How migration to Arizona is impacting housing and businesses across the state
Arizona has become a prime relocation destination for people across the country—especially those coming from California. People are attracted to the geographic climate, better property taxes, as well as the overall better cost of living, especially when compared to prices in California. But how is this migration and influx of new residents impacting housing, talent and business across the state? Robert Faver, president of UMB Bank Arizona, recently talked with the Phoenix Business Journal on issues surrounding affordable housing, including his own personal story.
Research shows Arizona has more than 60,000 new residents from California alone each year, making it the second fastest-growing state in the country according to U.S. News & World Report‡. But this begs the question: are we in a housing bubble? Unlike the housing bubble in 2008, the demand is real, and the supply is extremely limited.
Affordable housing concerns
The Phoenix housing market is booming. As a direct result of the pandemic, we are seeing more California residents, as well as people from other neighboring states, cashing out and coming to Arizona for better property taxes and bigger homes, which is driving prices up and reducing inventory. This is creating a big affordability issue with both houses and apartments and there are concerns about how the state will mitigate the rising cost and competition. The pandemic has impacted the market too for three main reasons: People don’t want to open up their house to other people during the pandemic, people want more space, and people want out of apartment living.
There is high demand for homes with an extremely low supply, which is creating bidding wars and driving up the cost of housing. Recently, a client mentioned they sold some land to housing developers who were building two different subdivisions. In both subdivisions, more than a third of buyers were from California. I had my own experience with the real estate market when I sold my own home a few months back. I received eight offers and most offered more than asking. We sold our home in a day which really goes to show how hot the market is right now.
Rise in real estate investment and industrial development
Real estate investments are on the rise—especially in the multi-family and industrial space as more companies call the Grand Canyon State home and the demand is increasing. The valuation on those properties is very high and we are seeing a lot of them being sold to funds. Industrial space is at a premium and as a result, we’ve seen a lot of farmers sell their land for a substantial amount of money for new businesses coming to town. It’s not necessarily new business, but expansion of businesses, which is great from an economic perspective and for jobs.
Mortgage interest rates remain low
In Arizona, we saw rates go up toward the end of last year, and since then, they have come back down a bit. Despite the climb, they are still near historic lows, which is helping people afford more expensive homes. As a whole, we expect mortgage rates to increase slightly by the end of the year and expect inventory to stay sparse, helping to keep demand strong. We also believe first-time home buying will stay strong.
Read more from Robert Faver’s recent interview with the Phoenix Business Journal:
- Mortgage interest rates dip, Valley home buyers demand skyrockets amid price hikes‡
- New joint venture to invest $1B in single-family rentals, targeting metro Phoenix‡
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