Arizona Real Estate Market Trends & Analysis
The Arizona real estate market was subjected to a great deal of volatility in as little as one decade’s time. Few states, for that matter, saw a more dramatic swing in their respective real estate markets than Arizona bore witness to in 2012. The state was hit hard during the Great Recession, perhaps harder than most, but few could have bounced back with the same speed and efficiency witnessed in Arizona.
Thanks, in large part, to more employment opportunities, corporate expansion, increased housing inventory, and wage growth, the Arizona real estate market is now firing on all cylinders. In the event Arizona’s latest new building initiative is able to satiate demand, there’s no reason to think the Arizona real estate market won’t thrive for the foreseeable future.
Arizona Real Estate Fees & Regulations
Real Estate
| Closing Conducted by: | Title Companies, Title Agents |
| Conveyance: | Warranty Deed |
Foreclosure Procedure
| Primary Foreclosure Method: | Non-Judicial |
| Process Period: | 3 - 4 months |
| Notice of Sale: | Trustee |
| Redemption Period: | Up to 6 Months |
Taxes
| Income Tax: | 2.59% - 4.54% |
| Corporate Tax: | 6.968% |
| Sales Tax: | 5.60% |
| Estate Tax: | No |
| Inheritance Tax: | No |
| Median Property Tax: | 0.72% |
| Property Taxes by County: | http://www.tax-rates.org/arizona/property-tax#Counties |
Average Transactional Costs
| Closing Cost: | $2,425 |
| Transfer Fee: | Deed $2 per deed; Flat fee |
| Origination Fee: | $1,810.00 |
Overview
Median Home Value: $255,800
1-Year Appreciation Rate: +5.1%
Median Home Value (1-Year Forecast): +2.9%
Median Rent Price: $1,550
Price-To-Rent Ratio: 13.75
Average Days On Market: 61
Percent With Negative Equity: 8.0%
Unemployment Rate: 4.9% (latest estimate by the Bureau Of Labor Statistics)
Population: 7,171,646 (latest estimate by the U.S. Census Bureau)
Median Household Income: $53,510 (latest estimate by the U.S. Census Bureau)
Percentage Of Vacant Homes: 16.19%
Foreclosure Rate: 1 in every 4519 (2.2%)
Median Home Prices In Arizona
The median home value in Arizona is $255,800, according to Zillow’s Home Value Index. The median home value across the United States, however, is about $229,600. The price variance is most likely attributed to positive economic developments currently shaping Arizona real estate trends.
The Arizona real estate market has become the primary beneficiary of several fundamental indicators. Impressive job growth, an influx of new residents, sound economic fundamentals, and pent-up demand have all stimulated price growth in the Arizona housing market. In the last year (August 2018 to September 2019), real estate in The Grand Canyon State appreciated an average of 5.1%. To put things into perspective, median home values across the United States appreciated 4.9% over the same period of time.
It is with noting, however, that Arizona’s most recent ascent isn’t a temporary trend, but rather a testament to the strength of the entire state’s housing market. If for nothing else, Arizona’s real estate market has appreciated at a faster rate than the rest of the country for quite some time. Since the recession began to take hold in January 2012, real estate in Arizona has appreciated by as much as 91.4%. Median home prices across the United States, on the other hand, have increased a more “modest” 55.1% over the same period of time.
Today’s historic appreciation rates have returned home prices in Arizona to their pre-recession levels, and even beyond. However, median home values are starting to reflect signs of a tipping point. While prices are expected to continue rising in the face of growing demand and a lack of available housing, it’s not fair to expect the same rate moving forward. Instead of the same 5.1% homeowners saw in the last year, more reasonable expectations place appreciation rates at approximately 2.9% over the next 12 months. The temperance will most likely come from a recent building initiative that plans to add more inventory to the lacking market.
Median Rent Prices In Arizona
The influx of new residents to the Arizona real estate market has increased home prices. As a result, landlords have been able to increase asking prices for rentals, too. Not surprisingly, there is a direct correlation exhibited between median home values and rental prices. Since the recovery began around 2012, both have increased year-over-year.
At their lowest point of the last recession, rental rates bottomed out at approximately $1,140 a month in the first quarter of 2012. Today, the median rent price in Arizona is $1,550; that’s an increase of 35.9%. Since the beginning of 2019, however, rents in Arizona saw particularly impressive gains. Having already increased 9.7% on the year, Arizona rents are now the highest they have been in more than 20 years.
Despite recent increases to rental prices, there’s nothing to suggest rates will come down anytime soon. In fact, rents will keep rising as long as inventory remains tight and the Arizona economy continues to attract new residents.
Arizona Foreclosure Trends & Statistics
According to RealtyTrac, a nationally recognized real estate information company that specializes in distressed properties, Arizona has a relatively low distribution of distressed properties. With approximately one out of every 4,519 homes in some stage of distress (default, auction or bank owned), Arizona boasts a foreclosure rate of 2.2%, which remains lower than the national mark: 3.9%. Of particular importance, however, is the distribution of Arizona’s foreclosures in relation to neighboring states. Every state bordering Arizona has a much higher foreclosure rate, with the exception of Colorado.
“In August, the number of properties that received a foreclosure filing in AZ was 28% lower than the previous month and 35% lower than the same time last year,” according to RealtyTrac. The decline in foreclosures is primarily attributed to Arizona’s improving economy. Encouraging job growth, improving wages, affordable housing, and historically low interest rates have all done their best to attract new residents to Arizona. The presence of new owners and renters has stimulated the entire economy, and the housing sector is no exception. As a result, fewer Arizona homeowners are finding themselves underwater or distressed.
