The Arizona real estate market has been pretty hot for the past couple of years. Will it hold up in 2022? Is it wise to invest in Arizona this year?
We will review the Arizona real estate market as we look at its current situation, find out about the housing market predictions 2022, and investigate its viability for rental investments. We also share with you a list of the top places in Arizona to invest in traditional and Airbnb rentals.
How Is the Arizona Real Estate Market?
The Phoenix Arizona real estate market was on fire in 2021, finding itself in industry experts’ top 10 thriving markets list. Though the other cities in Arizona failed to make it to the list, the Grand Canyon state overall showed an impressive housing market.
The latest Mashvisor statistics show that Arizona continues to be among the housing markets to watch out for in 2022.
- Number of Listings for Sale: 6,405
- Median Property Price: $679,412
- Average Price per Square Foot: $337
- Number of Traditional Listings: 20,770
- Monthly Traditional Rental Income: $1,911
- Traditional Cash on Cash Return: 2.05%
- Price to Rent Ratio: 30%
- Number of Airbnb Listings: 12,725
- Monthly Airbnb Rental Income: $3,643
- Airbnb Cash on Cash Return: 3.83%
- Airbnb Daily Rate: $200
- Airbnb Occupancy Rate: 63%
- Days on Market: 106
- Walk Score: 42
Related: What Is a Good Cash on Cash Return?
Highlights of the Arizona Real Estate Market
Let’s go deeper into the stats to see what the numbers mean to Arizona’s housing market.
The median property price in Paradise Valley is $2.9 million, making it the most expensive city in Maricopa County and the entire Arizona state. Dolan Springs in Mohave County is the most affordable Arizona real estate market at $147,000.
The state’s price to rent ratio is high at 30%, which means more people would rather rent than own a home. What it indicates for investors is a strong demand for rental, although profits may be a bit on the low end because of low rental rates.
Saint David registered the highest price to rent ratio at 78% but was also among the most expensive cities in Arizona in terms of median prices.
Phoenix, considered a hot market, posted a median property price of over $642,000, with a high price to rent ratio of 27%. The number of properties listed in the city is relatively high, but the traditional and Airbnb cash on cash returns are relatively low.
The Arizona Real Estate Market: Predictions and Trends 2022
What’s in store for Arizona’s housing market 2022? Forecasts published in housing market news point to another sizzling year for the Arizona real estate market but on a lower scale than 2021.
Phoenix as the Driver of the Arizona Real Estate Market
Real estate biggies believe that Phoenix will drive the Arizona real estate market. Phoenix is the fifth-biggest city in the nation and is continuously growing, especially with the in-migration that’s been happening since the onset of the pandemic. The city is also one of the areas where the rise in home prices is expected to continue. Zillow predicts home prices in Arizona to increase in the double digits in 2022 but at a slower rate than in the previous year.
Thirty-six percent (36%) of Phoenix’s households are renter-occupied, so its real estate market is a good mix of the owner- and renter-occupied housing units for sale. The most common property types are three- and four-bedroom single-family homes. However, you are most likely to see a duplex for sale in any of the neighborhoods. Townhouses and large apartment complexes are also common in Phoenix.
A Seller’s Market
Towards the end of 2021, fewer homes were selling above the listing price, with home sellers reducing their prices. The trend is probably due to the longer days on market, which is expected to flow through 2022. Despite the fact, Arizona will remain a seller’s market, mainly due to the imbalance between demand and supply.
The imbalance is an offshoot of three factors:
- The lack of supply of new houses, compounded by a labor shortage and rising prices of construction materials
- The in-migration encouraged by remote work opportunities
- The seeming tug-of-war between the millennials and baby boomers for property acquisition
Related: Should I Buy Real Estate in a Seller’s Market?
Renovation as an Alternative
Several Arizona homeowners may choose to make some home improvements while waiting for the real estate market to become less frantic. They are homeowners who want to sell their house to move to a cozier house. Or there may be homeowners wanting to purchase a new house to put up their current for traditional rental.
