Can someone explain the housing prices in AZ?

Question

I guess it's all relative since I live in southern California but I am looking at relocation to AZ and a few things are not making sense to me?

First, why are housing prices so cheap in AZ? I don't mean just cheap compared to CA (lower COL) but I ran a mortgage calculator on some houses and it is cheaper to buy than to rent. So why would anyone in their right mind rent? I get that some people have short-term commitments, have bad credit, no cash, etc. but it seems to be that those are short obstacles.

For example: Phoenix, Tempe ... normal 1bed apartment is around $800-900. Luxury around $1200-1500+. However, the same area I see houses as low as $120k for a 3bed/2ba. Anywhere from 120-220k. Which puts some of the cheaper ones at a mortgage payment of $800-900 with 0 down. (not saying you can get 0 down but just for math's sake) Wouldn't it make sense to just finance a house even if you're only there for a year or two? And then sell it?

I may be missing something because I'm using Map view for the houses and because AZ seems like all the cities and areas are very close to each other (unlike texas).

Also, north Scottsdale houses are 800-1.2mil? Why? I mean for that price you can buy a decent home in the greater los angeles area. It just seems very unbalanced.

Gary Nakauchi · Answer

That's exactly what I'm in the process of doing.  I lived in Rancho Cucamonga, and rent was $1700 for a 2bdrm apt.  I'm now renting in Chandler, which I think is actually nicer than Rancho, but am at $1000 a month, in a complex with the same # units and better amenities.

I just bought a triplex in central Phoenix Historical Oakland district, fully occupied, for 99k, using 20k down and hard $ the rest.  It's definitely a fixer; nothing hard, just a lot more of "fixes" than you would want to imagine.  All major systems are operable.  I'm well within my budget and spread out over time, the small fixes are easy.  I'm going to re-finance when it's up to bank level appraisal.  I'm just restoring it, not trying to upgrade it, because comps in the area are wild.  It meets all the BP 2%, 50% rules, ect.

I could never find this like in LA, and that's also why I made the move here.  Code enforcement is lax in the area, but I'm leaving them alone lest I awaken a sleeping giant.  I'm also hearing that compared to LA, permitted additions are easy to get approved via architect peer review boards, and while I'm not interested in that, it's still good news.  My lot is zoned and coded for it 's current set up, as all the houses in that area are.

David L. · Answer

Thanks. I'm looking slightly more north. Above Roosevelt and def right side of the 17. My immediate goal would be a place that I can actually live (I'm not quitting my job anytime soon) and cash flow so that a duplex or guest house will cover half or all of the mortgage and i can live for free or close to it. That would increase my savings rate from my income to where I can start branching out to more expensive deals. It'll also help me get familiar with the market. I'll be happy if I don't LOSE any money when I decide to leave AZ while the cash flow helped me out DURING.

Paying $1800 for a 1bed here in socal.. if I can make that work and bring my personal rent down to $0 while holding property, that'll be a very good reason for me to move to AZ and get my feet wet. Still would be holding down a full time job.

Account Closed · Answer

it is all neighborhood dependent, until you actually get to know the area you have no Idea. I CAN DO a search in San Diego and think the homes are cheap also

Gary Nakauchi · Answer

Hey David and Arizonians, Happy New Years!

In response to David's questions from several posts up:

1.  I did do a zip overview, had fastest and slowest appreciating zips, but chose the entry price over the zip in the end.  In this particular property, the $ is in the sweat equity fixer portion to refi out at comps, rather than appreciation, with renters holding up the fort.  I could have put the $$ into some Chandler/Scottsdale area which had 18% appreciation the past year, but I don't know where that would go next year, and it would still have to be a deal going in.  The current property was not a favorite, but on my list of drive by's, and I chose it after I drove by it, not in the office.

2.  Renting;  I've not done it yet in Phoenix.  I'm still fixing it as we speak.  Front tenants are moving out this month.  I'm budgeted for that so I don't care; it's faster to rehab without people inside.  The entry price allows me to go below market rents for 1/1's in the area, but comping on CL, rent. com and apartment. com show me $400 per room would be below, and $450-500 would be market.  Obviously, a lower price or a couple months rent discount would fill it faster; I'll cross that bridge when I get to it.

3.  If you wanted appreciation, that's different and I have not been here long enough to know the area.  I do suspect the FED will slowly raise rates, and because of the Dodd/Frank Act the economy is stable, so after an 18% appreciation year in Chandler/Scottsdale, the prices of houses in the area should gain a little more but not another 18%.  I have 2 good realtors and a contacts list full of crappy ones, PM or email me for their names.

I did look at new KB's for <300k and <180k in Chandler and Goodyear.  I would have got one of those if I wanted to just do appreciation; buy with market level upgrades of 30k added onto base sales price to resell to an average buyer in a year.  And nice developments in every direction when driven in a gradually widening circumference, I was drooling.  There are also <250k houses with 3 car garages, and pools in Chandler which is very nice, nicer than Rancho Cucamonga; I glance at those for a friend, but am not a particularly focused on them at the moment.  I'm currently lost in Home Depot trying to find parts to "lego" my place back together to battle "Super El Nino."

