Arizona market for buying and selling houses? Thoughts?

Question

I’m a newbie starting out in real estate investing. Wanting to know how the Arizona market is right now and how to tell if it’s good or bad.

Paul Welden · Answer

Phoenix area real estate market needs 25k-30k active listings in the MLS on a continuous basis to be a normal market.

On 3/2/2021 at 7:31pm, there are only 3,954 available in the MLS. In late 2020, we hade 7k-8k available but the #'s just keep decreasing.

There is about a 14 day supply of properties in the MLS but we need ~4 month supply to be normal.

I've been a licensed real estate agent for 16 years and have never seen anything like this before!

The Phoenix area real estate market is hotter than hot!

At some point, it's going to change and get to a more normal market, but when that happens, values will have already increased an extra $100k+. So, people can wait, but wait for what????

With none of the subprime loans like there were available back in the foreclosure mess 10+ years ago, and lenders having more strict qualifying guidelines, it's very doubtful we will see a repeat of the most recent foreclosure housing mess that we had 10+ years ago.

And when the forbearance period expires this month, and home owners have to start making their mortgage payments again but can't, they may need to sell but they can sell for a profit and not a distressed financial situation.

I think the main way buyers are able to actually buy a home in the Phoenix market is if they are lucky ... lucky they have an inside connection, lucky to have a good Realtor, lucky to be at the right place at the right time, lucky their offer was accepted, lucky the new home builder picked their "golden ticket," ... just plain lucky.

With 20k+ active buyers in the Phoenix market, luck has to be a part of the success of buying real estate here now.

Sure there are some people with a lot of cash and that certainly helps, but one of my buyers recently beat out a cash buyer at the same price only because I found out what the sellers really needed and that was a leaseback for a few months. We gave it to them and got our offer accepted.

Even wholesale off market properties are going fast with multiple offers and getting bid up! It's a crazy market here in Phoenix ... Wild, Wild West!

The market here is both good and bad ... depends on who you are and what your goals are.

Zach Wain · Answer

@Paul Welden - I have agreed with this statement until recently

"With none of the subprime loans like there were available back in the foreclosure mess 10+ years ago, and lenders having more strict qualifying guidelines, it's very doubtful we will see a repeat of the most recent foreclosure housing mess that we had 10+ years ago."

While todays lending market is nothing like it was back in 2006-2008, some credit unions have recently came out with 0% down conventional loans, and I have had more and more requests from clients with less than A+ profiles to buy with as little down as possible.  There are Non QM loans with bank statements only, and some versions of stated income; and more and more people are asking for those type of loans.  So it has me a little concerned from the consumer aspect because many people have already forgot what happened.  Lending/consumer mentality is not back to its old subprime ways, but its starting to push in that direction.

However, Fannie Mae is coming out with some updates to its DU loan approval software, version 11.0 on March 13th and Fannie Mae is getting more strict on higher DTI, lower credit score loans and there should be about 1%-2% less approvals than before.  So nothing major, but that is a good thing for the overall market.

I am wary of the 0% down consumers because they are the first to foreclose

Account Closed · Answer

@Ivan Casale I would say that Phoenix is an attractive market to invest in. I primarily focus on employment growth when choosing a place to invest. Jobs bring people, people bring competition, competition brings price and rent increases.

As mentioned above, it is a highly competitive market with extremely low inventory. My theory is that prices will continue to rise if interest rates are kept low. We won’t cure the supply problem with new construction, not for years anyway. COVID, 2008, lumber costs and the current lending environment have created a perfect storm on the supply side. I imagine the demand side is honestly being held down by COVID as well, if you can believe that. I’ve had many conversations with individuals who have no desire to move in the middle of a pandemic. Sooner or later this all has to shake out, but none of my warning signs are flashing at the moment for a pullback in pricing.

My advice, dip your toe in.

Bob E. · Answer

Phoenix market is very active right now.  The local REIA has an online meeting next Monday that should include their truly amazing market update.  You can sign up to join the meeting here:

Click Here for AZREIA Site

Paul Welden · Answer

@Zach Wain BBVA has been offering a 0% down portfolio Mortgsge for quite a while but they do have some strict UW guidelines. I agree that the low down payment home buyers are usually the first to go through a foreclose.

Louis Davis · Answer

@Ivan Casale The Arizona market is tough due to there is a ton of investors out there. Arizona is damn near the birthplace of wholesaling due to that's where most of the people that teach wholesaling reside. From my last visit there, a lot of people are teaming up and attacking certain parts of the market and they tend to not step on each others toes when it comes to territory. My advice would be to reach out to some of these guys so that you can get hands on learning. Figure out how they market, buy and sell the properties then once you feel comfortable enough, break away and start your own operation.

Hope that helps

Ivan Casale · Answer

@Louis Davis thanks a lot for the advice.

Ivan Casale · Answer

@Matt Dickens I haven’t really yet. Like I said I’m just starting out in the business. I’ve been reading and digging into the university that YouTube provides and trying to figure out how to get my buyers in place first before I go and find properties. I just don’t have the best idea on how to find those buyers yet. Just wanted to see if I could network with buyers here potentially and work my way from there.

Matt Dickens · Answer

Hey @Ivan Casale I live in Arizona and am a newer investor, so I am sure some older wiser ones will have additional insight. Arizona is especially competitive, at least in the Phoenix metroplex area. The west valley (west of dt phoenix) seems to be a little more inexpensive and I see more wholesale deals on that side of town. I have made 2 offers in the last two weeks and both homes have had 10+ offers at the 300-350K price point. Its a great market to invest in from a macro perspective as the things that drive growth here such as the business climate and weather most likely aren't going anywhere, but its a very competitive market especially if you are not going off market to find deals. Do you have a strategy picked out yet?

Arizona market for buying and selling houses? Thoughts?

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