Is Now a Good Time to Buy a House in Arizona?
Yes. Mortgage rates continue to hover at the lower 3% range but are expected to go up again towards the latter part of the year. Now is the best time to invest in the Arizona real estate market to take advantage of lower mortgage rates.
Why Invest in the Arizona Real Estate Market
Here are other reasons you should invest in the Arizona real estate market in 2022.
Arizona’s unemployment rate fell from 6.8% as of end-2020 to 4.1% as of end-2021. Several companies moved or set up their headquarters in Arizona over the past few years. Hewlett-Packard, Oracle, Palantir, and Tesla are among the tech companies that relocated from California to Arizona. Other companies that also set up base in the Grand Canyon City are Exro ( a Canadian company producing electric vehicle parts), Doordash, Viavi Solutions, Inc., and more.
The “Sun Belt Surge”
The Sun Belt Surge refers to the sudden rush of people from other states to areas where they can enjoy sunny weather, a robust economy, and affordable homes.
Although some insiders believe it’s the surge that draws big companies to Arizona, others think it’s the reverse. But whatever is driving which, the fact remains that the surge boosted Arizona’s population. And we know that the bigger the population is, the higher the demand for housing becomes.
Quality of Life
Arizona is an excellent place to be if you bask in a warm, sunny climate. It’s practically summer the entire year in Arizona, with the spring, fall, and winter happening at very short periods.
Arizona is ranked seventh in economic growth across the nation. It boasts one of the strongest local economies mainly because of its welcoming stance towards startups and innovative businesses. The state was among the first to use ride-sharing platforms like Lyft and Uber.
The state government of Arizona also expanded the coverage of Medicaid in recent years for its bonafide residents to include low-income adults. Medicaid covers children, pregnant women, parents, seniors, and individuals with disabilities only.
Interesting Things to See and Do
Whether as a tourist on vacation or a resident on a leisure trip, Arizona offers a vast range of options to visit and do for fun and adventure. It is, after all, one of the best vacation spots worldwide. Here are some of them:
Be awed by the breathtaking view of the Grand Canyon. You may go white-water rafting along the Colorado River, take a mule ride, or simply experience the beauty of nature.
Musical Instrument Museum
The place exhibits more than 15,000 musical instruments from all around the world. The fun part is you can handle and play the instruments.
Desert Botanical Garden
Arizona is a desert with an incredible botanical life and not just the cacti typically associated with deserts. The Desert Botanical Garden is a magnificent display of over 4000 floral species.
Hubbell Trading Post
The Hubbell Trading Post was founded in 1878 to supply the needs of exiled Navajo people upon their return home. It later became a hub for natives and pioneers to barter goods. Today, it sells locally crafted items like jewelry and rugs.
Children would love to see the US highway made famous by Pixar’s Cars. Aside from the charm it exudes, the scenery along Route 66 makes every road trip worthwhile.
Impact on the Rental Market
Owning a home in 2021 was very competitive, and it could continue until the middle of the current year. People who cannot afford the available houses or wait for the inventory to increase prefer to rent instead. It means the Arizona rental market will remain busy in 2022.
Top 5 Best Cities in Arizona for Traditional Rental Investment 2022
If you are interested in buying a house for traditional rental investment, here are five Arizona cities you can explore. The cash on cash return was the primary consideration for the selection, but each city was also matched against other criteria. Here’s the complete list of criteria:
- Traditional cash on cash return: Not lower than 1.95%
- Median property price: Not exceeding $600,000
- Monthly traditional rental income: Not lower than $1,500
- Number of traditional listings: Not lower than 100
1. Buckeye, AZ
Buckeye is one of the rapidly growing cities in the country. It boasts of above-average livability, with a high quality of education. Both its crime rate and cost of living are below the national average.
