The Ups and Downs of Arizona Real Estate

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Are you considering buying your own piece of Arizona real estate in 2022? Are you wondering if now is a good time to buy in the Grand Canyon State? I’m in the process of moving to Arizona for the third time in my life and I can tell you that the market is the most difficult I’ve seen in my 40 years of house hunting. I thought it might be helpful to share a bit about my journey for those who are going through or anticipating some of the same hurdles. Maybe we can commiserate together or share tips to help each other along the way.

I don’t pretend to be an expert on real estate in Arizona, but I know a fantastic experienced realtor and read a lot about the market, so I’ll share what I learn as we go along.

Our Real Estate Journey

So…where do I start? To give you some background, my Arizona real estate journey began in 1977. Don’t click away yet. I’m not going to reminisce about how I’d like to go back to the “good old days”. I do live in reality. But, to give you an idea of my beginnings, my husband and I rented a 1 bedroom furnished apartment in the central corridor of Phoenix for $298/month. Crazy, right? Of course, at the time my salary was $498/month, so in comparison, it still wasn’t cheap.

Over the next few years, we steadily moved to various apartments that were a little bigger, nicer, closer to work, school, or whatever. But because my husband was still in college at ASU, only working part-time and we were starting a family, we weren’t able to set aside enough for a down payment on a home. In 1987 we made the huge financial jump to move to Southern California for a variety of reasons, none of them being the cost of living. Our first 2-bedroom apartment there was $750/month! Yes, California has been that much more expensive than most of the country for at least 30 years.

Southern California Housing Hunting

We naively chose to move to So Cal when housing prices were seemingly increasing by the hour and by then we had 2 children that we wanted to grow up with a yard and space to play. Fortunately, in 1988 (with the help of a personal loan from a friend for the down payment) we were able to buy a house in a great school district for under $190,000. It was in a sleepy suburb in the Los Angeles metro area, about 30 miles from where my husband worked. It was a long commute, but worthwhile to own a home of our own.

We stayed in that house through extensive damage from the Northridge Earthquake and watched the value plunge to below its original price during the real estate crash of 1990. Later it steadily climbed until we sold it for well over our purchase price within a week of listing it in 2004. That was the era of the personal letter. When homebuyers offered exactly the asking price and then included a letter about why they wanted to buy our house so that their sweet children could grow up in such a lovely place. Of course, this was their way of trying to be the chosen offer to get the property. There was no over-bidding at that time.

Phoenix Arizona Real Estate – The Last Boom & Bust

In 2004, we moved back to Arizona because we both had elderly mothers that needed help and our kids were out of high school. We also missed our lifelong friends in the Phoenix area. (I did NOT miss the heat in Phoenix though.) Little did we know that we were walking into the beginning of the 2004/2005 real estate boom in the Phoenix area. Our timing is impeccable!

We started house hunting sometime in June and weren’t able to get an offer accepted until September. I felt so bad for our agent. We didn’t have a specific part of town that we felt we needed to buy in so we looked EVERYWHERE and even then Phoenix was a sprawling metropolis.

This was the era of people being able to qualify for homes that they financially couldn’t afford. It was also a time in Phoenix when California real estate investors were snatching up properties for rentals or flips because the prices were so much less than what they saw in their home state. Sound familiar? The difference was that buyers still weren’t over-bidding on homes (as I recall). BUT, sellers were setting their asking price much higher than before and appraisers were (for some reason) valuing the properties at those much higher prices just to get mortgages approved.

That average Phoenix home is now valued at more than double the price that we sold it for just 6 years ago.

Low Inventory Means Higher Prices

In addition, the supply of Arizona real estate was at an all-time low per capita, so for every home listed there were dozens of people looking to buy. I remember several times when I met my realtor to look at a house on my lunch hour and the sellers had already accepted an offer by the time he got back to his office at 1 pm to submit something. This was before real estate transactions could be done on your phone. It was SO frustrating!

If you have an interest in the economics of that housing boom and subsequent global crash in 2007-2008 watch the movie “The Big Short“. It was such a complex string of events that literally turned the world economy upside down.

Virginia House Hunting

Fortunately, we were able to ride out the housing crisis and Great Recession in our Phoenix home and weren’t planning to move anytime soon…until my husband’s company branch closed down and he/we transferred to Virginia.

Virginia was probably one of our easiest house-hunting forays. When we moved there, the market was relatively stable with a good amount of homes available. It’s a strong military area so people are moving in and out all the time. This time it still took a few months, but we again had a wide-open area to look at, then narrowed it down to property on some water, since there are so many rivers around there.

