Sunday, October 3, 2010

Why Phoenix?

Phoenix, Arizona is the fifth largest city in the United States, with growth continuing ongoing. Phoenix has grown by more than 100,000 people per year over the last 25 years. This is astonishing growth. Through the economic downturn, change in population in major markets across the US shows that Arizona, resource-rich Utah, Colorado, Texas, and tech hub North Carolina led the nation with greater than 2% growth in population from mid-2007 to mid-2008. An April 2010 report from University of Arizona forecasts population increase of 875,000 persons, pushing total Greater Phoenix population to approximately 5.2 million by 2016.

Job growth and diversity of employment both have a positive impact on the local market. Phoenix has a diverse employment base with jobs in high tech, government, farming, education, warehousing, manufacturing, natural resources and mining, construction, travel and leisure. The Phoenix area has a lower unemployment rate than the United States average (8.6% to 9.5%). An April 2010 report from University of Arizona forecasts an increase in employment of 409,000 by 2016.

The other reason people move to Phoenix is the great climate, golf courses and lack of natural disasters. Being in a desert, there is limited humidity and temperatures are great year round (except August when it is 110 degrees Fahrenheit plus). Phoenix also contains a very diverse employment base and all six major sports (football, baseball, hockey, basketball, golf and Nascar). The Greater Phoenix area has become a destination for second homes with 37% of MLS sales in 2010 coming from Canadians and people from the Northern States.

Simple economics state that if supply is low, demand is high and vice versa. The years of 2007 and 2008, in Greater Phoenix area there were massive amounts of foreclosures and excess resale inventory that drove the MLS active listings to more than 60,000. A healthy market in the Phoenix area should have 35,000 active listings. Currently, in Phoenix, there are 37,000 active listings on the market right now and 30,000 of those are single family homes. Out of those approximately 1/3 of listings are short sales, those 12,500 active listings cannot be purchased in a traditional sense and require a six plus month negotiation with a bank. Short sales are homes that are in pre-foreclosure.

As the inventory has declined, the average sales price per square foot has shown a promising growth at certain price points. There is evidence that home prices at certain price points have stopped falling and are bouncing along the bottom. They are neither growing nor declining. With the per square foot price of active listings and pending listings stabilizing and the affordability index climbing, the evidence of market recovery begins to become quite convincing. Phoenix is now a very affordable city to buy a home in, which fuels corporate relocations to the city. Experts predict the market will reach an 80% recovery by 2013.

Phoenix also contains the second largest university in North America – Arizona State University, which consistently brings new people to the Greater Phoenix area. The major fortune 500 corporations, such as Honeywell, Wal-Mart, Intel, Wells Fargo, Home Depot, Target, US Airways, IBM, Verizon and many health care facilities routinely provide sectional lectures to the university for the opportunity to recruit the best and brightest. The average age of people in the city of Phoenix is 34 years old.

In my recent online poll, 66% of respondants thought it was a good time to invest in US real estate and 100% thought that the Southern states were better investments than the Northern States.

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