Phoenix real estate agent Brian Cross has recently been handing out bumper stickers warning, “Don’t LA My PHX.”
But the trend has already started. Phoenix is in the midst of an extreme real estate boom and is making headlines alongside cities like Austin, Texas because of its soaring property prices. One economist called it “migratory madness” – a movement fueled by the pandemic that has inundated housing markets with foreign investors and buyers.
The trend may be lucrative for real estate agents and sellers, but concerns about the long-term consequences for the city are growing. On neighborhood forums like Nextdoor, Phoenix residents are asking neighbors not to sell their homes to investors and pinball machines, fearing that they will price locals and “tear up” the “historic character” of the homes, as a Midtown resident said on Aug. July wrote stickers appearing on cars.
“If we’re not careful, we’ll be following the road to LA, where no one can afford a home,” said Cross. He has urged sellers to prioritize local bidders, who are often the losers. The market boom, he fears, is “at the expense of hard-working people and families” and marks a turning point for the city’s affordability, which has long since declined.
According to new national data from Redfin released last week, nearly a third of all home purchases in metropolitan Phoenix were made in cash this spring, up more than 6% year over year. It’s a sign that investors and big budget buyers are increasingly buying real estate – which is bad news for everyone else.
“Ultimately, cash is king,” said Cross. “And buyers are just beaten … How can you compete with $ 20,000 or $ 30,000 above asking price – cash?”
This is often the reality for potential homebuyers in the Valley. Local real estate agents have many horror stories about the current state of affairs. Michael Martinez, an agent in Scottsdale, said he saw customers bid more than $ 40,000 above the asking price and are still being outbid. Bobby Lieb, a longtime real estate agent in the area, said a new client made 10 offers on homes, all of which failed before finally closing a deal.
“Cash buyers will win all day,” said Lieb. And nowadays, he noted, “there are a lot of cash buyers out there”.
The data shows that many shoppers outside of the state in Phoenix are from more expensive cities. According to Redfin’s migration data, nearly a quarter of overseas potential buyers in Phoenix were from Los Angeles. Another 17% were from Seattle. From that point of view, property prices in Arizona are still comparatively low.
But the speed at which they are increasing is staggering. According to Zillow’s Historic Home Value Index, average home values in Phoenix rose nearly 30 percent from June 2020 to June 2021 – compared to just 10 percent the year before and only 5 percent from 2018 to 2019. According to other estimates, entries in the Valley increased by more than 40 percent. Homes sell in less than a month and multiple listings appear within days of being listed.
Lower income buyers, especially those receiving state aid to buy homes, are really at a disadvantage.
“If you give down payment help, everything out there will beat you,” Cross said. “It’s kind of overwhelming.” There is little to do other than watch, in real time, how the city’s affordable landscape changes as residents are priced out – and, as Cross points out, “take heart” to people considering selling their home to money investors. . .
Lieb called the rising prices “astronomically crazy” and said he expected them to level off at some point – the trend “just can’t keep up”. But even if the market cools down a bit and there are signs of it, most expect the rally to continue.
“For now,” said Cross. “It doesn’t look like the demand is going away anytime soon.”