The real estate market in Phoenix, Arizona and the surrounding area has been healthy for some time now. But with big shifts in demographics and the economy, house prices in Arizona are especially primed to increase in the coming year.
Factors Contributing to Increasing House Prices in Arizona in 2017
Baby Boomers and Other Retirees
Arizona has long been a popular destination for retirees looking to enjoy the relatively cheap cost of living and the favorable climate of the state, both seasonally and year round. There are very few places where you can golf all year round, enjoy world-class dining and shopping, and still enjoy a median housing price of just over $210,000. Factor that in with the staggering “exodus” of Baby Boomers (800,000 in the fourth quarter of 2016 alone) leaving the workforce and housing demand is understandably going up. As with any market, when demand increases, so will the price. But the droves of retirees are not the only thing positively impacting house prices in Arizona in 2017 and beyond …
With a rapidly expanding state university system producing more graduates than ever before, many technological, healthcare, and finance companies are moving to and expanding in Arizona, especially in and around Phoenix, because of the ready supply of qualified workers. In fact, earlier this week, Intel Corp. announced a plan to invest $7 billion in a new facility in Chandler. It is no coincidence; Arizona State University is the company’s largest source of employees with engineering degrees and the two organizations already have a history of collaborating on numerous projects. Other tech companies considering or planning moves to the Phoenix area include Lucid Motors, Endurance International Group and Foxconn Technology Group.
More Jobs in General
In terms of jobs added and wage growth, the city of Phoenix outpaced other west coast cities like San Francisco by adding around 60,000 jobs through September of last year. While the primary drivers of Phoenix’s economy are sectors like finance and technology, the addition and expansion of those industries have a ripple effect and mean more jobs all the way around, especially in fields like construction and the service industry. Overall, the state of Arizona will continue to consistently outpace the rest of the nation when it comes to these measures.
Millennials nationwide are notorious for postponing homeownership. And the resulting increases in people renting versus buying homes may make you think that house prices in Arizona would decrease because of a lack of competition, the healthy appetite for rentals will actually likely contribute to growth in home prices in Arizona. The relatively high ratio of renters is encouraging investors to purchase single family homes to split up into multiple rental units.
Inventory is Relatively Low
Because we have been seeing increases in house prices in Arizona grow for some time, you might also think that there are tons of people eager to put their homes on the market. And while there are probably a lot of families who would love to do just that, the reality is that many of the people who bought homes at the height of the housing bubble (2004, 2005, etc.) are still slightly underwater on their mortgage and not quite ready to sell yet even though house prices in Arizona have largely recovered. The projected gains in house prices in Arizona are a good indicator for them, but they may not be out of the woods yet—especially since prices are not projected to increase to the artificially high rate we saw and that caused the last decade’s housing fiasco, anyway. Couple this with the low number of foreclosures and it is easy to see why there are so many people clamoring for fewer houses. Building permits for single-family homes are up, which means that the inventory problem will be tempered soon, but house prices in Arizona are still expected to increase throughout the year.
If you are considering buying a house in Arizona, the key takeaway here should be that if at all possible, it is better to act sooner than later. You can find out more about our projections specifically for the Phoenix area real estate market by reading the article we wrote late last year. Or if you would prefer to get some insights straight from the horse’s mouth, feel free to give us a call or drop us a line. Our real estate professionals are incredibly knowledgeable about the market and can talk through your situation and what makes the most sense for you in terms of potential investments in a home or other real estate. So what are you waiting for? Give us a call today!