Thinking about investing in rental properties in Arizona next year? Between the approaching election and the economic impact of COVID-19, real estate investors who were previously interested in the Arizona housing market may suddenly be skeptical.
With this article, you can inform your investment decisions through our research and Arizona housing market 2021 predictions. But first, a quick look at the state of the market as it stands today.
Arizona Real Estate Market Statistics for 2020
How is the housing market in Arizona? Let’s take a look at Arizona housing market statistics from Mashvisor to get a good grasp of the current situation.
- Median Property Price: $472,716
- Price per Square Foot: $362
- Price to Rent Ratio: 23
- Traditional Rental Income: $1,703
- Traditional Cash on Cash Return: 2.8%
At the very least, we can say that Arizona real estate investors are currently earning a good rental income and return on investment, despite the presence of COVID-19. But will the market continue to be profitable? Let’s get into our 2021 predictions:
#1. Arizona Home Values Will Rise in 2021
According to Zillow, Arizona home prices will see an 8.2% increase from now through September 2021. This market forecast isn’t too surprising as, historically, Arizona has seen strong real estate appreciation. Neighborhoodscout’s data states that property values have increased by 128% since Q1 2000. Yearly, this averages to a rate of 4.15%. If these numbers tell us anything, it’s that Arizona’s property values will continue to steadily climb. Even COVID-19 is not slowing them down.
Data from Veros Real Estate Solutions reveals that the hottest Arizona housing market for 2021 will be Sierra Vista, with a 5.8% increase in home prices. The Phoenix-Mesa-Glendale area follows as another strong Arizona housing market, with an expected 5.3% increase.
#2. As Affordability Drops, the Renter Population May Increase
It’s likely that the renter population will increase in the Arizona housing market 2021.
Affordability has long been an issue in Arizona. As we move into 2021, affordability will continue to decrease for residents.
Mashvisor’s data suggests that Arizona’s current price to rent ratio is 23, which is quite high. As it stands, it is more affordable to rent in the Arizona real estate market than own a home. With home prices only on the rise, many would-be home buyers will be priced out of the market. Though mortgage rates are low, they won’t necessarily offset the rapidly increasing property values for all buyers.
To make matters worse in terms of affordability, like most of the country, Arizona is still struggling to recover from high unemployment rates. Though the unemployment rate has dropped recently, it might have more to do with a dwindling workforce than true job market growth.
With these facts in mind, it is safe to say that the renter population in Arizona will increase, as renting will be much more affordable than buying a home in 2021. This could be a big plus for local real estate investors looking for a market with a high occupancy rate.
#3. Airbnb Will Continue to Be Profitable in Arizona
Despite the coronavirus and its subsequent restrictions, Airbnb is currently faring well in the Arizona housing market. Take a look at Mashvisor’s Airbnb data for Arizona below.
- Airbnb Daily Rate: $143
- Monthly Airbnb Rental Income: $2,561
- Airbnb Cash on Cash Return: 3.4%
- Airbnb Occupancy Rate: 60%
These statistics show that, even during the pandemic, Airbnb Arizona hosts are generating a good cash on cash return and rental income. While the Airbnb market in Arizona was definitely hit hard due to COVID-19, it’s still managed to remain profitable. This leads us to the real estate market forecast that Airbnbs in Arizona will remain profitable in 2021.
There are a few things you should be aware of if you plan on investing in Airbnb in 2021:
Coronavirus Will Change Airbnb Check-Ins
Hosts are renting out spaces to guests and conducting business as usual in the Arizona real estate market, with a few slight variations.
If you are planning on investing in Airbnb, it might be wise to set up contactless check-ins to prevent the spread of the virus and encourage guests to feel safe. Many hosts in Arizona and across the US have begun implementing contactless check-ins already. In 2021, this may become a new standard that Airbnb hosts will have to abide by in order to stay competitive.
Recent Changes in Airbnb Laws Won’t Significantly Affect Hosts
The Arizona housing market 2021 is looking good for Airbnb investors. But before jumping in, take a moment to understand some of the newer Airbnb laws in Arizona.
As of 2019, Arizona introduced new Airbnb regulations requiring Airbnb owners to include their tax license numbers on any ads or listings.
In 2020, the state further cracked down on Airbnb hosts in Phoenix, requiring them to register with the city. In addition, hosts must post their emergency contact information in a visible place within the rental. The law is an attempt to eliminate the difficulties police officers face with Airbnb guest parties by allowing for direct contact with landlords.
Though not a major game-changer for real estate investors interested in Airbnb investment property, it is something to be aware of. Violators of Airbnb regulations could face costly fines.
Related: 4 Things to Consider Before Purchasing an Airbnb Investment Property
#4- There Will Not Be an Arizona Housing Market Crash in 2021
According to Realtor.com’s Housing Market Recovery Index, the largest metro (Phoenix-Mesa-Scottsdale) in the Arizona housing market is making a comeback since a decline earlier this year. The Housing Market Recovery Index takes into account housing demand and supply, home prices, and the pace of home sales. The metro officially passed the benchmark for recovery in July and has been doing well ever since.
