Lately it seems like all anyone is talking about is Arizona real estate.   The Phoenix metro housing market is seeing a rise in home prices and a decline in the number of houses on the market, putting the area ahead of most other U.S. cities on the road to recovery.  The national media has pointed to the valley as an example of what is to come for the rest of the nation.  However, the road to recovery has been a long slog, and there have been many false starts and reversals in the market.

Home owners have been fooled before, and because of this they look to industry experts for advice on where the housing market is heading.  Troy Reeves has an understanding of the Arizona market like few others, and because of his accurate predictions in the past, Troy and his team are frequently asked where the market is headed next.

While it is true that valley home prices have risen sharply over the last few months, we are going to dive in a little deeper and answer the question so many of you have been asking, where is the market heading next?  Will it continue to rise at the same rate? Are we heading into a double dip recession?

Troy Reeves gives us a detailed analysis of the factors that will determine the future price of homes in the valley, and what we should expect in the near future.  Here are 7 of his top focuses:

Buyers With Short Sales and Foreclosures Can Now Re-Enter The Market

When the housing market collapse happened in 2008, it wasn’t just the massive flood of foreclosures that hurt real estate prices, the problem was actually two-fold. When homeowners decided to let their house go, either through foreclosure or short sale, they declared themselves ineligible to purchase another home for the next few years. So not only was the housing market flooded with homes, there was significantly less people with the credit to purchase them.

All of this is starting to change. It has been almost 4 years since the housing crisis was at its worst, and many homeowners are now able to re-enter the market. Currently it is just a trickle of people that are eligible to purchase again, but that trickle is poised to turn into a flood in the next 6 months to a year. This will lead to even further reduced inventory and pricing increases.

Inventory Shortage

Much like the height of the housing bubble in 2005 there is currently a shortage of homes available to be purchased.  This is one of the leading contributors of the recent increase in the price of housing.  When valley prices were at their lowest there was over 40,000 homes available, currently there is less than 13,000.

As you can see from the graph above, inventory levels are still trending downward. There are two major reasons for these lower inventory levels. The first is drastic reduction in the number of foreclosed homes banks are putting on the market. The second reason is that many homeowners and still priced out of the market. These are the homeowners who are upside down, but are not willing to hurt their credit by selling their home short. There is still a very large group of home owners out there that are unable to sell their home, even if they would like too. As home prices continue to rise the number of homeowners price out of the market will be reduced, this will allow inventory levels to loosen up.

Bank Owned Properties

This brings us to the banks. The banks are very secretive about their plans and future intentions. Currently the banks wield more power over the real estate industry than any other time in recent history. We hear all kinds of speculation regarding the future plans of the banks, but for this article we will stick with the facts.

The facts are this, after the housing crisis the big banks were over run with houses and the market was flooded with bank owned homes. Recently however, the bank owned homes placed on the market have dried up in Arizona. Instead they have announced different strategies to get these homes from reaching the market. Many large banks have started selling large chunks of homes to large investors. Other strategies include allowing more homes to be purchased at auction instead of being returned to the banks and sold through a management company. The banks have also announced plans to rent homes back to homeowners who have been foreclosed upon.

All of these strategies have one theme in common, they keep the homes from entering the market, and at least temporarily keeps the inventory suppressed. Look for these trends to continue from the banks, as inventory levels shrink and home values climb, the banks will be encouraged by their recent decisions and continue down the same road.

Out Of State/Out Of Country Buyers

It was no secret that Arizona was having a once in a lifetime fires sale on home prices over the last few years. The media may not have realized it, but investors did. Nearly 50% of home sales in the valley over the last 2 years came from someone outside of our state. Investors that were able to see past the short term knew there was no way to make a bad purchase with the prices where they were.

However as prices have steadily increased, investor interest has steadily decreased. This is not to say that they are gone, because they are far from it. But we have seen the ferocity of investor interest wain from its all time highs. Arizona real estate is still on sale, prices will with out a doubt rise over the long run.  But  as prices continue to creep upward, buyers can expect fewer investors in the market, and all cash offers like we are currently seeing will decrease.

