Another Real Estate Bubble in Arizona?

For the past few months I have become more and more concerned with the way pricing has been heading. Sure it is great for the sellers but I know for a fact there are a lot of buyers out there who simply cannot afford to own a home anymore because the inventory just is not there for homes under $200,000.

To make matters worse, rental rates are going up at alarming rates as well all while income levels in the valley have been relatively stagnant.

I decided to research home values and price per sq ft over the past 12 months to see if we can find similar trends to the bubble that popped in 2007-2012 and what I found surprised me.

This article is from the Cromford Report Daily Observation from June 17, 2016:
June 17 – The West Valley is a good illustration of the difference between 3 price segments in the single family home market. During the 3 months March through May 2016 we saw the following changes in average price per square foot compared with a year earlier:

  • Below $250,000 – up 10.1%
  • Between $250,000 and $500,000 – up 1.2%
  • $500,000 and over – down 3.0%

The overall average appreciation rate is 7.3%. but this is obviously misleading. It is too low to represent the entry range accurately and far too high for the rest of the market.

Among the top performing ZIP codes for appreciation we find:

  1. Glendale 85301 – up 20.3%
  2. Youngtown 85363 – up 15.6%
  3. Sun City 85351 – up 14.2%
  4. Tolleson 85353 – up 14.0%
  5. Glendale 85303 – up 13.7%

The top 2 ZIP codes were the lowest price areas one year ago, but they are catching the rest of the pack.

Even though Glendale had the highest appreciating ZIP code, it also had the lowest – Glendale 85310 went backwards by 5.6%. It was the only ZIP code in the West Valley with negative appreciation. Last year it was the most expensive ZIP code with an average price of $142.74. This year it has fallen back to $134.70 and been overtaken by Peoria 85383 at $136.76, Goodyear 85395 at $135.52 and Glendale 85308 at $136.27.

We can see that in general the lowest priced areas are appreciating the fastest and the highest priced areas are usually appreciating the least.

To summarize: If you are a buyer looking to buy a home in the Valley for under 250k good luck. You will be up against some very stiff competition.  However, inventory is not nearly as low when you get above the 250k amount. In fact home prices have only gone up about 1%. Then when you get to the 500k+ priced homes they have actually depreciated over the past 12 months.

During the bubble we were seeing home prices sky rocket across the board. This appreciation however seems to me at least to be sustainable. I will hold off on hitting the bubble panic button.

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