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. 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.

However, in the midst of a historic recovery, the Arizona real estate market took one step back in the wake of the Coronavirus. The moment COVID-19 was declared a global emergency, real estate in Arizona shuttered. That said, the lull was only temporary, and real estate has been firing on all cylinders ever since the second quarter of 2020. Demand has increased on the heels of government stimuli and low interest rates. However, local inventory has been unable to keep up with the latest surge in demand. As a result, prices have increased significantly, causing local investors to evaluate their best exit strategies. Whereas flipping was once the most popular way to invest in Arizona real estate, the most viable option now appears to be building a rental property portfolio.

The Top Arizona Real Estate Markets


While the best real estate market in Arizona is up for debate, here’s a list of the cities investors may want to pay special considerations to:

  • Chandler

  • Flagstaff

  • Mesa

  • Phoenix

  • Tempe

  • Tucson

  • Scottsdale

  • Sedona

  • Yuma

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

Arizona Housing Market Overview


  • Median Home Value: $366,343

  • 1-Year Appreciation Rate: +28.8%

  • Median Sales Price: $361,250

  • Average Sales Price: $435,725

  • Percent Of List Price Received: 102.3%

  • Days On Market: 27

  • Closed Sales: 25,746

  • Median Rent Price: $1,446

  • Price-To-Rent Ratio: 26.63

  • Unemployment Rate: 6.6% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 7,278,717 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $58,945 (latest estimate by the U.S. Census Bureau)

  • Properties With Foreclosure Filings: 1,208 (First Half Of 2021)

Arizona Median Home Prices


The median home value in Arizona is $366,343. However, it is worth noting that Arizona's median home value has experienced significant volatility over the course of the last decade. As recently as 2012, median home values across the entire state bottomed out at around $136,000; that means the average home has appreciated by as much as 169.3%. Most of that time, prices increased thanks to an expanding economy, improving consumer sentiment, and a lack of housing. In the last year, however, the Coronavirus shifted the way the market acted.

Over the last 12 months, the median home value in Arizona has increased 28.8%; few states, if any, can even come close to that level of appreciation. Even California, one of the most prohibitively expensive states in the country, hasn't been able to keep pace with Arizona's appreciation rate. The difference is most likely the result of the momentum real estate in Arizona had managed to build heading into the pandemic.

Before the pandemic, the Arizona real estate market was as hot as any of its counterparts. Prices were already increasing at an above-average pace, and the pandemic only fed the fire. When government stimuli and historically low interest rates were introduced to the Arizona real estate market, demand quickly outpaced supply. In a matter of weeks, in fact, demand turned into competition, the likes of which inventory couldn't keep up with. As a result, homeowners increased their prices accordingly, and local home values continue to test new highs each month.

Moving forward, it's safe to assume prices will continue to rise. As long as buyers remain incentivized to buy and inventory remains tight, competition will increase prices. New builds are on the way to help alleviate inventory shortages, but they are a ways out. Until they are brought to market, prices will continue to rise in Arizona.

Arizona Median Rent Prices


Arizona's appreciation rate has impacted every aspect of the local marketplace. In particular, the rental market is just as hot as the buyers' market. If for nothing else, higher home values and a lack of listings prevent a large population of prospective buyers from participating in the market. In other words, everyone who wants to buy (but can't) is being forced to rent. As a result, landlords have found themselves in a position of power in Arizona and increased their asking rates.

According to the latest data released by Apartment List, the median rent in Arizona has increased 20.9% in the last year and now sits around $1,446. The latest increase in rents is almost in line with home values, albeit slightly lower. It may only be a matter of time until rents actually catch up to their value counterparts.

Today, average rents in Arizona can be broken down as follows:

  • Studio: $1,042

  • 1-Bedroom: $1,121

  • 2-Bedroom: $1,377

  • 3-Bedroom: $1,747

  • 4-Bedroom: $2,052


Comparatively, the national average rent price is $1,219, or 18.6% lower than Arizona's. The difference is noticeable, and appreciation forecasts suggest the discrepancy will only grow for the foreseeable future.

Arizona Foreclosure Trends & Statistics


According to Attom Data Solutions’ Midyear 2021 U.S. Foreclosure Market Report, a total of 65,082 U.S. properties received a foreclosure filing (default notices, scheduled auctions, or bank repossessions) in the first six months of the year. “That figure is down 61 percent from the same time period a year ago and down 78 percent from the same time period two years ago,” according to the report.

Nationwide, foreclosures are down because of the safety measures put in place to protect homeowners from the negative impact of the Coronavirus. Forbearance programs and government aid, in particular, have kept distressed homeowners from filing for foreclosure over the better part of a year. Landlords couldn't follow through with evictions, and lenders weren't allowed to initiate foreclosure filings.

