Finding a strong market to invest in starts with identifying the population, job growth, and economic impact of a given region. Below is a video presentation that outlines long term data in support of the Phoenix, Arizona real estate market. The presentation is split into 2 parts, so be sure to view both videos. If you are interested in receiving further information or investment advice regarding this market, please contact us today and one of our professional investment counselors will follow up with you as soon as possible.
People who follow Jason Hartman’s Creating Wealth show know how much he likes markets with good affordability and attractive cash flows. He frequently cautions investors to avoid bubble markets, but also realizes the opportunity present when the bubbles deflate and values return to attractive levels. Phoenix is back on the radar screen as an attractive investment because of this phenomenon, and may create tremendous wealth for people who take advantage of the opportunity.
Phoenix is the capital and largest city of the U.S. state of Arizona, as well as the fifth most populous city in the United States.
Our analysis of the Phoenix market will concentrate on the economics and demographics, the real estate market specifics, and will wrap up with an examination of ideal places to invest. Opportunities that are recognized and acted upon can create tremendous wealth for astute investors with the courage and foresight to move against the trend of popular sentiment.
Phoenix was incorporated as a city in 1881 after being founded in 1868 near the Salt River, near its confluence with the Gila River. For more than 1,000 years, the Hohokam peoples occupied the land that would become Phoenix.
Looking at investment in Phoenix will require examination of the underlying demographics, quality of life, and business climate of the city. These trends generate the magnetism required for Phoenix to continue attracting residents and businesses in its continuing trend of growth.
According to the 2000 census, there were 1,321,045 people, 865,834 households, and 407,450 families residing in the city.
The median income for a household in the city was $41,207, and the median income for a family was $46,467. The per capita income for the city was $19,833. 15.8% of the population and 11.5% of families were below the poverty line. Out of the total population, 21.0% of those under the age of 18 and 10.3% of those 65 and older were living below the poverty line.
According to a variety of demographic analysis, the long-term population growth rate for Phoenix is expected to range between two percent and three and a half percent. This represents a net in-migration of people to the Phoenix area that is expected to drive continued growth of the housing market and business community.
With 325 days of sunshine per year, there is tremendous quality of life to be had in Arizona. As the 5th largest city in the country, Phoenix represents a fast growing, dynamic economy that plays host to both Fortune 500 and start-up companies. With its competitive business climate, and attractive tax structure Phoenix attracts a wide diversity of skilled knowledge-based workers, innovation leaders, cultural creators and scientific minds.
Phoenix is also the home of five major league sports teams, including Arizona Cardinals, the Phoenix Suns, and the Arizona Diamondbacks. There are also over 300 golf courses in the Valley of the Sun.
The business climate in Phoenix is broad and diverse. With aerospace, semiconductor manufacturing, tourism, agriculture, and mining operations all playing important parts of the economy, Phoenix has the building blocks for a path of sustained growth. The construction sector was also a major employment area in recent years during the state’s rapid growth phase. With a relatively light tax burden, Phoenix is a great place to do business, and is one of the targeted landing points for business entities that are seeking to escape from confiscatory tax environments like California.
Phoenix is currently home to seven Fortune 1000 companies: waste management company Allied Waste, electronics corporation Avnet, Apollo Group (which operates the University of Phoenix), mining company Freeport-McMoRan (recently merged with Phoenix based Phelps Dodge), retailer PetSmart, energy supplier Pinnacle West and retailer CSK Auto.
The military has a significant presence in Phoenix with Luke Air Force Base located in the western suburbs. At its height, in the 1940s, the Phoenix area had three military bases: Luke Field (still in use), Falcon Field, and Williams Air Force Base (now Phoenix-Mesa Gateway Airport), with numerous auxiliary air fields located throughout the region.
Phoenix is on a growth trajectory that is expected to persist long beyond the time when the current credit crisis is a distant memory. With an attractive environment for technology, business expansion, entrepreneurs, and corporate recruiting, Phoenix is poised for a long run of growth in the coming years.
The real estate market in Phoenix has experience some recent volatility, but exhibits many signs of returning to a balanced equilibrium. This balance frequently results in 28,000 to 32,000 homes on the market at any given time. This stands in stark contrast to the average of 7,000 homes on the market during 2005 when the market was skyrocketing, and the peak of 59,000 in 2007 when the market was saturated.
The real estate market in Phoenix is currently in the process of returning to a balanced equilibrium. There are many who have been scared off by the volatility of recent years, but the Platinum team has been keeping a close eye on Phoenix to determine when prices will adjust back to a point where investment becomes attractive again.
Analysis of the monthly median sales prices for Phoenix show the rapid price spike and decline of recent years, and also shows some very encouraging signs for prudent investors. From 2001 through 2003, Phoenix was exhibiting signs of a relatively normal market that suddenly began appreciating like crazy in 2004 and 2004. This price inflation proved unsustainable, as prices eventually plummeted down to below 2001 levels in the current market. This may present an opportunity for prudent investors, since the fundamental economics of the Phoenix area remain attractive for long-term growth, and the current price levels appear to be depressed by historical standards. It may not be reasonable to expect another bubble boom, but it is likely that prices will regress back toward a reasonable long-term growth trajectory.
Another way of looking at the recent price fluctuations is to analyze the monthly average price per square foot. This shows an even more stark contrast than the median sales prices since the average cost per square foot is currently well below 2001 levels. This indicates that the average house size has increased over the last eight years, and that the current prices are severely depressed. This may prove to be a boon of opportunity for astute investors who recognize this phenomenon and act accordingly.
The recent turbulence has hit the Pheonix market especially hard. The rapid price spikes and subsequent crash have left many people upside-down in their home loans, distressed sellers and foreclosures becoming a large portion of total sales. This is a very disheartening trend for current property owners, but presents a compelling opportunity for investors. The tremendous share of property listings owned by banks has severely depressed prices to a point that is likely to be well below the long-term equilibrium. By selecting areas with attractive cash flow to cover your costs, there could be very attractive gains available to investors that take advantage of this opportunity and act.
If you are interested in the investment opportunities available with the Phoenix Market, contact your investment counselor for a one-on-one consultation. In addition to the investment properties, ask your counselor about our coaching programs where they will work alongside you to develop a holistic strategy that merges attractive investments, solid financial planning, exceptional education, and a strong focus on personal values to help achieve your goals now and into the future. We are ready to help you realize the success that you have ever dreamed of. Are you ready to take the next step?