The place I bought, I would not mind moving into, but I don't have to, so that's my back up plan if all else fails.  There were other deals I had on radar that actually had good numbers, perhaps better, but I did not want to move into them, so the exit strategy was compromised, and I'm not a pro, so I need the back up plan to allow for mistakes and oversights.

I think you'd probably be better off after living in the area for a month or 2, because my perception changed, and learning the area and talking to some local agents or investors changed what I thought about Phoenix before I got here; in a progressive way of understanding, not necessarily good or bad.  I actually purchased the current property from an owner in Chino, Ca, who could not manage it from afar.

I wish you the best, steel sharpens steel, and that's why I like this BP site.  With Ca house buying power, you could get a 10+ unit in AZ, it's all a matter of experience.  I can't wait till next year, so keep us posted with the development of your plan.

Garrick Oconnell · Answer

David  you are right the prices in Arizona compared to 90% of all homes in southern CA are very inexpensive on all levels.

I go between San Diego, CA and AZ and the overall cost of land in our southern CA eyes affordable housing are abundant. If you are looking to house hack and rent out a portion of your duplex you must be very careful and aware what market rent is in the area the home is located, are comparable rents including utilities, etc.

Avery Gilmer · Answer

Hey @Bevla Reeves do you know where I can get more information on the programs that are available?

Rachel Frazier · Answer

@David L. I live in the (Phoenix/Scottsdale) Valley.   I am originally from San Francisco and definitely understand the multitude of differences between the Bay Area market and the metropolitan Phoenix market. You have received several accurate and  thorough responses to your question.

I suggest you visit the area to better understand the different cities (and "villages" or areas within the cities, the socioeconomic demographic differences, as well as their proximity to Phoenix or other areas, the Valley is beautiful and full of opportunity but as you have been advised you MUST do your research to find them. Deals are available but the market has changed over the years making deals harder (but not impossible) to find.

You are definitely on the right track by starting with BP. I am confident that you can find several BP members who would be happy to meet you during your visit and answer any questions you have regarding investing in the metropolitan Phoenix area.

Good luck!

Rachel

Garrett Sparks · Answer

Phoenix market is VERY competitive!  There are a lot of REI here as well as hedge fund buyers pushing up the prices at the auctions.  Deals are still out there for flippers but much harder to find than the past.  Definitely do your homework on neighborhoods.  Lots of good areas(like chandler) and a lot of rough neighborhoods like South Phoenix.....Hope that helps

David L. · Answer

That's very cool. I looked at the Inland Valley myself but while it's cheaper than the rest of LA and OC, it's not that much cheaper. If it is, it's in a really bad neighborhood and a drive to San Bernardino is longer than a flight to Phoenix hah

At first I was looking at a simple SFH that I can live in, have a yard for my dogs, and call my own while I fix it and upgrade it on the weekends over the course of a year that I live in AZ. Still an option but now I'm looking at duplex or triplexs because they seem to yield more cash flow during the flip/hold. I just finished watching the BP course and have to do some analysis with the 2%/50%70% rule but won't be able to get something real until I go out there and really see what AZ is even like. The best I got is realtor.com and google street view.

A few questions for you (or anyone else) if you don't mind:

1) How did you choose your Zip code or neighborhood that you're in? Why not another place like Tempe or phoenix?

2) Is it hard to find renters for property out in AZ? Do you just list on CL? (I've upgraded a home and sold for a profit but I don't have experience finding and dealing with tenants and estimating rent calculations. Which won't be a concern if I buy a SFH, but will be if I buy duplex/triplex)

3) What is the market like for flippers in AZ particularly Phoenix suburbs, tempe or south scottsdale? Is it on the rise, dropping, peak, etc? I hear it's very competitive for flippers but still possible. Just curious about the market and timing. I am hoping that if I buy property, it will appreciate within a years time when I leave.

Exit strategy may be to stay longer if I get promoted at my job, or to leave and rent the place if the property is appraised low.

David L. · Answer

Thanks for the advice. It's just a little weird living in CA and seeing prices over the internet for 2bed condos for $90k. Seems like one would jump on those low prices and the market would equalize itself. I may be failing to see the actual specifics of the neighborhoods or something.

I'm looking to buy, live for a year or two and then sell when I leave AZ. The fact that I would be my own tenant, I know how to do home DIY so I'd put in some sweat equity over the years as well as the lower prices make it a perfectly reasonable first home to flip. I can't do that here in CA. At least not with my money. A house around here worth flipping is at least $350k. Down and closing costs alone are way too much for me to jump in, not to mention risk. I've done it once and profitted huge but it was quite an ordeal which I learned a lot from.

Can someone explain the housing prices in AZ?

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