While this is only one area in the state, it’s still a good indicator of how Arizona is doing in terms of a COVID-19 recovery. And based on this, it is not very likely that the Arizona housing market will crash in 2021.
#5- The Arizona Housing Market 2021 Will Be a Seller’s Market
Is Arizona a buyer’s market? Will it be one in 2021?
Not likely. Buyer’s markets are typically characterized by low home prices and excess supply. Arizona will be experiencing an increase in property values, which can leave many potential home buyers priced out of the market. Conversely, this will be excellent for sellers eager to capitalize on real estate appreciation gains. And turning to the largest metro again, we see that active listings are down 41% YoY and days on market is down 18% YoY – supply is dropping but demand seems to be high. All of this spells out a seller’s market. And we can likely expect the Arizona housing market to remain a seller’s market in 2021 as no major changes in these key trends are on the horizon.
#6- These Are the Best Places to Invest in Real Estate in Arizona for 2021
According to Mashvisor’s Arizona housing market data, both short term rental properties and traditional investment strategies are performing well. Just be sure to invest in the best areas, whichever rental strategy you choose for next year.
Best Cities for Buying an Airbnb Rental Property
Ranked according to the highest cash on cash return, the following cities will make for excellent Airbnb investments in the Arizona housing market.
#1- Tucson
- Median Property Price: $304,215
- Price per Square Foot: $170
- Airbnb Daily Rate: $99
- Monthly Airbnb Rental Income: $2,277
- Airbnb Cash on Cash Return: 4.2%
- Airbnb Occupancy Rate: 59%
#2- Chandler
- Median Property Price: $434,756
- Price per Square Foot: $213
- Airbnb Daily Rate: $164
- Monthly Airbnb Rental Income: $2,865
- Airbnb Cash on Cash Return: 4.0%
- Airbnb Occupancy Rate: 63%
#3- Tempe
- Median Property Price: $395,999
- Price per Square Foot: $244
- Airbnb Daily Rate: $143
- Monthly Airbnb Rental Income: $2,724
- Airbnb Cash on Cash Return: 4.0%
- Airbnb Occupancy Rate: 64%
#4- Gilbert
- Median Property Price: $442,729
- Price per Square Foot: $207
- Airbnb Daily Rate: $192
- Monthly Airbnb Rental Income: $2,861
- Airbnb Cash on Cash Return: 3.9%
- Airbnb Occupancy Rate: 62%
#5- Avondale
- Median Property Price: $296,629
- Price per Square Foot: $154
- Airbnb Daily Rate: $173
- Monthly Airbnb Rental Income: $2,066
- Airbnb Cash on Cash Return: 3.8%
- Airbnb Occupancy Rate: 56%
See also: Airbnb Investment Calculator: What Is It and Why Do You Need One?
Best Cities for Buying a Traditional Rental Property
#1- Chandler
- Median Property Price: $434,756
- Price per Square Foot: $213
- Price to Rent Ratio: 18
- Traditional Rental Income: $2,020
- Traditional Cash on Cash Return: 3.4%
#2- Avondale
- Median Property Price: $296,629
- Price per Square Foot: $154
- Price to Rent Ratio: 18
- Traditional Rental Income: $1,400
- Traditional Cash on Cash Return: 3.2%
#3- Scottsdale
- Median Property Price: $963,459
- Price per Square Foot: $339
- Price to Rent Ratio: 25
- Traditional Rental Income: $3,232
- Traditional Cash on Cash Return: 3.2%
Related: The Scottsdale Real Estate Market Data You Need
#4- Gilbert
- Median Property Price: $442,729
- Price per Square Foot: $207
- Price to Rent Ratio: 19
- Traditional Rental Income: $1,939
- Traditional Cash on Cash Return: 3.1%
#5- Mesa
- Median Property Price: $361,670
- Price per Square Foot: $197
- Price to Rent Ratio: 19
- Traditional Rental Income: $1,568
- Traditional Cash on Cash Return: 3.0%
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
So, Is Buying a House in Arizona a Good Investment in 2021?
Ultimately, yes.
Pre-coronavirus Arizona housing market predictions seem to have held true, despite the devastating toll the coronavirus pandemic has had on the US economy as a whole.
For a competitive real estate investor with cash reserves, the Arizona housing market could be a good move, as it is a steady market with little risk. For long term gains and stability, the Arizona housing market is ideal.
You may want to make a move now and this has you wondering “is it a good time to buy a house in Arizona?” The short answer is, while it is not a buyer’s market, it depends on the individual investor.
The current housing inventory in the Arizona housing market is low, particularly compared to the high demand. This makes for a rather competitive purchasing environment, meaning some investors could be left in the dust. However, for an investor prepared to pay premium prices, the Arizona housing market could look appealing: there will be plenty of tenants and good return on investment.
Regardless of when and where you invest, analyze rental properties carefully with the help of real estate investment tools, such as an Airbnb calculator, to ensure your success. One way to do this is by taking advantage of Mashvisor’s real estate investment software.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today and enjoy 15% off for life.