Phoenix went from bad to worse to worst(?)  when the housing market crashed. That was then, this is now!

I'm enjoying the ride. I find that the influx of people from other parts of the country (the soon to be 3 Californias, if they have their way, for instance)  and from the midwest have really brought back the Phoenix (Maricopa County) markets. High Tech companies are moving into the area which creates jobs. Of course, since I buy "off market" and cash flow the properties I'm particularly happy.  ;-)

Today's Newspaper

***********************************

New houses are going up in the Phoenix area at the fastest pace in 10 years, and prices are climbing faster than they have in five years.

Buyers are again heading to Valley suburbs farther out to find houses they can afford.

By the building numbers

More than 1,950 new houses sold Valleywide in May, and the pace of sales for the year is 18 percent ahead of last year, Belfiore Real Estate Consulting reports.

May was the best month for new house sales in metropolitan Phoenix since March 2008, according to RL Brown’s Phoenix Housing Market Letter.

Brown reports the median new house price in the Valley is up almost 3 percent from last year to $330,000. That's about $65,000 more than the area's median existing house sale price.

Jim Belfiore said demand from buyers in the spring gave homebuilders the confidence to push prices upward at the most significant pace in nearly five years.

It's not as bad as it was 10-15 years ago, but it seems like something has to give eventually. I remember hearing stories about people camping outside of new construction communities so they could buy homes as soon as they opened the doors for business lol. It was the wild west back then and I haven't seen consumer demand quite that crazy, but I have seen builders throwing houses everywhere they can like demand will never go down. 

Account Closed

The Arizona Sun Corridor (Prescott to Nogales) is set to explode in population over the next 30 years and double in population to over 12 million. Phoenix is obviously going to be leading the charge on that.

The main population segments moving here are going to be:

1) Retirees from colder states (Florida #1 destination, Arizona #2) Over 10,000 people turn 65 every day.

2) Younger Generations from California (mostly from SoCal - Median home price is double Phoenix's)

The main thing that'll keep the ball rolling is young families from more expensive markets like California. You can buy twice the home for half the price so everything out here seems like an absolute steal.

As long as interest rates don't get too high and we don't run out of water (or get nuked by North Korea!) I don't see anything really slowing down -- at least for a few more years.

Originally posted by @Wes Blackwell :

@Mike M.

The Arizona Sun Corridor (Prescott to Nogales) is set to explode in population over the next 30 years and double in population to over 12 million. Phoenix is obviously going to be leading the charge on that.

The main population segments moving here are going to be:

1) Retirees from colder states (Florida #1 destination, Arizona #2) Over 10,000 people turn 65 every day.

2) Younger Generations from California (mostly from SoCal - Median home price is double Phoenix's)

The main thing that'll keep the ball rolling is young families from more expensive markets like California. You can buy twice the home for half the price so everything out here seems like an absolute steal.

As long as interest rates don't get too high and we don't run out of water (or get nuked by North Korea!) I don't see anything really slowing down -- at least for a few more years.

 I agree. I'm betting once folks from California figure out that investing in Arizona is easier and safer than in California we'll see an up swing from there. 

As to "(if) we don't run out of water" I'm betting that one of two things will happen sometime in the future, 1) it will be decided to pipe the Columbia river from Washington the way oil is currently being piped across continents, or 2) a process will be developed to desalinate seawater cheaply or a process will be developed to bring moisture out of the air which can currently be done on a small scale. That will solve the water problems in the southwest states.  Or, they will develop a box that just sits there and blasts out cold air into a house which will reduce the summer heat to a much more livable temperature. Oh, that last one is called "air conditioning" which nobody saw coming back in the 30's and 40's. That is why Maricopa County is livable for most people through out the summer. Pie in the sky thoughts. 

Originally posted by @Account Closed :

Originally posted by @Wes Blackwell:

@Mike M.

