The U.S. housing market has weathered a challenging 2020. Unprecedented events such as a global pandemic and a tumultuous presidential election have fueled a period of economic uncertainty. However, despite these challenges, recent research shows that Arizona’s real estate market will see an 8.2% appreciation in house prices from the beginning of 2021 through September, making it one of the hottest real estate markets in the country. This market forecast isn’t surprising considering that Arizona has a history of exponential growth in property value since Q1 2000.
The predicted growth is catalyzed mainly by low property inventory and low mortgage rates. While buyers are attracted by low mortgage rates, the low inventory forces them to compete with desirable property and locations, which ultimately bolsters the property’s value.
That said, below are some of the most promising real estate markets in Arizona:
Phoenix is Arizona’s most populous city and is considered one of the largest housing markets in the United States and also one of the hottest real estate markets in the U.S. It features a combination of beautiful weather, a booming economy, nightlife, prestigious restaurants, and shopping, which continue to draw people to the metro area.
Short-term rentals, in particular, are thriving thanks to the city’s tourism industry, which brings tourists every year with major events like the Phoenix Film Festival and a vast collection of golf courses. Of course, Phoenix’s short-term rental industry was hit hard by the COVID-19 pandemic. However, the industry has shown resilience with relatively fair returns as investors implement safety measures to curb the spread of the virus and encourage guests to feel safe.
Additionally, Phoenix’s affordability is attracting the growing population of remote workers eyeing homes in the suburbs as opposed to crowded cities. They want affordable homes with office spaces and an appealing, warm climate, all of which can be found in Phoenix.
For decades, Scottsdale’s real estate market has been growing thanks to its high employment rate, good schools, and growing tourism industry. This makes it a desirable area for families and young professionals to settle. As such, investing in condos, apartment complexes, or single-family homes for traditional renting or vacation options is a great way of maximizing returns and capitalizing on one of the hottest real estate markets.
Essentially, the traditional rental is thriving mainly due to the high price to rent ratio, standing at 23 according to recent findings. Therefore, with home prices on the rise, residents will rent out properties rather than buy their own. Even though the mortgage rates are low, they won’t offset high the cost of property for all buyers.
As an investor, the only downside to Scottsdale’s high property price is that you’ll spend more on initial investment than other locations on this list, but you’ll likely enjoy guaranteed returns.
Tucson is a family-friendly city whose cost of living is 6% lower than the national average. The “old pueblo” town of Tucson boasts excellent public schools and is surrounded by beautiful outdoor scenery, making it a desirable choice for families. In particular, Corona de Tucson stands out as the most promising real estate market in the larger Tucson city. The town is an excellent place for investing in long-term rentals for single-family homes given its proximity to schools and low crime rate. This is because the median home value here is quite pricey, which drives most residents to rent. Additionally, the downtown area has a slew of thriving businesses, making it ideal for commercial real estate investors.
If you are looking for long-term property investment in Arizona, then Tempe town is the go-to-market. In fact, Arizona State University is located in Tempe, in addition to more than 20 other colleges within the town’s proximity. The great nightlife and a growing number of commercial buildings in Tempe have catalyzed its growth as an urban center with a demand for college rentals and commercial property.
Moreover, Tempe has seen its job market increase by 3.3% and is expected to grow by a whopping 49.9% over the next 10 years. For reference, the U.S. average for the next 10 years is 33.65%. With such promising economic growth, investors can expect a high demand for houses in Tempe.
Prescott is a smaller town compared to other towns in Arizona. However, unlike most towns in this list, most residents here prefer homeownership, as evident from the town’s growing number of homeowners. Single-family home units are the most common as most of its residents are young families setting their roots in this town. Prescott is also home to several colleges and universities, making it a good place to buy traditional rental properties and commercial real estate. For novice investors with a limited budget, the town makes a good place to venture into real estate, given its relatively low median home value.
Arizona Real Estate Market Outlook
Arizona is becoming one of the top destinations for domestic relocations due to its strong economy and stable housing market. Its warm weather and excellent restaurants also make it a popular tourist destination. Thus, building your real estate portfolio with Arizona properties should be part of your growth strategy. However, before making any investment, it’s best to consult an experienced real estate agent for guidance on how to break into the market and scale your investment.
Michael Hills is vice president of brokerage at Atlas Real Estate.