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What’s behind Arizona’s housing market demand?

A closer look at Arizona's hot housing market.

This HousingWire Daily interview transcription features an interview with Caliber Home Loans’ Brandon Bialkowski and Vanessa Accra. In this episode, the loan consultants discuss Arizona’s hot housing market, which is experiencing a significant uptick in homebuyer migration.

Listen to the full episode here and make sure to subscribe to the podcast on iTunes.

Below is the transcription of the interview. These transcriptions, powered by Speechpad, have been lightly edited and may contain small errors from reproduction:

Alcynna Lloyd: Hello, HousingWire listeners. Today I’m joined by Caliber Home Loans’ Brandon Bialkowski and Vanessa Accra. Thanks for joining us on HousingWire Daily.

Vanessa Accra: Thank you. We appreciate you having us on.

Alcynna Lloyd: Listeners, today the loan consultants will be speaking to us about Arizona’s hot housing market. In case you didn’t know, Arizona has experienced a significant uptick in home-buying demand, representing continued economic growth within the state. And back in Q2 of 2020 alone, the state’s quarter-over-quarter homeowner rate increased by 7.7 percentage points according to data from the U.S. Census Bureau. Data shows this uptick in demand is attributed to migration, as many home buyers are relocating from states like California, Oregon, Illinois, Minnesota, and more. So, why are so many home buyers drawn to Arizona’s market?

Brandon Bialkowski: That’s a great question. I think one of the main things that is a key to this is the affordability factor. So, people moving from California, Oregon, Washington, are seeing huge property taxes. They’re seeing their home prices also increase. But I think the main thing is the affordability of Arizona.

We also have low property taxes in comparison to states like that. The great weather is something as well that attracts many homeowners here. We get a lot of second home purchases and things like that. But we’re also seeing a lot of people migrating and purchasing as a primary residence.

So, I think that those three things are the three major things. We’re also seeing huge job growth out here. So, big tech companies like Nikola, TSMC, things like that are moving their headquarters and things out here to Arizona. So, it’s just creating job growth.

One other thing I kind of touch on with that, and I was talking to a friend who happens to be a GM at U-Haul, and we were kind of going back and forth on the migration patterns and the housing out here in Arizona. And he’s like, “I want you to do me a favor. Please go online and see what a one way looks like from LA to Arizona, versus Arizona to LA.

And the cost associated with moving from LA to Arizona I think was, like, $1,500, versus moving out of Arizona into LA was, like, $200 for a 20-foot truck. So, just that alone just shows you the growth that we’re seeing in Arizona.

Alcynna Lloyd: That is interesting. I know. And not a lot of people consider the price of moving yourself from a different state to another. So, that’s an interesting fact that you brought up. As we talk about some of the facts that you brought up, this market is reminding me a lot of Austin’s housing market, which also experienced an uptick in migration. Similarly to Austin’s market, I imagine as demand ticks up, it’s made inventory and affordability a top concern. What are some of the challenges homebuyers or sellers are facing in this market?

Brandon Bialkowski: So, I think that’s a great question. I want to touch on both the out-of-state buyers as well as kind of the local buyers here in Arizona. So, the out-of-state buyers that are coming in from higher priced areas like California, Oregon, Washington, even Chicago area…they have more money and availability. They just sold their home in California. Their net proceeds are a lot higher, so they have more money and purchasing power.

It’s creating a big challenge for the local buyer here in Arizona, as they’re looking to either move up or purchase their own first property. So, we’re seeing the amount of cash transactions increase substantially. It’s also putting the first-time home buyer in a bit of a bind as they generally don’t have a ton of cash to put down. We’re seeing people offer $30,000 to $40,000 over on [inaudible 00:03:41] right now.

So, with them being limited in their down payment, we’re seeing that become a huge issue, because they don’t have the cash reserves to make up the appraisal difference. We’re also seeing some appraisal concerns as well as these buyers are coming in and offering substantially over the market price.

