By all accounts, the real estate market in Phoenix, Arizona is just at the beginning of a recovery. Most investors believe that Phoenix property values bottomed out last year, following a sharp price drop during the previous years. This has brought together two statistics that make it favorable for investing. First, the inventory of houses pending foreclosure has dropped to a third of what it was at the peak of the housing crisis. Second, the price per square foot has been practically flat for more than a year, but has lately shown signs that it is trying to rebound. This raises the question of who is buying property in Phoenix.
First-Time Home Buyers
The anticipated market recovery has been attracting several types of buyers for Phoenix property. First time home buyers are starting to buy up the inventory of houses in the Phoenix market. They see prices lower than they have been in more than ten years and mortgage interest rates at an all time low. Anyone who has the cash for a good down payment and qualifies for a mortgage will find the market conditions very hard to pass up.
Rental Property Investors
People looking for rental property investments are also finding the Phoenix property market very favorable. In addition to the favorable pricing, the investment minded buyer is seeing a very favorable price-to-rent ratio right now. What is the reason for this? Demand for rentals is high. With so many people losing their homes to foreclosure, they need a place to live. Many people who have lost their home are earning an income, but their property was so far “under water” that the amount of their mortgage was nearly double the current price of the house. These people can still be good tenants.
Foreign Investors
Another group of investors with a keen interest in Phoenix property is foreign investors. Many have jumped to take advantage of their currencies relative strength compared to the dollar, making the very affordable housing prices even more affordable. One currency that has increased in value relative to the dollar is the Canadian Dollar. After decades of being the US dollar’s weaker cousin, its strength is now more or less on par with the US dollar. It is not as strong as it was in the fall of 2011, when the dollar was only worth about 90 cents Canadian, but its strength has been hovering around the $1.05 to $1.10 mark for several months now.
What Type of Phoenix Property Are They Buying?
The attractiveness of Phoenix property for investment purposes is not just limited to single family homes. The markets for condos, town homes, apartment buildings and duplexes have all benefited from the current market conditions, but single family homes seem to be the most attractive now. There are a couple of reasons for this. For one thing, it is easier to get financing on single family homes than any other type of real estate. Secondly, because many people are now looking into Phoenix property, single family homes are the most liquid of real estate properties now. Bear in mind that the phrase “most liquid” is relative to other types of real estate, but real estate generally is not considered a liquid asset.
As always, be cautious when looking into any real estate investment. Understand the local market, the local laws and surrounding neighborhood before you jump in with both feet. When opportunities like this arise, it is easy to get into a frenzy and start to cut corners. Approach this opportunity with care and due diligence.
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Who is Buying Phoenix Property and Why?
