By Mike Bodeen · 25 November 2019
For the past few issues, we’ve been discussing the inevitability of Phoenix Metro’s escalating appreciation. Three words in basic economics drives this: supply and demand.
There are many reasons why demand for our housing will remain high, notably, new business start-ups and relocations – much of it from the California exodus.
In a recent article from the Phoenix Business Journal, for example, Chris Camacho, President and CEO of GPEC (Greater Phoenix Economic Council) said there are currently 340 companies in the pipeline evaluating greater Phoenix for investment and job creation, “from high-growth startups to global enterprises.”
” …there are currently 340 companies in the pipeline evaluating greater Phoenix for investment and job creation…”
Joseph Vranich, president of Spectrum Location Solutions LLC, said that Texas topped the list of choices for relocating California companies, followed by Nevada, then Arizona. According to Vranich, the top three reasons companies leave California are taxes, a harsh regulatory environment and quality of life, specifically related to unaffordable housing prices.
“Arizona provides a friendlier tax and regulatory environment for businesses,” Vranich said, “but it also benefits from its proximity to California, which is the fifth-largest economy in the world, according to U.S. Department of Commerce data released in 2018.”
“Arizona is a good place, but one of the many good things about it is it’s only about an hour flight from L.A.,” Vranich said. “So if you want to move your company, you’re not going to be too far away from your friends and family.”
On the supply side, we’ve been reporting over the past few years, the local dearth of available listings for sale, which continues to retreat. We discovered that in Phoenix, as well as nationally, many folks just aren’t moving as much as they used to. More boomers are deciding to age in place, staying put in their homes longer. We also know that many folks who have recently bought or refinanced their homes into sub-4% mortgage rates are thrilled about their lower payments. Home Depot and Lowe’s are reporting higher revenue as well, due in part to folks remodeling their homes to stay in them.
Investors continue to scoop up available residential properties for the continued demand for rentals that the new home market has not kept pace with. Though we need rentals for sure, every home purchased for an investment hold is one less home for a primary home buyer.
So here we find ourselves, in the beginning of what we believe to be the next hyper-appreciation market. In the short term, apart from a catastrophic national event, there doesn’t seem to be anything that’s going to stop this upward price trajectory.