Media – What country is saying about AZ

Arizona is the talk of the nation when it comes to real estate. As we have become the first state to shrug off the months of negative trends, the media is looking to us as an example of what is to follow for the rest of the nation.

TV shows like the new Property Wars Series with Doug Hopkins from Posted Properties, who has been our business partner and good friend for many years, highlight the insane competition among bank foreclosures.

It is important to realize when listening to the national media that they report on what is happening and they do it well, however they are not always as accurate at predicting the future.

Rental Prices Stabilizing

It is easy to get lost in the statistics when looking at the housing market. There are so many different metrics to study and analyze. At the end of the day however, looking at the price of renting vs the price of owning a home is a great way of telling if homes are over or under priced. At the peak of the housing collapse it was twice as much to rent as it was to have a mortgage on that same home. This is without factoring in tax breaks and other incentives for owning a home.

Prices are going up, more renters are again qualified to purchase a home, and the rise in rental inventory are all helping to stabilize rental prices.

New Builds

The last four years have been very hard on home builders. The majority of home builders when out of business and the ones that were able to make it through typically had to sell homes at a loss. But like the saying goes, whatever doesn’t kill you makes you stronger, and now that the market is turning around home builders are poised to start making a profit again.

Because home builders are now able to make money they are starting to develop again, driving around you may have already noticed this.  There are many new projects set to take place throughout the valley in the next few months. So what does this mean for prices?  The increase in inventory levels provided by new housing starts should help reduce the shortages we are currently seeing.  In addition these brand new homes should help raise the median home price.


The media is starting to pick up on something The Reeves Team has known for quite a while, its a hot market out here. The attention we are getting in Arizona will continue to add to the idea that now is the time to buy.  It is important to understand the future of Arizona housing prices is a complex subject.  It is not as simple as the national media would have you believe.  In the near term buyers who have been struggling to get offers accepted on homes should find it easier to get into that home over the next several months.  As more and more homeowners will be priced back into the market there will be more traditional sales available to potential buyers, which we are already starting to see.  You can expect the out of state buyers and investors to cool off considerably over the coming year, this again will make it easier for a traditional buyer to get those offers accepted.   When you couple that with the continuation of the historically low interest rates(we just hit a new all time low today) we are finally approaching a very favorable market in the valley.  At the end of the day prices should continue to go up, though not nearly as quickly as we have seen over the last quarter.  We should see the market continue to get healthier with slower sustained growth and more traditional buyers.

Do you have any predictions of your own?  Please leave your questions and comments in the section below.



37 Responses

  1. A lot of great information. Thanks for the post. I have been learning a lot about rental properties and property management and this might be the best way to go.

  2. Troys team continues to help us through all of our questions and concerns during the building of our house. They are very responsive and quick to get everything answered. It is great to have them as a realtor team & resource. Thank you!

  3. Just wanted to thank Troy Reeves for helping with a referral from Texas. His team has been very professional and look forward to sending additional clients and family his way!

  4. If you are looking to invest in the current real estate market then you are definitely not alone. Many individuals and companies have been purchasing investment properties with home prices starting to rise and interest rates remaining low. Now is definitely a perfect time to invest in real estate if you have the capital to make it happen.

  5. Great research. You never really think about how much renting prices effect home value. I like Arizona too, it will be good seeing the market turn around.

  6. Very informative. We used Glen Marlin, from your office, to sell our home recently and were very impressed. He helped us to price it right and get what we were asking for. Thank you.

  7. Thanks again for the updates and great information! Always good to see things heading in the right direction, let’s hope it stays that way.

  8. Thanks for the update! There’s a lot of great information here! Just to support what you were saying about Phoenix’s housing market: CNNMoney wrote an article back in June about the rising home prices across the nation, and Phoenix had the best annual returns, gaining 8.6%!

  9. The market is complicated isn’t it! I hope that soon many will once again be able to realize the American dream of owning their own home!

