Phoenix housing Market in a slump (According to ASU Business Report)

10 Replies

Hello BP,

Just read this report today. It appears the Phoenix, Arizona market is hitting a slump. I am planning on purchasing a house soon and want to time it right with the market. I'm thinking about waiting a few months for the prices to go down to meet demand. This will be my first real estate investment and I would like some other opinions on this strategy. 

Thank you!

Are you planning to buy for your primary home or as an investment?  And what price range (not that you need to share, just think about it)?

I think it makes a difference.  The "cheaper" houses are still in short supply and for the most part, are hard to make good sense of rental wise right now.  Sure, there are deals out there, and ways to make things work, but from a general perspective it's hard to do.

In the more expensive houses - I think now is a fairly good time to buy.  Prices have been pretty stagnant or declining in recent months.  I don't think they'll decline like we saw 8ish years ago, but if you're buying as a primary residence with a long term hold in mind, then it's not a bad choice right now.

I haven't researched higher end houses as rentals, because for the most part they're simply out of the range I'd consider paying for a single unit. 

Not sure if that answers the question?

I agree with the points @Deborah Smith  has made about the current market.  And it's important to clarify if you're flipping / buy and hold / primary residence.

Generally speaking (and you've likely heard / read this 100 times), there is never a perfect time and the deals are sometimes tough to come by, but they are out there!

Best of luck. 

I would venture to guess Phoenix slumps are the best time to buy. Can you get this to slump more?



@Deborah Smith  @Mike Dmuchoski  

Thank you for your responses! I am still living with my parents right now since I am doing commercial real estate. It usually takes about a year before you start seeing any income with my current job. We have 2-3 big deals that are going to close soon and I am expecting to get a large amount of cash to put down on a house. Since it is going to be my first investment my plan is to live at the property and get a fixed rate 30 year FHA loan. However since my income is not very consistent I will need to to rent out available rooms/units. The plan is to pay off the mortgage with the rent and continue to use my income to invest. I want a property that isn't cheap but also not too expensive (100k-250k).

@Andrew Warner  

That's a tough one for me.  One on hand, if you get closer to your upper range I think you'll get a lot more for your money right now.  Riskier though, of course, since your income fluctuates.  But it's a little harder I think to get room renters in better areas... you'll really need to focus on an area that's likely to have singles, perhaps near a school, or cooler area to hang out (tempe, uptown, etc).

And I probably wouldn't want room renters in a not-so-great area as I think you'll have a much harder time finding people you'd be willing to have be your room mates.

Maybe a small multifamily is the way to go?  Provides more separation from your tenants but you might be able to get in to something decent without having to spend as much?  Probably also better return on your money.

Thank you @Deborah Smith  for the advice! By multifamily do you mean a du/tri/fourplex?  I have been looking at some in Tempe and they seem a bit pricey right now and don't meet the 2% rule. I recently talked to @Justin Howe and he said the PMI is now required for FHA loans and that a conventional loan may be better suited. If this is the case I wouldn't mind looking into a more than four units.

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@Andrew Warner  when you go past 4 units you get into commercial lending with usually an adjustable rate and expensive appraisals. You can get regular owner occ financing with 1-4 units but not above that. OTOH if you can make the deal worth it then by all means go larger. When you go larger though you need a bigger bankroll which it sounds as though you are lacking, unless of course you have other access to cash.

@Jeff S. Thanks for the tip! I always thought the 1-4 units applied mainly to FHA loans. I'll keep that in mind.


Agree on all points with @Jeff S.  

Regarding the 2% rule... it doesn't always work out to 2%, but if it doesn't that doesn't necessarily mean it's not a good deal.  In Phoenix I have generally been around 1-1.5%

Like any other metric suggested here, or anywhere else, consider it as only one facet of the deal as a whole. It may not reach 2%, but maybe the cash flow/ROI is acceptable to you in the way the deal is structured. Or maybe it doesn't meet the 50% rule, but is fair enough in the other guidelines that overall the deal is good, and so on.

With only what we know discussed here, if I were in your shoes, I would probably look toward a good 3-4plex and do owner occupied FHA financing. It's easy financing, little down, provides income, doesn't force you to have room mates, and is something you can probably keep long term or sell fairly easily if you decide to move on later. Now the trick is finding the right one :)

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