time to buy. Pries in Phoenix are very strong but not as strong in the surrounding areas.

Almost 40 percent of the population in Flagstaff, Tucson, and Phoenix are renters. The price of home ownership is very high. Investing a single family home is more reasonable in Phoenix. The homes can be split into several rental units. The health care sector, as well as the retail sector, may not pay that well but people will be looking for rental units for years to come.

Mortgages are a sound investment in this area. The prices for homes will continue to rise, the equity will continue to grow, and the risk of default will stay around the national average. Construction loans have an average risk. It is expected that over 60,000 new homes will be built in Phoenix over the next three years as well as an additional 60,000 apartments. In Prescott, it is estimated 5,000 homes will be built and in Tucson 5,000 apartments. Flagstaff and Yuma may have less than 1,000 new construction projects, and many of them will be apartments.

Due to the growth in population, it may be wise to invest in retail stores and eating establishments in Phoenix. Pinal County does not have enough of either. Flagstaff has more competition and pay will go with the cycle of tourism. There is no growth in retail in Prescott, and the retail market has declined in Tuscon. Office space is a good investment in Phoenix due to the increase in the financial and the health care sectors.

As The Phoenix Real Estate Market Booms, Rental Prices Skyrocket

The prices for homes are increasing all over the country. Homes in Phoenix are expected to surpass the national average.

In the month of May rent was 2.6 percent higher than it was the past May according to the Census Bureau.

Phoenix saw a 4.9 percent increase from the previous May.

The growth in 2017 has been happening quicker than in 2016. The calculations for the increase use data from apartments and single family homes. Government data is also used to come up with these figures.

The population in Phoenix is quickly growing. The Mayor, Greg Stanton credits the growth due to additional jobs in the health care field. Home sales are also increases where first time home buyers are making the switch from renting to owning a home.

The average rental cost of a two bedroom home in Phoenix was $1,020 in the month of May. The national average is $1,150.

This report does not include North Phoenix, but other nearby cities had higher rent costs than the rest of Phoenix. The town of Sunrise charged $1,340 in rent for a two-bedroom apartment while Gilbert got $1,350.

Two bedroom apartments in Bela Rosa, Talus Ranch, and other areas in Northern Phoenix ranged from $975 to $1,150. Two bedroom homes were listed at prices from $1,495 to $2,250.