Economists divide markets into three categories: buyers, sellers, and balanced. These terms discuss the relationship between supply and demand in the real estate market and other industries. Market forces differ between states, cities, and even neighborhoods. Whether you are an investor or buyer, property affordability is a question that lingers in your mind. This is in turn decided by its location being a buyer’s or a seller’s market.
Arizona, a Buyer’s or Seller’s Market?
A forecast by I Need House Info discovered that Arizona appears to be a seller’s market. Medium houses are going for an average of $472,716. This figure is a marked rise from the previous year, hinting that it is more seller oriented.
In a buyer’s market, supply exceeds demand. In Arizona, there is a very low supply and little hope of an increase in the future. Even though the demand is relatively weak, it is more than enough to surpass the supply. This means that sales prices display an upward momentum.
Though there are talks on lowering prices, this is not about closed sales. Instead, it is due to numerous sellers reducing their expectations and adjusting their listing to align with market conditions.
This action does not lead to closed prices going down from the previous year as you would expect in a buyer’s market. Instead, we are seeing the average price per sq. ft. reaching new heights within contracts. It is currently at $362.
Arizona Real Estate Market in 2020
2020 has seen property prices increase as it progresses, although different cities experience differences in rise. Phoenix, the capital city, is one of the hottest markets in Arizona. It was expected to get a 0.9% rise in 2020, but in just April, property was going for $265,000 on average. This is 6% higher than was obtainable in 2019.
Arizona real estate investors are earning excellent rental income and return on investment. Price to rent ratio is 23 despite the COVID-19 pandemic. Affordability has been an issue in Arizona for a while now. In 2019, the National Low Income Housing Coalition (NLIHC) listed it as the third-worst state in the US when it comes to affordable housing. This shortage has had a decade-long devastation on Arizona’s low and middle-income households.
In 2019, Arizona’s rental-housing supply could only sustain a quarter of its demand. According to the NLIHC, for every 100 extremely poor households, only 25 affordable rental units are available. This is translating to rapidly increasing property values for buyers.
Renter population is even expected to increase in 2021 since it is more affordable than buying. Local real estate investors will enjoy this massive plus in a market with a soaring occupancy rate. Active listings have dropped by 41% year over year and the days property spend on the market is 18% less year over year.
Should Investors Seek the Arizona Real Estate Market?
A competitive investor with cash reserves should take an interest in the Arizona housing market. It is steady and poses little risk, even in the long term. The state does not just seem to be a seller’s market now, but projections show that it will even be more so in 2021.