Foreclosures in Arizona are no exception, as filings are down about 64.4% over the first six months of 2021 from the same point in the previous year. In all, Arizona saw a total of 1,208 properties file for foreclosure from January to June. At that rate, only 0.04% of the state's housing units are considered distressed. Foreclosures in Arizona are pretty much in line with national averages, if not slightly lower.

While down, foreclosures are expected to rise once government aid runs out. It is too soon to tell exactly how many foreclosures will be filed in Arizona, but it's safe to assume there will be an influx sooner rather than later. Therefore, the Arizona real estate investing community should start lining up financing. Those with capital to deploy could simultaneously land their next deal and help distressed homeowners.

Tax Lien Investing


  • Tax Lien or Deed: Tax Lien state

  • Interest Rate: 16%

  • Redemption Period: 3 years

Below you will find a list of online auctions in the state of Arizona. Most counties in Arizona conduct their tax lien sales in the month of April. Arizona offers great opportunities for online tax lien investing:

Arizona Real Estate Investing


New metrics and indicators created in the wake of the pandemic have forced investors around the country to reevaluate their exit strategies. In particular, many investors are starting to emphasize long-term investment strategies instead of short-term rehabs and flips. If for nothing else, today's marketplace increases the viability of building a rental property portfolio.

For starters, competition has led to historical appreciation rates. Over the course of the pandemic, prospective buyers have both received government aid and spent less. Additionally, it's never been cheaper to borrow institutional money. The culmination of several factors has made today one of the best times to buy a home. However, inventory is significantly lacking across the country. There are not enough listings to keep up with demand, and homeowners are increasing their asking prices accordingly.

According to Attom Data Solutions' second-quarter 2021 U.S. Home Sales Report, "the typical single-family home and condo sale across the United States during the second quarter of 2021 generated a profit of $94,500. That was up from $90,000 in the first quarter of 2021 and $60,572 in the second quarter of 2020."

Real estate across the country has appreciated at an unprecedented rate, and the Arizona real estate market is no exception. In the last year alone, the median home value has increased nearly thirty percent. At that rate, it has become prohibitively expensive to buy a home in Arizona, let alone flip one. That's not to say there aren't plenty of opportunities to flip real estate in Arizona, but rather that profit margins are growing slimmer with each passing month.

In response to price increases, more Arizona real estate investors are looking to build rental property portfolios. In the void of profit margins, historically low interest rates make buying a rental property more attractive than ever. Not only do low borrowing costs help offset today's high prices, but they can also increase monthly cash flow from rental properties places in operation. At the very least, the lower the mortgage, the more cash flow investors can keep each month from their rental properties.

In addition to low interest rates, long-term investors will be pleasantly surprised by the state's price-to-rent ratio. At 26.63, it is unequivocally more affordable to rent a home in Arizona than to buy one. As a result, investors with rental properties will find their listings getting a lot of attention. With low inventory levels and rental affordability, the risk of vacancy is essentially mitigated.

The Arizona real estate investing community has every reason to be excited in 2021. Despite historical appreciation, there are still plenty of opportunities to capitalize on today's market. The most appealing of them all, however, appears to be long-term rental properties. The pandemic has created a window of opportunity in the form of demand and low borrowing costs.

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 2021. Investors, in particular, have enjoyed a lucrative run for the better part of a decade. However, it’s the long-term investors who currently have the advantage. Historically high home prices have reduced profit margins for rehabbers and flippers. Still, 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, interest rates give investors the ability to increase monthly cash flow from properties placed in operation.

  • 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, like everywhere else, there isn’t enough real estate in Arizona to satiate the number of people actively participating in the market. As a result, competition has enabled homeowners to increase home prices for nine consecutive years. Since the recovery began in 2012, median home values have increased nearly 70.0%, 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.

  • 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 larger scale. As we remove ourselves from the pandemic, Arizona is poised to lead the recovery.

Summary


The Arizona real estate market is currently the beneficiary of a thriving economy. Improving employment numbers have insulated real estate in Arizona slightly more than in other states. As a result, Arizona real estate trends have gained a lot of momentum over the course of 2021. 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 despite 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.zillow.com/home-values/
https://www.zillow.com/ca/home-values/
https://www.attomdata.com/news/most-recent/attom-mid-year-2021-u-s-foreclosure-market-report/
https://www.apartmentlist.com/research/category/data-rent-estimates
https://armls.com/docs/ARMLS-Market-Watch-2021-Q2.pdf
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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