BUYING A HOUSE IN 2020? WHY THIS YEAR IS DIFFERENT.
Employment growth and a healthy economy have been keeping the Arizona housing market strong so far- can we expect the same in 2020?
With a lot of chatter about when the next housing market crash will hit, it only makes sense for active participants in the real estate market to be looking at predictions for 2020. While a housing market bubblepopping would affect the nation as a whole, certain markets could be better prepared. What can we expect from the Arizona housing market next year? Let’s take a look at some key Arizona real estate trends.
Pressure on Arizona Home Prices to Go Higher
Whether you’re a home buyer or a real estate investor, affordability will typically be one of the first things on your mind. So what kind of prices does the Arizona housing market forecast have in store for us? According to the latest Zillow forecast, we’re looking at a hot seller’s market statewide, with the median home value in the Arizona real estate market currently at $254,600. Having already increased by 5.3 percent since last year, Arizona housing market predictions for 2020 point to even more value increase (2.1 percent increase) which will lead to higher prices as well.
Of course, different cities within the Arizona housing market 2020 will experience different price trends. Let’s take a look at the average selling price of some major markets in the state so Arizona real estate investors know what to expect from each area.
Taking a Deeper Look at the Market
The Phoenix real estate market: Phoenix is currently one of the hottest markets in the state, but only expected to go up in value by 0.9 percent in 2020. The average sales price of Phoenix homes that sold over the last month is $265,000. This is 6 percent higher than last year.
The Scottsdale real estate market: Another red hot location in the Arizona housing market, Scottsdale is projected to experience a 1.6 percent increase in home value within the next year. With Scottsdale properties selling at an average price almost double Phoenix, expect to pay around $480,000 for Scottsdale investment properties.
The Tucson real estate market: You definitely won’t find a buyer’s market here as competition is through the roof, and price increases reflect that. One of the Arizona housing market predictions is that Tuscon homes will increase by 3 percent in value by 2020. Currently, the average selling price is $217,000, 4.2 percent higher than what it was last year.
Expect Strong Investment Property Performance in 2020
Before you invest in the Arizona housing market, you should know what the general return on investment for a rental property is. After collecting and analyzing data from rental properties all throughout the state, we’ve got the most accurate stats for Arizona real estate investors. Here’s the Arizona housing market forecast:
- Median Property Price: $417,713
- Price per Square Foot: $382
- Price to Rent Ratio: 22
- Average Days on Market: 114
This data is important for real estate investors so they know what to expect from a typical home purchase in Arizona. We’ve already discussed prices, but it seems Arizona houses for sale are spending a little bit longer on the market. The high price to rent ratio also tells us that the people in Arizona find it more affordable to rent rather than own a home. This is good news for rental property investors. Let’s look at the average rental return rates in Arizona:
- Monthly Traditional Rental Income: $1,577
- Traditional Cash on Cash Return: 1.4%
- Monthly Airbnb Rental Income: $2,452
- Airbnb Cash on Cash Return: 3.0%
- Airbnb Occupancy Rate: 55%
For statewide averages, these numbers are looking pretty good. This data is a result of analyzing tens of thousands of rental properties so that we can provide the most accurate Arizona housing market predictions. Note that we divided rental property performance based on rental strategy. That’s because profitability or the level of cash flow your investment property generates depends on different external factors for traditional long term rentals and Airbnb short term rentals.
Airbnb Regulations Introduced
This is one of the factors that Airbnb real estate investors need to consider and research when looking for Arizona housing market predictions. There’s a new statewide law that will require you to include your property’s tax license numbers in any short term rental listings or ads. These new Airbnb rules took effect on August 27th, 2019 and short term rental operators need to abide by them, or they’ll face the risk of being fined. In the Arizona housing market, if you’re operating a short term rental property, you need to collect and remit the state transaction privilege tax, county excise tax, and local transient occupancy. You also cannot host any large special events in your rental that would typically require a permit. Violators can be charged with a fee ranging from $500 to $1500.
The Economy Will Continue to Thrive
With the US having experienced economic expansion for about a decade now, experts are warning of a possible recession. But it should be noted that news of a recession does not equate to a housing crisis. It just means that after years of growth, the economy could be slowing down. And while a housing crash was the cause of the last recession, the upcoming one will most likely be kicked off by a stock market correction, monetary or trade policy. Even if a recession is on the horizon, experts project the housing sector to remain strong with home values increasing in 2020 and beyond. Zeroing in on the Arizona housing market, how will the Grand Canyon State hold up in light of a recession?
Forbes named Arizona one of the best states for business. It ranked #10 for labor supply and #5 in growth prospects. It’s got some of the best job and economic growth prospects forecasted, not just for 2020, but for the next three years. The main sectors experiencing job growth are construction, health care, manufacturing, and transportation. And as the job market continues to bring more and more people into the state, the Arizona real estate market will also continue to go strong.