The Future of Arizona Real Estate: We have all seen the housing markets do their thing over the last few years. Chances are, if you are a home owner today, you have a much different perception of real estate and what it means to get in or out of the market.
In an industry that is historically dominated by investors that buy up “fire-sale” properties, who then flip them back into the market; identifying the proper trends of your particular area can be a little difficult. There are several reasons for this, not the least of which is the plethora of information which exists for consumers.
Too often the market advice comes from unreliable sources which shape “perceptions” of what the real estate market is actually doing. But this over stimulation of information is not all bad. It simply means that you need to be able to separate the chaff from the wheat. We know that by reviewing some of the most basic statistics and analytics of the housing industry, that the real estate market is finally seeing some “bounce-back” from 2007-2008 housing bubble which collapsed nearly the entire industry.
In a 2012 article, CNN identified the top 100 areas who were most impacted by the American Foreclosure epidemic. Of all of these areas, none were hit harder than those markets in the South West Region of the United States. Having been in Arizona at the time, I can assure you that this was a situation of epic proportions. Foreclosure rates skyrocketed, new construction halted to a stand-still, and investor purchases went through the roof.
Over the past 7 years, we have seen many changes occur in the housing market. For the first time in nearly a decade we are beginning to see the market trend the opposite [more positve] direction. There are several indicators which we (realtors) use to determine the fair market pricing of homes. While the actual asking price is ultimately up to the seller, it is our job as agents to guide them into a fair asking price.
Among these methods are; the Days On the Market (or DOM), Average Closing Price, and Market Inventory. None of these are, by themselves, indicative of a home’s worth. Nor can they individually indicate what the market as a whole is doing. However, when combined and evaluated together, they provide valuable insight into the world of Real Estate. To review a few of these data points, I will use them in context of my home Real Estate Market: Mesa, Arizona and the Phoenix Metro Area.
In reviewing the current DOM numbers for the local Mesa Arizona real estate market [chart 1.1], we can see that the average number of days on the market has been steadily declining over the last 6 months. This is in large part due to the lack of housing inventory currently available to buyers. Trulia reports that it currently has 5,655 resale homes and 4,323 homes in pre-foreclosure in the Phoenix region. When this happens [shortened supply], we tend to see an increase in average sales price [chart 1.2] and an increase in new home construction permit applications.
In terms of cost, in the Phoenix Metro region alone we have seen that the average price per square foot has increased by 6.6% compared to this same time last year. The median sales price for homes for February 15 to May 15 was $184,694 based on 3,996 homes sold, and the median home sales price increased by $15,744 [or 9.3%] while seeing an 11.7% decrease in the number of homes sold.
All of these factors would seem to support what the National Association of Realtors (NAR) suggests; that the future of the Arizona real estate market is on the rise. According to the NAR there has been a 25% increase over the past 3 years in consumer confidence and building equity. This increase comes at a time when we are seeing an increase in new home sales and an increase in rents. The latter would lead one to believe that the imbalance of home affordability and increased rent costs would lead to more favorable home ownership [equity] conditions.
According to Zillow; “In April  rents nationally rose an average of 4% compared to an increase in home values by just 3% year over year.” This means that while the real estate market is far from its 2007-2008 values, the increasing number of individuals who are paying more for rent than they would have paid on a mortgage is bound to make for some interesting dynamics. If we consider the factors which have already been mentioned in this article, adding in; an increasing consumer base, a diminishing inventory supply, and increased costs in the next best alternatives, we can see the upside potential. Any economics major will tell you that these variables provide for a formula for increasing prices.
So, while we are still in the bounce-back phase of the real estate bubble bust, I wouldn’t worry too much about your home values. Overall they are on the rise with all indicators showing further increase. If you are considering buying a home, then you may want to meet with a professional now to discuss what options are available to you and the necessary steps required to make such a major decision. Until then, we will have to simply watch the market do what it does, and go with the flow.
Kenyon Realty Agents are experienced agents who are willing to work for you to ensure that you get the best possible outcome. If you’d like more information please contact us today: 480.832.1331