When the topic of Arizona’s real estate and housing market comes up, one can unequivocally say that in recent years, it’s all about “boom” and not “gloom.” By all calculations, Arizona real estate is trending positively and even moving into “off the charts” territory.
Hindsight being what it is, we now have a crystal-clear view of what happened to the market 10 years ago in the wake of the Great Recession. We’re all familiar with the grim statistics of that time, which showed, on average, homes in the greater Phoenix market lost 56 percent of their value. Foreclosures swept across the city and state—as well as the entire country—like a tsunami. By 2011, the median home price in the Valley had plummeted to $118,500.
But that was then and this is now. Today, real estate is, in a word, thriving. Zillow, the national online real estate database, rates the statewide housing market as “very hot” at present, calculating the median home value in the state at $254,600, up 5.3 percent over last year. And locally, ArizonaRealEstate.com pushes that figure even higher, reporting that, as of mid-September, the median price of a Phoenix home was $272,500.
And it’s not just Phoenix and the Valley that are performing so positively. Many experts are citing a real estate boom across the entire state right now. Mohave County, for example, is benefitting from an influx of California home buyers, who are leaving their state to escape exorbitant home prices and an overall high cost of living. As a result, Yuma and Mohave counties are seeing large increases in population. Even in Flagstaff and Coconino County, and the White Mountains, real estate is flourishing both in primary and second home sales.
D. Patrick Lewis, president of the Arizona Association of Realtors, says the Arizona real estate and the housing market has made nothing short of a phenomenal recovery from the dire condition it found itself in 2008 and the years that followed.
“Arizona got hit so hard in that downturn, so it’s taken us a bit longer to come back from it. But we are definitely back to [pre-recession] levels and, in fact, the market is a lot healthier now than it was just before that time,” he explains. “While single-family homes in Phoenix remain, hands-down, our biggest seller, what we’re seeing is that the residential resale market is what’s really hot. New home builders and contractors are still busy, but they’re constrained by the costs of labor and land costs right now. So we’re not seeing them make up the lack of inventory as we normally would.”
Lewis says it’s not just houses that are moving briskly in the Arizona marketplace. He notes that, particularly in the last six months, land sales are also picking up.
Shawna Warner, Realtor with Russ Lyon Sotheby’s International Realty, begs to differ with Lewis on the issue of what’s hot right now, saying that it’s newly built homes that are topping her sales chart these days.
“What I’m mostly seeing is that potential homebuyers want new construction,” she says. “A lot of my buyers simply want ‘new,’ even if they’re coming out of one house and purchasing another. I think it’s because they don’t necessarily want to go through the headaches of renovating older properties—they want something that’s already done.”
Warner does agree with most real estate experts in her assessment that supply and demand are a dominant factor in Arizona right now. “[Housing] inventory is low, so it’s placing somewhat of a strain on certain marketplaces.”
And what about popular home features today as compared with a few decades ago? What amenities are homebuyers seeking when they start shopping for houses?
Lewis says that today, with new technology blossoming, homebuyers are responding with an ever-lengthening list of conveniences that were largely unheard of a generation ago. “Smart features, green features…because we live in the desert, energy efficiency and green systems mean a lot to people here,” he explains.
In addition to such vividly “green” systems as solar heating and cooling, popular features that homebuyers are seeking include such conveniences as programmable entertainment systems, integrated telecom systems, security services, eco-friendly appliances, and high-tech thermostats, to name just a few.
“Primarily, though,” Lewis adds, “the bottom line is that they want value for their money—they want to know that their investment in their communities and their homes are going to pay them dividends in the long run.”
The Affordability Factor
Every puffy white cloud has a patch of grey. With the housing market thriving and having become a “sellers’ market,” the natural counterpoint to that development is for home prices to rise—and rise they have.
The problem, as some experts see it, is that Arizona income levels haven’t risen proportionally to the price of real estate.
“While the job market itself is really strong right now, wages seem to be showing the slowest growth and have been a bit stagnant over the past few years,” Lewis notes. “So that does push homebuyers into other areas. But, really, it’s lack of inventory that’s driving things right now. We are such a hot market with regard to job growth. In fact, I think we’re No. 5 in the country, and Maricopa County is No. 1 in terms of population growth. So, due to those factors, our inventory of homes right now is at about one and a half months, which is incredibly low. And that’s what’s really driving the affordability issue right now.”
The Arizona Republic real estate reporter Catherine Reagor rightly states in a recent article that with real estate business surging and creating a sellers’ market, home prices and rents have soared locally. “It’s a lot tougher for many to buy or rent now,” she wrote, adding that the ‘supply-and-demand’ model is creating an affordability issue that will likely get worse before it gets better.
“When it comes to buying a home, comparing incomes to home prices is a key method to track affordability,” Reagor noted. (It’s important to point out that while the Valley’s median home price has climbed more than 45 percent since 2013, the median household income increased by just about 15 percent.) “Metro Phoenix has almost always been more affordable than the U.S. average, but that is about to change as incomes have not kept pace with rising home prices.”
She added that it’s the reason housing advocates and the real estate industry are banding together to raise money for affordable housing, and Arizona lawmakers have given the state’s housing trust fund a $15 million boost this year.
Lewis, too, says that new legislation will help ease the affordability challenge. “Regarding affordable housing, right now,” he says, “the National Association of Realtors actually put forward a bill that makes it easier for FHA-funded condominiums to be FHA-certified. And the nice part of that is it will help boost affordability for people to qualify under Fannie Mae or DDA loan products.”
And what about the future? With history as proof, everyone knows that real estate markets can fall just as quickly as they arise, so they remain somewhat unpredictable for the longer term. Lewis is bullish on the coming real estate market, however. He says that, notwithstanding some unforeseen calamity occurring, Arizona’s short-term real estate future looks bright.
“From an economic standpoint, we’re really in a strong position as a state,” he says. “We think we’re going to continue to see strong growth here in Arizona; we haven’t seen a lot of the riskier mortgage products returning, so that helps our position greatly. While we are seeing some signs of an economic slowdown nationwide, the combination of job creation and climate—along with the infrastructure we have, particularly in Phoenix—will continue to keep our real estate market strong.
“That being said,” he adds, “it has been a seller’s market for the better part of the last five years, and while we may see that change in the short term, demand continues to be very strong here right now.”
Story: Bruce Farr