As we’ve previously explored, many of the Valley’s neighborhoods are seeing an expansion of high rises and general development – both residential and commercial. Many of these new (often, luxury) condo units are available for lease and purchase, and the diversification is creating a marked trend: longtime renters realizing rising prices and turning into homebuyers. At the same time there remains a steady base of renters that apartment developers are banking on, those faced with student loan debt, waiting to start a family and empty nesters looking to downsize.
In highly desirable urban areas, rents are rising at an astonishing rate, as are home prices. According to a recent AZCentral article, “The Midtown Phoenix neighborhood Cheery Lynn/The Yard in ZIP code 85014 saw home prices jump 50 percent during the past year, according to Street Scout Home Values, an annual analysis of metro Phoenix’s housing market done with The Information Market. That was the biggest jump for any Valley neighborhood.”
The index rise has left many looking for different options, which is leading to the propulsion of “more first-timers, buyers returning from foreclosure, new-home purchasers and Baby Boomers.” The influx of buyers is giving the housing market a diversified boost and these groups are buying in greater numbers than any time since the market crash.
In the long run, this spells good news for both buyers and the sellers. While margins are still down somewhat since their 2006 peak and interest rates remain low – the market is obviously ripe for sellers to command a healthy profit, but also for the buyers to note a positive change in their expenditures when compared to a costly rent payment.
Boomerang buyers – those who lost a home during the financial crisis – are a significant driving force behind the growth, moving back into home ownership. Out of state retirees are also making their mark, finding Arizona living comparable to, but cheaper than, that of California.
While this growth is a positive shift in the market as a whole, it may make rental developers nervous – especially as we see continued construction. While the rent index in many areas is rising – we could soon see drop if more renters decide to take the plunge and jump into the home buying market.