Arizona Real Estate
Arizona is the sixth largest state in the United States as is made up of approximately 113,642 square miles of desert landscape in the central and southern areas and forest woodlands in the northern mountain regions. In the early days of Arizona’s history, the real estate industry, like many other real estate markets in the United States at the time, witnessed great fluctuations over the first few years. As the years passed, economists and real estate companies together managed to identify several different trends that assisted them in predicting which way the real estate market would fluctuate. One common trend associated with housing prices in today’s market focuses on median household incomes – the higher the average household income rises, the higher the prices for single-family homes are expected to go. On the other hand, the number of house sales is associated with the state’s population; if the state’s population increases, naturally, the number of houses for sale sold will increase and vice versa. In Arizona's Real Estate market, the fore-mentioned trends have held true throughout the decades, specifically throughout the 1970s to 1990s. It isn't until the year 2005 that Arizona's real estate market began to see a turn in the outcomes of the trends. For example, in 2006 incomes rose 10% while house prices decreased by 6%.
For a variety of reasons, Arizona has become an excellent choice for people not only looking to settle down and raise a family but also for people looking to own property for business and investment purposes. Being such an attractive place for settlers and investors, Arizona has now taken the lead in population growth throughout the entire nation. The state of Arizona has also become the home of the third largest populated county in the U.S. – Maricopa County, with a population increase of over 137,000 annually. In fact, in the year 2006 alone, it has been noted that Arizona's population increased more so than any prior year.
While Arizona has attracted many investors and businesses, the overwhelming amount of new residents comes from settlers moving to Arizona. So many new residents have moved to Arizona that it is now the second major state populated by domestic migrants, Florida is the first largest. This augment in migrants and in the increase of overall population is largely due to an availability of jobs and increasing wages in Arizona. To be more specific, in 2006, private sector workers' wages have gone up 4.9% while personal incomes grew 9.4%. Also, the transition from the year 2005 to 2006 has also generated an increase of approximately 110,000 jobs for Arizona workers; a statistic that is predicted to only increase in the near future.
Figure 1 - Increase in Jobs (2005)
Like the popular trends in home sales and prices have taught us, increases in wages and settlers would only mean that the real estate market is looking at increases in median home prices and home sales. This, though, has been proving incorrect in the present years; in fact the exact opposite effect is taking place in the current real estate market. While land today is very scarce in Arizona (with almost only 16% of its land left being available for private sectors) it seems that the increased population of settlers is not taking advantage of what is available. By the year 2005, the number of unsold homes rose from a mere few thousand available homes to over 46,000 available homes. To be fair, it wasn’t only Arizona that was facing such a decrease in home purchasing; throughout the entire nation, home buying decreased about 20%.
Normally, when a state experiences a large increase in population, quite like the increase Arizona experiences, the demand for homes would increase; thus causing the average prices for homes to increase as well. However, the large supply of available homes has decreased the median home price of Arizona homes and consumer skepticism towards real estate in Arizona has attributed to a sudden decline in home purchasing. According to the Census Bureau, average home prices increase 64% from 2001 to 2005, making house prices rise from $194,000 up to $260,000.
The current ongoing population growth along with the increases in home prices matched with such a great decline in home buyers has caused a great problem for the real estate market in Arizona. It is believed though that in the upcoming years, a need for homes will increase so much that the increased inventory of available homes will begin to decline, thus the problem will solve itself during the end of 2008 and the beginning of 2009.
References:
Durnford, Stacie Z (2006). Arizona - A Snapshot. Retrieved January 28, 2008, from Durnford Group Web site: http://durnfordgroup.com/resources/ArizonaIn-Depth.html
Bajaj, Vickas (2006, November 7). In Arizona, "For Sale" is a Sign of the Times. New York Times, Retrieved January 27, 2008, from http://www.nytimes.com/2006/11/07/realestate/07land.html?pagewanted=print
Butler, Jay Q (2006, June 9). Greater Phoenix Resale Numbers. Retrieved January 28, 2008, from Arizona State University Web site: http://www.poly.asu.edu/news/2006/06/09/
McConnell, Nick (2007 September 22). Scottsdale, Arizona Market Trends. Free Articles Archive, Retrieved January 29, 2008, from http://www.freearticlesarchive.com/article/Scottsdale__Arizona_Real_Estate_Market_Trends/27246/0/
(2007, December 13). Will Home Prices Hit Bottom By June. The Wall Street Journal , Retrieved January 30, 2007, from http://blogs.wsj.com/economics/2007/12/31/will-home-prices-hit-bottom-by-june/