    Thanks for keeping us informed!

  10. Very good post indeed! As stated, there are SO many factors with predicting the real estate market trends, that it is almost impossible to get a completely accurate interpretation of “where are we heading next”. However, Time and time again Troy Reeves illustrates extremely good practice in judgement with predicting the tides-of-change with the real estate market. My favorites line in this article is one of the last… “We should see the market continue to get healthier with slower sustained growth and more traditional buyers.” But I think we can also add, …traditional buyers AND seller’s..I believe this statement is saying that the housing market is truly and currently on a gradual climb to recovery, and I completely with him. And even though harder to find, the deals are still available for you buyers, and Hey YOU, Mr. Seller get off that fence, “it’s time to sell”.

    • Ken….thank you for the kind words! Our sellers in 2012 to date have over 99.6 % of list price at COE…highest in years… to low inventory! Now is a great time to sell….you can almost name your price. Once again thanks for you input.

  11. Troy,

    Great article with lots of useful information. Here at Legacy Insurance, we have already seen quite a slow down in the number of out of state buyers compared to the last two years. Also, seeing a lot more clients staying in their homes and refinancing lately due to those low mortgage rates you mention in your article. Thanks for the info Troy!

  12. Great information Troy! Appreciate you keeping everyone informed of the current market conditions. There hasn’t been a better time to buy than now with affordable housing and incredibly low rates. I recommend buy, buy, buy!!!!

  13. Troy this is informative and well organized. I appreciate that you have included many different factors in your analysis and predictions. You have left out mortgage interest rate predictions. Are you still predicting significant increases?

    • Corey I have been saying for many years that we need a correction in our current state/fed rates…..with that said we can not do it till we recover in our current economy! We(the government) should have increased it when everything was booming to slow things(housing market) down a bit. Of course 20/20 hind sight!! We will need to adjust the Interest rate to a health level(7-9%) real soon(within 3-5 years), that is my prediction. Thanks for your comment…How is your new house?

  14. As a Senior Account Executive for Old Republic Home Protection, I have had the privilege of working with Troy Reeves and his Team for over 12 years. Troy and his Team pride themselves in keeping their clients and the community abreast with the most current and pertinent information regarding our real estate market. This site is a specific example of the knowledge and professionalism Troy and his Team utilize when assisting homeowners.

  15. It’s great working with such a professional real estate team like the Reeves Team. This website is very informative and focused on what is going on in the local real estate market. It is easy to get discouraged with the national media, but Arizona real estate is on the rise! Thank you for providing this service Reeves Team!

  16. Great article. I hope to see more inventory so the first time homebuyers and move up buyers have an opportunity to purchase. Thanks for the information.

  17. Great information. I’m always interested in being current on the real estate market. Its overwhelming to think how much it really effects our economy.

  18. I think most of the information provided is accurate. I would like to add one thing, it will be interesting to see when the market pricing improves even more how many of these investors will actually elect to sell the homes they recently purchased as opposed to renting. A veteran investor understands that the rental market requires patience and is a long range plan. Many of the investors I see are not patient and will probably sell at the first sign of a decent profit. This should affect the market inventory if that should happen.

    • Jim, I wish we could get a “true” count of JUST how many investors have purchased over the last few years? I am researching this now and will hopefully have additional info for everyone soon! Jim…thank you for your comments

  19. It has certainly been nice to see some positive news stories from the mass media about the Arizona housing market over the last several months. I certainly believe we are still having a “sale” on homes. There is no other major metro market you can get similar homes for the price of homes located in the Phoenix m etro area. Good article.

  20. I believe this is one of the most informative sites I have seen. Educating the public regarding home buying at this time is crucial. Arizona is coming back and I for one am thrilled to see Troy Reeves and his team looking at the positive side of our state turning around not only in the job market but in homes sales as well. Well done, Reeves Team!

    • Martha, we try and keep our clients upto date on what’s happening in this VERY fast paced real estate market here in Phoenix area. We appreciate your kind words!

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