We started our search around early September and found a house by mid-November. The market continued to be stable and slowly increased over the first 4 years. Then the pandemic hit and the number of houses for sale dropped. I suspect that people just didn’t want to be out looking and didn’t want people wandering through their house when there was a potentially deadly contagious virus in the air. That certainly makes sense to me.

Selling in Virginia

When we decided to sell our Virginia house in 2021 the market was very strong there too. Not quite as crazy as Arizona real estate, but hot enough that we received 8 different offers on our place within less than a week and nearly all of them were over our asking price. We were also able to negotiate to rent back the house (for free) for an extra month after escrow closed. This was great for giving us time to get packed and not have to rush too much.

Our Arizona House Hunting Journey Today

Last year my husband retired from his job and my work could be done from anywhere. After a long cross-country road trip, much debate, and uncertainty, we decided to move back to Arizona once again. I’m not sure we could have chosen a worse time to buy Arizona real estate. With hopeful hearts, we rented a place in Prescott Valley in November and enjoyed the holidays.

We initially had (what we thought was) a comfortable housing budget. Quickly we found out that in the current market it wasn’t going to meet the needs that we had for our house (due to the potential that we may have a family member living with us in the future).

Our casual search for real estate started in January 2022. After a couple of weeks when we saw how fast houses were selling we got more serious. We began our search in the Prescott area and over a good chunk of the Phoenix metro area. Our real preference was in or around Prescott, or in the East Valley of Phoenix area. After looking at possibly hundreds of listings we eventually realized that the majority of Prescott, Prescott Valley, and our Maricopa County search area were out of our price range. The neighborhood that made the most sense for us financially was on the far west side of town in Sun City.

Exploring Sun City Arizona Real Estate

Sun City is one of the first and oldest 55+ “retirement” communities in America. The single-story, efficiently-designed, low-maintenance homes were built in the ’60s and 70s mostly. Some of the houses have a mid-century modern vibe and prices have always been quite a bit lower than the rest of the metro area. Prices even there, have gone up in this crazy market, but they’re still somewhat cheaper than other neighborhoods. There’s not quite as much over-bidding since the buyers are mostly retired or buying winter homes with a more limited income and budget ceiling. It also helps that someone in the house must be over 55 years old and that no one under 18 can live there full time.

Making Offers on Homes

Because of our potential need for a semi-private space for another adult, we have specific needs in the way of layout, etc. so many of the houses we looked at either needed an additional half bath or other structural changes. A few weeks ago we found a house that we liked that had the space potential that we needed, but since we knew we were going to have to put some money into it, we made a lower offer than the asking price. I know that’s insane in this market, but it had been listed for a few weeks and we took a chance. Sadly, the seller didn’t want to budge on the price, so we lost out on that one.

We also made an offer on a really small 1300 square foot house sight-unseen, that was well below our budget. Our thinking was that we could expand that house for under our max budget and have it just the way we wanted it. Unfortunately, after looking at the condition and age of the house and considering the construction delays for remodeling that we’re hearing about, we decided it was too much of a risk, so we let it go.

Our Continuing Real Estate Journey

Just last week we fell in love with a home with great potential (in my dreamer’s eye). This amazing atrium is just waiting to be updated, as well as many other mid-century-leaning features of the house.

Please know that I’m one of those people that walks into a home and immediately starts remodeling in my mind. I have a great imagination when it comes to building layouts and design. Probably sometimes too much imagination for my husband’s comfort level. But it certainly helps when we’re looking at older homes that aren’t exactly what we need but have the potential to be. And I can honestly say that the homes we’ve bought always look much better when we move out than they did when we move in…and that’s what makes the home-owning journey so rewarding for me.

We’re in the midst of our inspection period right now with several different inspections going on at the 50-year-old house that we’re hoping to buy. In my next post, I’ll let you know what happened with this deal. I’m hoping it’s our last for a while and it doesn’t fall through, but we’ll see how it goes.

BTW, if you want some unsettling Arizona real estate house hunting news check out this article that was written for “Arizona Real Estate Notebook” in December 21, 2020, about the scarcity of homes for sale.

Are you house hunting in Arizona? How’s your journey going? What challenges are you facing? Anything that I can answer for you about this great state that we keep coming back to?

If you’d like to know more about our Arizona real estate journey, you can find lots of helpful tips on what inspections to have and what to check into about the Arizona water shortage in my next post here.

Arizona Home Inspections – Termites, Water, and More

Tags: arizona, featured, house hunting, housing market, Maricopa County, phoenix, real estate, Sun City

Category: Arizona