The Arizona Sun Corridor (Prescott to Nogales) is set to explode in population over the next 30 years and double in population to over 12 million. Phoenix is obviously going to be leading the charge on that.

The main population segments moving here are going to be:

1) Retirees from colder states (Florida #1 destination, Arizona #2) Over 10,000 people turn 65 every day.

2) Younger Generations from California (mostly from SoCal - Median home price is double Phoenix's)

The main thing that'll keep the ball rolling is young families from more expensive markets like California. You can buy twice the home for half the price so everything out here seems like an absolute steal.

As long as interest rates don't get too high and we don't run out of water (or get nuked by North Korea!) I don't see anything really slowing down -- at least for a few more years.

 I agree. I'm betting once folks from California figure out that investing in Arizona is easier and safer than in California we'll see an up swing from there. 

As to "(if) we don't run out of water" I'm betting that one of two things will happen sometime in the future, 1) it will be decided to pipe the Columbia river from Washington the way oil is currently being piped across continents, or 2) a process will be developed to desalinate seawater cheaply or a process will be developed to bring moisture out of the air which can currently be done on a small scale. That will solve the water problems in the southwest states.  Or, they will develop a box that just sits there and blasts out cold air into a house which will reduce the summer heat to a much more livable temperature. Oh, that last one is called "air conditioning" which nobody saw coming back in the 30's and 40's. That is why Maricopa County is livable for most people through out the summer. Pie in the sky thoughts. 

 had not heard the piping of the Columbia down to AZ  I suspect the Greenies in Oregon and Washington would have something to say about that.. 

You're not wrong. I bought my first house in southern California in 2012 at the bottom of the market for $139k at 3.25%. My wife and I sold it in 2015 for $200k and kept the profit from equity as a down for our current house in Goodyear, AZ. I was surprised at the home prices out here when we bought (Dec 2017) compared to years prior but we still got a deal at 4.25%.  I work remote for a technology/web development consulting company based in Central Phoenix but with 3 boys, we didn't want to live near downtown.

I'm currently saving to invest in some properties down the road, possibly out of state, and would eventually like to buy and hold. Tech industry isn't so bad right now for a full-time gig to build some hard money but Phoenix is definitely up there now thanks to those pesky Californians... like myself lol.

@Torin Murphin

You're the perfect example! 

I remember when I was first considering moving here I was comparing Sacramento to Gilbert, and I could spend the same to buy a house that was 40 years newer and totally remodeled... with way better schools and way more safe too. I can only imagine the sticker shock for people looking from SoCal.

As more and more young families catch wind of the far more affordable pastures out here in Phoenix, they'll just keep on coming. Not gonna stop either.

Especially with tech because many employees can work remotely. That's a MAJOR game changer for markets near main tech hubs.

And Phoenix is growing in tech big time too!

https://www.cbsnews.com/media/americas-top-10-tech-cities-arent-on-the-coasts/4/

Phoenix - #3 Market for Tech Job Growth
One-year tech job growth: 188 percent
Median early career pay: $58,400
Median midcareer pay: $96,800

I'm friends with the CEO of a major start-up firm out here and all he talks about is the tech growth in downtown Phoenix. Same metro feel as LA and the Bay Area... WAAAAAAY more affordable.

http://ktar.com/story/1908091/could-downtown-phoenix-be-the-next-major-hub-for-high-tech-companies/

"Shannon Selby, the economic development program manager for the City of Phoenix, said the number of high-tech companies in the area has increased from 67 to 281 over the last five years, a growth of more than 300 percent."

Nuff said.

@Wes Blackwell Yup! The tech industry here is booming. We're growing every year and keep signing more clients and larger ones. We wanted to buy before it got too crazy.

Also, I read something that Buckeye will be the next biggest growing city in Arizona due to a ton of businesses buying land and building distribution or manufacturing centers... and people always hate on the west valley!

