Where would one go about making money in real estate? What makes a location favorable for real estate investment properties?
Certainly, a booming economy, a growing job market, and favorable climate and outdoor living conditions will draw real estate investors into an area. This is the case for the Arizona real estate market. The growing population and job market have attracted many entrepreneurs to the state, consequently raising demand for real estate. The favorable living conditions have, furthermore, comforted real estate investors and buyers to invest in Arizona real estate market. In the Arizona real estate market, you will find plenty of locations that are peaceful and that enjoy a crime-free environment. Not to neglect that investment properties in these locations will more likely sell faster and earn a higher return on investment.
Related: Should You Invest in Phoenix Real Estate in 2018?
Today, we will tell you more about the Arizona real estate market and shed light on its top-performing real estate markets. Read to learn about median home prices, investment property types, and current trends in the Arizona real estate market.
Median Home Prices
While home prices in Arizona witnessed a rise and sharp fall in the boom and bust, today home prices have been steadily increasing. Prices are even expected to rise higher in the upcoming years. Now is the time to buy a property in the Arizona real estate market, before property prices rise too high. Experts, as a matter of fact, expect prices to rise by almost 25% in the upcoming three years.
Are we approaching a house correction given the steady increase in median home prices? Let’s take a look. In 2006, the median home price peaked at $280,000, then bottomed out at $125,000 in 2011. The median home price in 2017 reached $265,000 and has reached $280,000 this year. While median home prices increased significantly until 2018, this does not indicate a price correction yet. Since 2013, median home prices increased from a year to another by 7-8%, which reflects a healthy increase. Moreover, borrowers, despite the steady increase, were and remain able to qualify for these higher prices.
Although prices have been rising, the Arizona real estate market remains a desirable market with plenty of affordable investment properties. In fact, to invest in Arizona real estate means better value for your money as opposed to other metropolitan cities within the US housing market 2018. Thus, you pay less for higher values. According to real estate market analysis, when buying a 2,500 square foot investment property in Los Angeles, you expect to pay up to $550,000 and up to $585,000 in Seattle. While if you were to buy the same property in Phoenix, it would only cost you about $250,000. You could buy two investment properties in Arizona that will make you double the gains as opposed to one investment property in Los Angeles, per se.
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Single Family Homes
Single family homes continue to drive the Arizona real estate market 2018. As compared to last year, single family homes grew by 4%. Particularly, previously-owned single family houses compromise the majority of residential sales in the Arizona real estate market- approximately 80% of all sales. Annually, the number of previously-owned single family homes are three to four times greater than new single family home sales.
Overall, single family homes continue to foresee an increase in prices. Average single family homes in March 2018 are up 8.8% from that of March 2017. The market share of entry-level single family homes under $200,000 within the Arizona real estate market dropped from 17% to 11% in 2018 as compared to 2017. While single family homes priced above $500,000 took on a higher market share this year recorded at 28%. This is 3% higher than that of 2017. Lastly and most favorably, the mid-range that fall between $200,000 and $500,000 enjoy a robust demand and reasonable supply. The market share for this category increased this year to 61%, from 59% in 2017. Certainly buying within the mid-range will make better real estate investment opportunities.
Arizona’s #1 export industry remains to be tourism. Many tourists, whether international or domestic, continue to flow into the state for the favorable climate conditions and abundant entertainment venues that the state offers. This has, in turn, increased the presence of Airbnb in Arizona. According to Airbnb analysis, about 131,000 people used Airbnb in Arizona last year. Additionally, Arizona hosts earn on average $4,000 per year from their rental properties, according to the same study.
The strong presence of Arizona Airbnb can be traced back to the favorable conditions the state has adjusted for the home-sharing business. While nationwide and worldwide, regulators are limiting the use of Airbnb, the State of Arizona is removing all restrictions. On January 1st of 2018, a new law went into effect removing all restrictions on short term rental properties. This means that real estate investors and landlords can host as many properties on Airbnb as they like for as many days as they want per calendar year. This new law ensures that people earn more money in rental income renting out on a short- and long-term basis. You should also hop on!
Where to Invest in Arizona Real Estate Market
There’s plenty of locations that you could capitalize on while earning a high return on investment. Below are the two top performing cities in Arizona real estate market.
Scottsdale Real Estate Market
Awarded in 2017 the Voice of the People for excellence in economy, Scottsdale makes a viable option for real estate investments. This is because a strong economy means better standards of living, and better standards of living, therefore, incentivize people to buy property and settle in. Moreover, Scottsdale’s growing population has also been attractive for real estate investors. More people means more renters and property owners. Moreover, investing in Scottsdale real estate market will enable you to gain more profit over the years. Since 2000, Scottsdale real estate investors have enjoyed an annual rate of appreciation of 3.95%. The total real estate appreciation over the past 8 years has been recorded at 102.77%. While appreciation should not be a major measure to consider in your evaluation, it yet remains an important factor to consider. Below are some numbers for the Scottsdale real estate market to help you evaluate your investment opportunities.
Median Property Price: $871,027
Airbnb Rental Income: $1,583
Airbnb Cash on Cash Return: 1.2%
Airbnb Cap Rate: 1.2%
Traditional Rental Income: $3,369
Traditional Cash on Cash Return: 2.34%
Traditional Cap Rate: 2.34%
The data is derived from Mashvisor’s property calculator. You too can use it! If you would like to get data on specific locations and even investment properties, you can do so using Mashvisor’s investment property calculator. Click here to start exploring.
Related: Is Buying a Scottsdale Investment Property a Smart Choice?
Phoenix Real Estate Market
The good climate and living conditions, availability of entertainment venues, thriving economy, and growing population in Phoenix have all contributed to the rise in its real estate market. As a matter of fact, the Phoenix real estate market is of the top performing, not only in the Arizona real estate market but nationwide as well. Real estate market analysis shows an 8% year-over-year rise in median sales price and a 2% in median rent per month. In fact, experts have concluded median home prices to increase by at least 25% in the upcoming few years. Despite the increase in property prices, the Phoenix real estate market remains much more affordable than other places. We encourage that you invest in Phoenix real estate market today before prices rise higher. Have a look at the Phoenix real estate market numbers and consider them in your evaluation:
Median Property Price: $432,731
Airbnb Rental Income: $872
Airbnb Cash on Cash Return: 0.48%
Airbnb Cap Rate: 0.48%
Traditional Rental Income: $1,391
Traditional Cash on Cash Return: 0.82%
Traditional Cap Rate: 0.82%
Related: Is Phoenix Real Estate Market the Place to Invest at the Beginning of 2018?
The Arizona real estate market is desirable for many real estate investors. This is because prices are yet very affordable, the economy is thriving thus encouraging for real estate investors, and regulations for the home-sharing business are favorable. Do not get discouraged by the rising prices, they are still much more affordable than properties in Los Angeles and other metropolitan cities. To learn more about the Arizona real estate market, visit Mashvisor. Or, to start looking for and analyzing the best investment properties in the city and neighborhood of choice, click here.