Arizona 2021 Market Outlook
November 4, 2020
Gary L. Farris
Certified Distance Education Instructor
Arizona School of Real Estate & Business
For the last several years, Arizona has experienced a significant increase in population growth. In fact, Maricopa County, has for over the last 5 years, the largest growth population for counties with population over 1 Million people.
But what is driving the growth? Foundational to the growth in any area is job creation. Most people need to work. In 2019, Maricopa County had the largest increase of any county in the United States, with 89,000 new jobs. In second place was Los Angeles County with 56,000, but consider LA County has a population nearly double Maricopa.
So why are businesses moving here? It sure isn’t for the summers. Natural resources? Much of our water is imported via the Central Arizona Project. Transportation center? We have roads, rail, and airports, but no seaports.
All signs point to the fact that Arizona is a business-friendly state with lower tax rates and streamlined government regulations. The Arizona Commerce Authority website states the per National Capita Income going to taxes at 9.9 % while in Arizona it’s 8.4%. For businesses, benefits include a simplified tax system with no franchise, business inventory, or estate taxes, to name just a few items mentioned on their website.
Also, Arizona’s diverse employment base runs the gambit from aerospace, defense, leisure, hospitality, telecommunications, technology, financial, transportation, and some of finest medical and healthcare providers in the nation.
That sounds great, but why move your business and many employee’s families – it’s an expensive endeavor!
With business’ families in mind the median home price in ARMLS in August was $324,000 up 11 percent from the same month in 2019. As a comparison, in California where I was born, raised, and have had an active Brokers license since 2007, the state median home price is $626,000.
While not just moving to Arizona, there is a trend of people leaving California. My informal measurement is the cost of a one-way household moving truck. From Phoenix to Palm Springs where we have another home the cost is $130. Book in reverse from Palm Springs to Phoenix the one-way rental and the cost is $1,600.
Consider as well, that from both business and personal perspectives, greater Phoenix is the closest major metropolitan area outside of anywhere in California. Basically a 6-hour drive to Orange or Los Angeles Counties.
Other factors that might have a major upside impact on resale home prices in 2021:
From 2017 – 2019 new home starts in Arizona have averaged about 15,000 per year. Down dramatically from the arguably skewed new home starts in 2004 – 2006 of roughly 40,000 per year. Still when compared to the continued job creation and population increases, this does point to seller’s market for 2021.
Another factor is the Federal Reserve monetary policy committing recently to holding their benchmark interest rate to near zero for the next several years. While this means lower interest paid by the borrower, the flip side is this could drive homes prices higher as more people could qualify to buy a home.
Finally, for some “blue sky” outlook literally, the virus has driven us to alternate methods of “face to face” communication. In the case of the Arizona School of Real Estate and Business, we have conducted Livestream sessions since March, with the approval of the Arizona Department of Real Estate. Across virtually all industries, work from home is to a large degree, here to stay. The major limitation in rural communities is the connection speeds.
For the “blue sky,” Elon Musk’s low earth orbit Starlink satellite high speed internet constellation is set to begin offering limited service in late 2020. This is the first of such systems with other companies following soon. This could have a profound impact on where we can live.
Back to earth, assuming no return of lockdowns, I see 2021 as marque year for Arizona Real Estate.