@Torin Murphin

All Buckeye needs is a "cool factor" to attract people there. Just look at what has happened to Gilbert:

https://www.biggerpockets.com/forums/600/topics/582579-opinion-gilbert-population-growth-good-thing-or-bad-thing

Those business will attract jobs. High paying jobs attract employees with expendable income. Expendable income attracts all the cool food joints, breweries, yoga studios, etc. that millennials love.

Love prices + cool stuff = millennials crack.

And before you know it the area has been "gentrified 2.0" and blows up like crazy.

Interesting thread. Buckeye sounds really interesting especially since it looks like it’s backed by one of Bill Gate’s investment companies .

http://www.businessinsider.com/bill-gates-smart-city-pros-cons-arizona-urban-planners-2017-11
Looks like they bought the land around $7500 acre .

It makes sense more people are moving out of CA to Arizona and other lower cost lower taxed states .
There are lower cost parts of CA like Central Valley , Bakersfield for example but the economy is still pretty rough there , 10% unemployment and not too many industries with higher paying jobs.

A lot of people from CA would invest in Arizona and Nevada for cash flow , but it seems many are flocking to the Midwest and less expensive areas if they are looking to get into the market now .

I know Phoenix got hit very hard with foreclosures and homes could be bought for $30k or so on low end and people had their pick since the bank was off loading so many homes , now looks like low end is $150k plus . A lot of people made a fortune buying and selling
Was tough to get financing back then though especially for lower end non owner occupied .

But even all cash 5x return not including any cash flow is a nice very nice return in about 8 years or so.
Can one cash flow in Phoenix at today’s prices?

Originally posted by @Jay Hinrichs :

Originally posted by @Mike M.:

Originally posted by @Wes Blackwell:

@Mike M.

The Arizona Sun Corridor (Prescott to Nogales) is set to explode in population over the next 30 years and double in population to over 12 million. Phoenix is obviously going to be leading the charge on that.

The main population segments moving here are going to be:

1) Retirees from colder states (Florida #1 destination, Arizona #2) Over 10,000 people turn 65 every day.

2) Younger Generations from California (mostly from SoCal - Median home price is double Phoenix's)

The main thing that'll keep the ball rolling is young families from more expensive markets like California. You can buy twice the home for half the price so everything out here seems like an absolute steal.

As long as interest rates don't get too high and we don't run out of water (or get nuked by North Korea!) I don't see anything really slowing down -- at least for a few more years.

 I agree. I'm betting once folks from California figure out that investing in Arizona is easier and safer than in California we'll see an up swing from there. 

As to "(if) we don't run out of water" I'm betting that one of two things will happen sometime in the future, 1) it will be decided to pipe the Columbia river from Washington the way oil is currently being piped across continents, or 2) a process will be developed to desalinate seawater cheaply or a process will be developed to bring moisture out of the air which can currently be done on a small scale. That will solve the water problems in the southwest states.  Or, they will develop a box that just sits there and blasts out cold air into a house which will reduce the summer heat to a much more livable temperature. Oh, that last one is called "air conditioning" which nobody saw coming back in the 30's and 40's. That is why Maricopa County is livable for most people through out the summer. Pie in the sky thoughts. 

 had not heard the piping of the Columbia down to AZ  I suspect the Greenies in Oregon and Washington would have something to say about that.. 

 LOL - It is just all that nice fresh water running into the ocean must be hurting some saltwater fish or other. ;-)  

From what everyone is saying about Arizona, it makes me feel pretty confident in continuing to buy properties here. We are half through the year and half way to our goal of 15 properties this year and we are working on closing on 6 loans in the next 2 weeks and another 5 in the next few months. 

I find that investors can still cash flow if they are willing to adjust their models. We switched to a lease option model last year from a flipping model and we have been able to cash flow and experience appreciation on each of our properties in Arizona.

@Shiloh Lundahl interesting you have switched to a lease option model , it seems a lot of people would do those before but haven’t heard it talked about much recently .

