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Quick Hits: If you’re planning to buy a home in
Phoenix, Flagstaff or Prescott, do it now, because prices are going up for the
next few years. Investments in single-family rental properties have good
potential mainly in Phoenix. Apartment developments have the best potential in
Phoenix, where splitting homes into rental units is also attractive, and in
Tucson. Mortgages and construction loans have average risk. Best bets for
investments in retail are Phoenix, especially the southeast suburbs; worst bets
are Tucson and Prescott.
Investing
in Arizona no longer means dubious retirement projects in the desert – a kind
of Florida West with sand instead of swamp. You can find those too, if you like
taking a flyer, but Phoenix and Tucson have grown up and offer investors a
range of possibilities. In addition to the big cities, Prescott does
cater to retirees, Flagstaff has a younger demographic, and Yuma has a heavily
immigrant population; all have different housing needs.
The
strongest economic growth, and therefore strongest demand for housing, is in
Phoenix, where jobs are being added at twice the national rate many of them in
healthcare, retail, and the large finance sector. Job growth has also been
strong in Prescott, mostly in the retail and healthcare sectors as you would
expect from the retiree population. Growth in Tucson, on the other hand, has
recently been slow. Flagstaff depends heavily on the cyclical tourist trade.
Home
prices in all Arizona markets rose and fell sharply in the boom and bust; but
afterwards prices in Phoenix – and somewhat in Prescott – went through a
mini-boom of speculation in foreclosed properties. It looks like those have now
been flushed through the system, so we can take at face value the recent price
increases – strongest in Phoenix, Flagstaff and Prescott, weaker in Tucson and
Yuma. I expect Phoenix prices up at least 25 percent over the next three years,
which means you shouldn’t wait if you plan to buy there. Prices have been
strongest in Phoenix itself, slightly weaker in the southeast suburbs.
Flagstaff,
Tucson and Phoenix have a high proportion of renters, almost 40 percent, but
because home prices in the former two are high compared to rents, investing in
single-family properties to rent them out is most feasible in Phoenix – where
the ratio is much more favorable and where housing needs encourage splitting
single-family homes into multiple rental units. The relatively lower pay in the
growing retail and healthcare sectors will expand renting in future years.
Mortgages
are a good investment right now. Because home prices will keep rising the next
few years, the equity cushion for new mortgages will grow quickly; yet prices
are in balance with local incomes, so the risk of default will stay average.
Construction loans also will have average risk in the growing markets,
especially Phoenix, where I expect 60,000 new single-family homes built over
the next three years and 60,000 apartments. In Prescott I expect a modest 5,000
homes built and in Tucson 5,000 apartments. In Flagstaff and Yuma I expect less
than a thousand new housing units, mainly apartments.
Because
of the rapid population growth, investments in retail stores and restaurants
are favorable in Phoenix; the suburbs in Pinal County are greatly underserved
for both. Such investments in Flagstaff face stronger competition and the
cyclicality of tourism. The retail sector has been flat in Prescott and has
actually shrunk in Tucson. The large growth of finance and healthcare in
Phoenix will probably call for more office space.
Should You
Invest In Arizona Real Estate?
Arizona Property Management and
Investments
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Quote:
(888) 777 6664
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