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Is Phoenix Real Estate Headed for Boom or Bust

Aug 17, 2007
Phoenix has become one of the hottest real estate markets in the country for the last couple of years. This constant demand for real estate has resulted in almost unprecedented appreciation rates. But as interest rates begin to nudge up, many economists are suggesting the appreciation rates will level off, or even begin to fall.

You don't have to rely on the advice of experts entirely when evaluating real estate appreciation. Instead, you can look at some of the drives that affect appreciation and see if the market values will increase or fall.

Some of the factors that contribute to appreciation in real estate are:

Growing Population. Increased population rates create additional demand for real estate, that demand creates significant appreciation. In Phoenix, economic conditions are strong - there are a number of companies moving to the Phoenix area. In fact, Phoenix is known as a very strong job market with many corporations establishing new production facilities. Parts of Phoenix are becoming known as the new silicon valley, or silicon desert.

Income rates. While Phoenix isn't necessarily one of the highest paying job markets in relation to other markets, the steady economic growth has created a competitive job market and salaries. Higher wages provide buyers with more buying power for real estate, which keeps prices appreciating.

Vacation homes. Phoenix has always been a popular vacation destination and retirement center. But vacation homes aren't only for retirees. In fact, 40 percent of all homes sold in the United States last year were vacation or investment properties. Again, this simply accelerates the demand for real estate which keeps home prices appreciating.

Immigration. Arizona is known for its ever increasing population of immigrants. What most people don't realize is that this immigrant population also seeks out real estate. In fact, 40 percent of immigrants own their own home. With a constantly increasing immigrant base, it only follows that there will be a consistent and steady demand for real estate.

Echo Boomers. Lots of people know that the baby boomer generation has significant buying power in the United States. What most people don't realize is that the baby boomers are contributing to demand through their children. This generation of consumers are coming of age and seeking real estate. This generation is called the "Echo Boomer" generation - the expectation is that they will echo the demands of the previous baby boomers.

Real estate appreciation simply doesn't rely completely on economic trends or nation-wide inflation. There are a number of factors that contribute to the success of the real estate market and the appreciation of real estate. Look at the trends of the current population - it's a farm more accurate predictor of future real estate trends.
About the Author
Go to www.central-arizona-homes.com and get a free copy of Reg Gustin's 2005 Housing Appreciation Report. A 10-page report with data analyzing the housing appreciation throughout Maricopa County.
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