What type of cap rates or returns are you seeing on properties bought today in the current market ?
I’m guessing you mostly buy off market deals ?

I see you have Burbank CA as your location as well . I live in the SFV, used to live very close to Burbank . Very nice city .

@Joseph M. I am in Burbank half of the week. The other half of the week I am in Arizona. But I manage most of my real estate over the phone so it doesn’t really matter where I’m at to manage our properties or deals. All of the lease options that we have are with properties that we own in Arizona.

We don’t look much at cap rates to determine if the property will work for our model. What we do look at is how much rent we can get each month, how much of an option for the property we think we can get, how much money will be left in the property after we get a loan on it, how much cash flow we will get each month, and how much of a profit we will make when the tenant exercises the option.  These are the numbers that guide our decision-making when it comes to buying properties. 

In a lot of cases we are able to pull out all of our original investment when we refinance the property into a long-term commercial loan. Other times, we offer second position loans on some of our properties that perform at 10% to 12% for private money lenders who just want passive income. When all is said and done we net a couple of hundred dollars a month in cash flow for each property. The cash flow is not very high when compared to other states, however, we also take into consideration the total profit of when the tenant exercises the option plus our monthly cash flow. We average around $60,000 total profit for each property over a 4 to 5 year period of time with little of our own money invested.

@Joseph M.

Just to point out, areas of the central valley like Fresno and Bakersfield have historically always had higher unemployment rates because so much of the employment sector there is in agriculture. Weather and seasonal work drastically affect those figures. 

It always puzzled me too until I did a bunch of research into it. You have to compare the current figures to historic figures of the state and account for the fact that it's always been higher... the question really is how much higher is it today than it has been in the past? And is that a problem.

But still, investors in California are better off looking at markets further north like Stockton and Sacramento that have a lot more robust economies.

@Wes Blackwell yeah that’s a good point . I actually have some relatives in Bakersfield that bought during the crash. The low end has gone up about 300% or more from the crash but may not have recovered yet from the peak boom highs .

I do kind of regret not buying rentals there during the crash as I decided to buy a house to live in the L.A area in 2010 instead , it worked out well but returns would of been higher there . I did really want to own my own home though .

Things definitely overcorrected .

Yeah Sacramento looks appealing for people as it’s still quite affordable and the economy is strong now unemployment rate low . I had read a recent article that the number of people buying there from the Bay Area has gone up a lot . Not surprising since Bay Area Median price is about $800,000 and $1.6 million for city of SF.

@Joseph M.

We all wish we had bought more property during the crash hahahah, once in a lifetime opportunity!

Median home price in Sacramento is around $350-375k so it's an absolute steal for anyone coming from the Bay Area. You can buy twice the house for half the price!

And as more and more tech companies allow employees to work from home or only commute a few days a week, Sacramento is going to become a WAAAAAY better option for most Bay Area workers. Same thing goes for Stockton (just not to the same degree).

@Wes Blackwell

Yeah I don’t see the trend of people working from home or telecommuting going away only increasing .
Especially in the tech industry and as technology advances .
Also it’s probably not too far off that self driving cars will be mainstream .
It won’t be as much of a hassle or as stressful to commute if you can chill in your car , get work done on laptop or even take a nap .

@Shiloh Lundahl
Just saw you are the guest on the latest BP Podcast , looking forward to listening! Congratulations!

Article from today

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Almost 50 percent more potential homebuyers from outside Arizona searched for houses in Phoenix area during the first quarter than a year ago

About 23 percent of out-of-state buyers looking in Phoenix were from Los Angeles during the first three months of this year

Denver residents’ top pick for moving was Phoenix

—
Metro Phoenix draws homebuyers from LA, Seattle and Denver
https://www.azcentral.com/story/money/real-estate/catherine-reagor/2018/07/15/metro-phoenix-draws-homebuyers-la-seattle-and-denver-home-prices-household-income-redfin/772863002/