John Karadsheh
Recently, we hosted an open house at one of our listings in Phoenix and had more than 50 people come through.
Incredibly, 80 percent of those buyers driving around in the oppressive 114-degree heat were here from out of state—California, Oregon, Washington, New York, New Jersey, Hawaii and Colorado. Many were already renting and looking to buy (some even just staying in Air B and Bs), while others were visiting for the weekend to check out Phoenix for a future move. Without exception, all were excited about what was happening in the Valley, and ready to leave their more expensive states behind.
While a lack of inventory has caused a bit of a real estate slow down across the country, Maricopa County is perfectly poised for continued success. Here are a few reasons why we think residents from California and other states will keep driving our growth in the Valley:
- Outmigration—All of our personal experiences in the field this year have shown us that more and more people are moving here from other states. In fact, 23 percent of out-of-state buyers looking in Phoenix were from Los Angeles in the first three months of this year.
- Housing Values—Even though home prices are rising faster here than in the rest of the country (a staggering 8.8 percent increase over the second quarter last year), our median sales prices remain incredibly attractive.
Median Home Sales Price:
- Maricopa County $272,000
- San Diego $622,300
- Los Angeles $677,400
- San Francisco $1,328,500
- Portland $425,500
- Denver $405,100
- Oahu $775,000
- Jobs— We have them. Our 3.2 percent employment growth is double the national average of 1.6 percent. Unlike our last economic boom, when a high percentage of jobs were based in construction, we now have a broad base of available employment ranging from tech to manufacturing, and education to healthcare.
- Forward Inventory— Even though housing inventory is 7.8 percent lower than last year, some think that the amount of home building going on in the Valley is indicative of a market bubble. This is not at all the case. During 2005 and 2006, we were building about 60,000 homes per year. In 2009 through 2011, we were building only around 10,000 new homes. Last year, we built around 20,000 homes, and the hope is that we will hit about 23,000 this year.
To meet demand, we need about 30,000 to 35,000 new homes per year. So, no bubble, and we need to keep building. The great news is that in 2018 so far, hundreds of millions of dollars worth of land has been purchased by developers from all over the country, and those investments should begin to filter through to housing in the coming years.
- Visitors—Before people move, they visit and four times more Californians visit Arizona than from any other state. In 2017, we had 43.9 million visitors to Arizona. As of May, our year-over-year tourism revenue was up 6.8 percent statewide. We also personally saw many more people shopping around and taking a first look at homes in the Valley this past spring.
- Rental Affordability—People also are migrating to Arizona because of our rental market. California has five of the 10 most expensive rental markets in the country. For example, a one-bedroom apartment in the Los Angeles area averages $2,249, while in San Francisco, it’s closer to $3,400. Comparably, in Phoenix, a one-bedroom apartment runs about $830 a month and the median rental price for a single family home is $1,485. It is no surprise that our rental occupancy rates are above 95 percent, rental rates are continuing to rise, and developers are putting billions of dollars into building more apartments.
- 1031 Exchanges—The Phoenix Business Journal posted an article in late July about the significant increases in 1031 money coming in from California. We have also felt this surge. Some investors just want out of California altogether, while other investors are just seeking better cap rates in medical, office, retail, industrial or multifamily units, and are flocking to take advantage of the opportunities they see here. We also are seeing many of those investors pick up personal residences in the Valley, as well.
- Traffic Plus Gas Taxes—California has two of the top three worst cities in the country for traffic—Los Angeles and San Francisco. While we think our traffic might be challenging, our great freeway infrastructure was designed for growth. Our average commute time is about 26 minutes, compared to almost an hour in Los Angeles. Also, gas in Arizona is an average of about 70 cents per gallon less than California.
For all these reasons, we believe more people will flock to Arizona from more expensive states. What does the influx mean for those of us here in the Valley? We believe the California migration will continue to support our growth and property values here for years to come. Housing will not get less expensive, so if you are thinking about moving or investing, now is a good time to plan.
We are happy to help you think about next steps, take you out for a preliminary look at properties on the market, and give you an idea of what your home is worth. Call us any time. We are available seven days a week to accommodate your schedule. We look forward to hearing from you.
John Karadsheh is the Designated Broker for KOR Properties. You can reach John at (480) 568-8684, or visit his website at KORproperties.com. KOR Properties is a boutique real estate brokerage serving the Valley of the Sun and the creator and founding sponsor of Mesa Food Truck Fridays.