- Median Property Price: $508,579
- Average Price per Square Foot: $253
- Number of Traditional Listings: 247
- Monthly Traditional Rental Income: $1,968
- Traditional Cash on Cash Return: 2.64%
- Days on Market: 34
- Walk Score: 71
2. Maricopa, AZ
Maricopa’s real estate market offers affordable homes to buyers. The city is a growing community that is home to top-rated schools. It is also one of the safest cities nationwide.
- Median Property Price: $390,239
- Average Price per Square Foot: $204
- Number of Traditional Listings: 142
- Monthly Traditional Rental Income: $1,623
- Traditional Cash on Cash Return: 2.49%
- Days on Market: 46
- Walk Score: 47
3. Peoria, AZ
Peoria may not be a well-known city, but Money Magazine included it in its 50 best places to live in the US. The magazine credits Peoria’s impressive high school graduation rate, fast job growth, and a good median family income for its inclusion in the list. It is ranked as with the 86th fastest commute time among Arizona’s cities.
- Median Property Price: $557,483
- Average Price per Square Foot: $281
- Number of Traditional Listings: 401
- Monthly Traditional Rental Income: $2,013
- Traditional Cash on Cash Return: 2.49%
- Days on Market: 39
- Walk Score: 70
4. Tempe, AZ
Tempe is one of the best places to live in Arizona. It exudes a mix of urban and suburban vibe with its parks, dining places, and coffee shops. The city’s public schools are above average.
- Median Property Price: $501,849
- Average Price per Square Foot: $322
- Number of Traditional Listings: 952
- Monthly Traditional Rental Income: $1,895
- Traditional Cash on Cash Return: 2.09%
- Days on Market: 17
- Walk Score: 54
5. Goodyear, AZ
In AZ Big Media’s 2020 Ranking Arizona poll, Goodyear was named the 4th best city to live in Arizona. The recognition came after Money Magazine ranked Goodyear the 22nd best city to live in in the US. Goodyear is the 9th fastest growing city in the US and is famous for its sports training facilities. Its low crime rate makes it one of the safest cities in the US.
- Median Property Price: $571,576
- Average Price per Square Foot: $263
- Number of Traditional Listings: 243
- Monthly Traditional Rental Income: $1,928
- Traditional Cash on Cash Return: 1.95%
- Days on Market: 73
- Walk Score: 48
Top 5 Best Cities in Arizona for Airbnb Rental Investment 2022
We’ve come up with a list of five cities of interest for people looking to invest in Airbnb rentals. Like the traditional rental list, cash on cash return was the main criterion. Below is the complete set of criteria:
- Airbnb cash on cash return: Not lower than 5.00%
- Median property price: Not exceeding $600,000
- Monthly Airbnb rental income: Not lower than $3,000
- Airbnb occupancy rate: Not lower than 60%
- Number of traditional listings: Not lower than 100
1. Glendale, AZ
Glendale blends its old history and culture with its contemporary vibe and entertainment facilities. Today, it is known for its parks and recreation, family entertainment, and sporting events. It is considered one of Arizona’s popular suburbs.
- Median Property Price: $518,543
- Average Price per Square Foot: $263
- Number of Airbnb Listings: 205
- Monthly Airbnb Rental Income: $4,248
- Airbnb Daily Rate: $197
- Airbnb Cash on Cash Return: 6.15%
- Airbnb Occupancy Rate: 78%
- Days on Market: 30
- Walk Score: 89
2. Yuma, AZ
Yuma is a mid-sized city that combines a big city and a small-town feel. It is home to a young and diverse population. The various cultures are respected and celebrated in different community events. It houses several public schools, charter schools, and private schools. People interested in pursuing higher studies need not leave the city because its three college campuses offer various degree programs. The city’s cost of living is 11.8% lower than the national average.
