Property market...anyone help?

Its a bit of a broad question. Are you looking for commercial or residential? Land or developed? Also in this region, I think the market varies widely. Even within a metro area markets vary in different areas and different price ranges. I'm not a real estate expert (perhaps another will read this and respond) but I see related data in my business dealings and I have friends in the sector.

From a high level point of view, in my opinion we have not hit bottom yet. The market has sunk every quarter this year, with 1/2 of all residential mortgages in Arizona in the negative, with banks holding a 2 year supply, something like 1/2 of all sales being shorts or foreclosures, demand remains anemic, and with unemployment holding steady under the most optimistic reporting/forecasts and average incomes declining, I'd say no one knows where the bottom is and any significant growth over the next decade is unlikely. If the real estate market beats inflation, I'd be surprised - at least not in Arizona. But, that's just my opinion.

 

I would be careful of Arizona real estate. AZ has a weak economic base and is very overbuilt especially on the residential side... The State has a lot of fiscal challenges and the taxes aren't inexpensive as it is. I hate to be negative as it is a beautiful place but you just have to ask yourself, where is the economic growth going to come from there..? What do you see driving job growth and wage growth..? Ya I don't know either..

 

Commercial Real estate is cash yield driven, and the percentage yield rate is usually based on the yield of a ten year Treasury bill plus a risk factor.
In normal economic times the risk factor (or spread) for commercial properties was anywhere between 3% and 5% over the 10 year rate.
In Arizona today you can buy property where the spread is at least 8% over the 10 year rate, with the added upside that any vacant space in the property is essentially free.

In real terms this means that your money buys you at least a 10% per annum return on your money and any vacancy in the center represents additional income and return as it becomes leased. In neighborhood shopping centers the tenants who have survived over the past two years are in relatively good shape and the rental market has been stable since early 2010.
Arizona represents a better investment opportunity than most states precisely because of the lingering problems. The properties are priced at a discount to similar properties in other places as the risk spread in AZ is still bigger than almost anywhere else.

Markets are very efficient and right now the distressed states like AZ are where the upside is greatest, as the prices are lower than most other places for similar properties.

 

410 - if you're buying, I have a building in Tucson that needs a new owner.

 

Hey Aron, I have a nice house in Tucson in the foothills north of River that needs a new owner.

 

Ha! Me too.

 

Yep..