Nonetheless, Arizona is not entirely void of foreclosure activity. While the local economy has made gradual improvements for years, some counties inherently boast more distressed properties than others. In fact, the following counties have the highest distributions of foreclosures in the entire state:
Gila (1 in every 1,386)
Cochise (1 in every 1,957)
Graham (1 in every 2,225)
Santa Cruz (1 in every 2,598)
Pinal (1 in every 2,813)
Tax Lien Investing
Tax Lien or Deed: Tax Lien state
Interest Rate: 16%
Redemption Period: 3 years
Arizona Auction Practice Site - Daily Practice Auction
Apache County, AZ - February
Coconino County, AZ - End of January to first of February
Maricopa County, AZ - February
Mohave County, AZ - February
Pinal County, AZ - February
Yavapai County, AZ - End of January to First of February
Real Estate Investing In Arizona
Arizona real estate investors, not unlike investors across the country, tend to favor distressed assets. Placing an emphasis distressed homes increases their odds of locating deals with potentially larger profit margins. That said, there’s one type of distressed property Arizona real estate investors should pay special considerations to: auction homes.
Auction homes, in particular, appear to be the single greatest source of distressed homes in the entire state. As it turns out, the overwhelming majority of Arizona’s distressed homes have already been repossessed by their loan originators, not the least of whom are expected to recoup potential losses by selling the assets at auction. In fact, 64.7% of Arizona’s distressed inventory is either up for auction or will be at some point in the near future.
The remaining 35.3% of Arizona’s distressed homes are bank owned; that means the distressed assets failed to sell at auction, and are now in the sole possession of loan originators. Otherwise known as real estate owned (REO), bank-owned homes award Arizona real estate investors with yet another opportunity to secure a deal with attractive profit margins.
Of course, knowing where to find real estate deals in Arizona is only part of the equation. Once investors secure deals, they need to know what to do with them, which begs the question: Which exit strategies are working the best for Arizona real estate investors?
Investors should be able to incorporate all three of today’s most popular exit strategies into their business models: wholesaling, rehabbing and long-term rentals. Despite nearly seven years of appreciation, prices still look as if they have room for growth, so it’s reasonable to suspect rehabbers and wholesalers will be able to enjoy respectable profit margins for the foreseeable future. That said, Arizona’s real estate market leans slightly more in favor of investors with long-term aspirations. Rental property owners, in particular, are perhaps in a better position than any other investors.
Investors may offset today’s higher acquisition costs with years of rental income, all while someone else pays down their mortgage. More importantly, however, is the interest more and more people are showing in the state. The state’s growing job market and improving wages have made Arizona one of the fastest-growing states in the entire country. Positive net migration has resulted in significant rental property demand. More and more people are moving to Arizona in search of new job opportunities, not the least of whom need a place to live. While some will be inclined to purchase, a large contingent of transplants will rent out of necessity. Whether it’s the lack of inventory or a relative unfamiliarity with the local market, most people will seek temporary rental solutions, which bodes incredibly well for passive income investors in Arizona.
Arizona Housing Market Predictions
Predicting the housing market without any degree of error is a fool’s errand, even in a state like Arizona, where positive trends have been present for nearly a decade. There’s always going to be at least a slight margin of error associated with the housing market. Nonetheless, it is good practice to make well-informed, educated guesses. Maintaining a pulse on where the market currently rests, and where it’s going, will help real estate investors in Arizona maintain an edge over the competition. Consequently, there are a few Arizona real estate market projections that are more likely to play out than others:
Passive income investors will have the upper hand: Real estate in Arizona has experienced a prolific 2019. Investors, in particular, have enjoyed a lucrative run for seven consecutive years. However, it’s the long-term investors who currently have the advantage. Historically high home prices have reduced profit margins for rehabbers and flippers, but buy-and-hold strategies have simultaneously awarded investors the ability to offset high acquisition costs and pay down their mortgages with other people’s money. Additionally, the latest influx of new residents to the Arizona real estate market have significantly increased the need for temporary, multifamily housing.
Prices will rise for the foreseeable future: Arizona real estate trends are at a unique crossroads. On the one hand, increasing demand has facilitated an incredibly active housing market. However, much like everywhere else, there isn’t enough real estate in Arizona to satiate the amount of people actively participating in the market. As a result, competition has enabled homeowners to increase home prices for seven consecutive years. Since the recovery began in 2012, median home values have increased more than 90%, and there’s nothing to suggest they won’t continue to increase in the coming year. In fact, it’s safe to assume home values will continue to rise, albeit at a slightly tempered pace.
Positive economic indicators will support a healthy real estate market: Not unlike the majority of markets across the country, Arizona is a lot better off today than it has been in years past; that, combined with a stronger economy and historically low interest rates should promote homeownership on a higher scale. As a result, the entire market should see a lot more activity, which bodes well for everyone involved in transactions for the foreseeable future.
Arizona Real Estate Market Summary
The Arizona real estate market is currently the beneficiary of a thriving economy. More job opportunities and increasing wages have helped make Arizona one of the fastest growing states in the country. As a result, Arizona real estate trends have gained a lot of momentum over the course of 2019. Homes have appreciated for the better part of a decade and rental prices continue to ascend. It is worth noting, however, that demand continues to persist. More and more people want to call Arizona home, in spite of escalating home values. The resulting demand, combined with historically low interest rates, bodes incredibly well for just about everyone participating in the market: buyers, sellers and real estate investors.
Sources:
https://www.zillow.com/az/home-values/
https://www.census.gov/quickfacts/AZ
https://www.bls.gov/eag/eag.az.htm
https://www.realtytrac.com/statsandtrends/az/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/az/
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