- Median Property Price: $326,134
- Average Price per Square Foot: $209
- Number of Airbnb Listings: 160
- Monthly Airbnb Rental Income: $3,036
- Airbnb Daily Rate: $121
- Airbnb Cash on Cash Return: 6.02%
- Airbnb Occupancy Rate: 65%
- Days on Market: 66
- Walk Score: 70
3. Cottonwood, AZ
Cottonwood is a flourishing city with an above-average livability score and the cost of living lower than the national average. The main reason for that is the local government’s provision of adequate funding, allowing hiring several high-caliber teachers. It is an excellent place to acquire education so that families with children of school age will find it a delight to reside in the city.
- Median Property Price: $491,466
- Average Price per Square Foot: $290
- Number of Airbnb Listings: 123
- Monthly Airbnb Rental Income: $4,011
- Airbnb Daily Rate: $160
- Airbnb Cash on Cash Return: 5.68%
- Airbnb Occupancy Rate: 70%
- Days on Market: 56
- Walk Score: 68
4. Page, AZ
Page is a small city with a rural feel and a laidback lifestyle, which retirees find appealing. Most of its residents are families and young professionals; 60% own their houses. The city, situated amid plateaus and lakes, takes pride in its several scenic spots and outdoor activities.
- Median Property Price: $382,032
- Average Price per Square Foot: $218
- Number of Airbnb Listings: 181
- Monthly Airbnb Rental Income: $3,119
- Airbnb Daily Rate: $161
- Airbnb Cash on Cash Return: 5.46%
- Airbnb Occupancy Rate: 65%
- Days on Market: 122
- Walk Score: 76
5. Chandler, AZ
Chandler is one of the best places to live in Arizona. It ranks high in the best places for women in tech, safest areas to live, and best places to find a job. Chandler’s home prices are among the most affordable in the state. The place is very accessible, and the commute time is relatively short. It houses two major school districts so residents can take their pick. It offers various forms of entertainment for those who want to unwind, and while its dining areas and shops appear expensive, people on a budget will always find something for them.
- Median Property Price: $510,472
- Average Price per Square Foot: $298
- Number of Airbnb Listings: 381
- Monthly Airbnb Rental Income: $4,168
- Airbnb Daily Rate: $207
- Airbnb Cash on Cash Return: 5.06%
- Airbnb Occupancy Rate: 67%
- Days on Market: 6
- Walk Score: 30
Finding Your Investment Property in the Arizona Real Estate Market
If you are a first-time real estate investor, this section will guide you on how to invest in real estate.
Step 1: Look for the right location.
You can choose between two options for this step. Either way, it would be best to sign up first with Mashvisor for your 7-day free trial before you proceed.
Option 1: We’ve started the first step for you by identifying great locations for your rental property. You may pick from the list and simply type it on the search bar, e.g., “Cottonwood, AZ.” Choose a neighborhood from the dropdown menu to display the neighborhood map. All listed properties for sale in that neighborhood will be displayed.
Option 2: You may skip our list and make your selection through the real estate Heatmap tool. Using our example, Option 1 will display a map of Cottonwood, AZ. When you click on the dropdown arrow next to Heat Map Data Set, you will be prompted to filter your search using one of the following criteria:
- Rental income (Traditional or Airbnb)
- Cash on cash return (Traditional or Airbnb)
- Listing price
- Airbnb Occupancy rate
Based on your selected filter, you will be redirected to a heatmap, a color-coded tool that shows the best and worst locations in Cottonwood, AZ. Select a neighborhood to display the listed properties for sale in that location.
Step 2: Search for your investment property.
Personalize your search for the best investment property to satisfy your investment goals. Set your target cash on cash return, cap rate, and budget. Click on “More Filters” to show other filters to set:
- Property Type: Single Family Home, Townhouse, Multi Family, Condo/Coop, or Other. First-time investors will find it easier to invest in a single family home. If you are interested in Multi Family or off market properties, you need to sign up for an Expert Plan.
- Property Status: For Sale, Sold, or Foreclosure
- Number of Bedrooms
- Number of Bathrooms
- Year Built
- Square Feet
- Traditional Rental Income: Set a range
- Airbnb Rental Income: Set a range
Tap the “Apply” button when you are sure about your filters. You will find a property listing of homes that fit your criteria. If no listing appears, it means that no listed property for sale matches your criteria.
Should it happen, you are left with two options. First, adjust your filters, starting with the less critical ones (e.g., number of bedrooms and bathrooms). Second, if you are adamant about your criteria, you can look for it in another location. However, remember that at this point, you are looking for the property that will yield the best return on investment. You are not in search of one that you dream of owning.
Step 3: Determine how you want to purchase the property.
Set your filter to cash or mortgage.
If you choose “Mortgage,” you will be prompted for the following information:
- Down Payment
- Loan Type (30- or 15-year fixed rate)
- Interest Rate
The cash on cash return of all properties that match your criteria will account for all the mortgage expenses. You can toggle between a 30- or 15-year fixed rate to see how it affects the projected cash on cash return. The information should help you make an informed decision on how to purchase the property.
Step 4: Select your investment property.
Sort your property list in descending order of the Traditional or Airbnb cash on cash return to display the property in your chosen neighborhood with the highest return. Generally, investors would choose the property at the top of the list. However, if the difference in returns is not significant, some investors add their own criteria and choose something else. For example, if they see the third property on the list as easier to fix into an Airbnb rental, they will skip the two other properties with better returns.
Step 5: Decide on a rental strategy.
If you’re still undecided on what rental strategy to adopt, use the Mashvisor rental property calculator. The tool will provide you with a side-by-side comparison of the cash flow, cap rate, and cash on cash return of traditional and Airbnb rentals.
Related: How to Evaluate a Rental Property Quickly
Additional Step: Check Local Regulations on Airbnb
Our tools can provide you with a comparative market analysis and investment property analysis. Unfortunately, they cannot tell you offhand about your property location’s Airbnb laws. We’ve identified three of them.
There are two local regulations that should be noted when investing in Arizona:
Short Term Vacation Rental Ordinance
In January 2020, the Phoenix City Council passed the ordinance requiring owners of short term rental to register with the city. The Short-Term Vacation Rental Ordinance further requires owners to provide contact information in case of an emergency or complaint. The host or owner must respond to police inquiries within the hour if an untoward incident occurred at their rental. First-time violators will be fined $500, second-time offenders $1,000, and third-time offenders $1,500.
Senate Bill 1554 Short-Term Rental Enforcement
The bill states that a property cannot be rented more than once in 30 days if:
- The short-term rental property is not an individual’s primary or secondary residence; or
- A corporate entity owns or runs the rental, but a majority homeowner is not situated within the property’s premises during the rental period.
However, it may be superseded by a county or municipality ordinance allowing the host or owner to rent out the property more than once during the 30 days.
The bill also disallows any marketing campaign for the short term rental intended to exceed the house’s occupancy limit or use for non-residential purposes, e.g., holding an event.
Another key provision of the bill is the host/owner’s compliance with habitability, health, and safety regulations.
For Maricopa County, one legislation of particular importance:
Arizona Revised Statutes Title 33. Property § 33-1902
You must register your rental property with Maricopa County, regardless of whether it’s for a short term or long term rental. Additionally, you need to update any information in the registration within ten days after a change in the information takes place.
Check with your county or city government for other related regulations.
The Arizona real estate market, which was intense in 2021, is expected to excite the housing industry in 2022. The “Sun Belt Surge,” the state’s promising job growth, a robust economy, quality of life, and numerous attractions, will work together to drive the Grand Canyon city’s housing market.
The relatively low mortgage rates that are expected to last until sometime middle of the year suggest that it is a good time to buy a property in Arizona now. The increasing property prices, the lack of new housing inventory, the reluctance of homeowners to sell, and the increasing demand for housing favor the rental market.
Whether you are investing in a traditional or Airbnb rental, the key to success is to find the best location and the most suitable property that will deliver good cash on cash return. You have the Mashvisor tools to help you do that.
Click here if you are ready to invest in the Arizona real estate market.