Alcynna Lloyd: Whether we talk about price increases or appraising, it all comes back to inventory and homebuilders. The National Association of Homebuilders most recent housing market index indicates the lack of land, material availability, partnered with the persistent skilled labor shortage is expected to place upward pressure on construction costs, which could impact growth.

So, how are homebuilders in Arizona’s market preparing for the influx of potential buyers? Data shows that Maricopa County and Pinal County within the greater Phoenix region saw a 76% increase in single-family construction permits in 2020. So, how would this continue to impact the region, and what can we expect to see?

Vanessa Accra: So, we do have a substantial amount of builders, obviously, like you said…76% Meritage, which is one company, for example, purchased land here, and they’re…in Arizona, total, there’s 22 future communities, and Meritage is the fourth-highest builder…

Many builders are also starting to build upwards into condo complexes with the current land shortage as well. We’ll most likely probably see more of your first-time home buyer roll into that type of home. There’s more demands on the outskirts than there is more land available, such as San Tan Valley, Queen Creek. We’re seeing things push out past Florence, out past the 303 and the West Valley.

They are concerned with obviously the demand on pricing as far as materials and labor. And the concern with that is gonna be…it’s really gonna push your affordability higher and make it less affordable. And especially for those, you know, in that first-time homebuyer spectrum.

Alcynna Lloyd: Well, as we talk about affordability, I want to focus on the Biden administration’s $15,000 first-time homebuyer tax credit plan. Biden’s potential stimulus plan includes this $15k for first-time homebuyers, which may be an incentive for many Americans who have plans for entering the market and may not feel like they have the affordability to do so. If enacted, how could this also impact the market?

Vanessa Accra: So, we already have a demand shortage. And with the tax credit, it’s basically going to push that even higher, because now you’re going to get an influx of more of the first-time homebuyers… It’s going to make it even more difficult for them. And it really depends on how that tax credit is actually going to come into play, too.

I know there’s talks on different ways that it could come into action, so we’re not sure if it’s going to be, you know, a credit right when they’re purchasing, an instant tax credit [inaudible 00:06:55] that they would have to wait to get refunded once they file their taxes.

So essentially, they may have to still come up with their down payment, and if you’re in that first-time homebuyer market, that may be an issue still to start with. We do have a lot of great down payment assistance programs here in the valley, but you’re not seeing a lot of buyers that need to use that program able to get under contract due to the type of competition they’re up against.

Alcynna Lloyd: So, what are their options?

Brandon Bialkowski: I think the real estate agent is very key in this market right now. If you’ve seen the experience [inaudible 00:07:33] real estate agent out there in the Phoenix market, you know how they’re presenting their offers. They’re presenting them in a much better light than many of the inexperienced real estate agents.

So, they’re ordering inspections already before they go under contract. They have deadlines that we’re hitting…us on our end, because we’re so purchase focused in our mindset, we have the ability to close loans very quickly, so we’re able to work with sellers and buyers in getting them the most advantageous closing time possible.

So, whether that be 10 days, whether that be a [inaudible 00:08:11] for 15 days as the seller looks for a property. The seller is also…comes into play with this, because as they’re selling their home, they have to purchase a new home more than likely. So, we’re seeing issues with that as well, because of the demand is so high, and the inventory is so low, it’s just…it’s creating havoc out here in the market with the sellers not being able to find a house to go into after they sell their home.

Vanessa Accra: I think who you work with now is more important than it ever has been.

Alcynna Lloyd: That’s what we keep hearing, especially in this extremely competitive market, as we see more and more homebuyers migrate. So, my last question for you today is, whether you’re a lender, an appraiser, a homebuyer or seller, what do we need to know about Arizona’s red-hot market? Do you have any advice or anything to let our audience know?

Brandon Bialkowski: So, the main thing is that it’s still a great market to invest and build wealth. Yes, the supply is extremely low, but we’re seeing the supply extremely low in other areas as well, as you mentioned Austin as having a shortage. Florida is seeing a ton of growth as well. So, it’s still a great market to invest in and build wealth.

People moving in from California do have the money to invest. They can purchase many single-family homes and have the same payment that they’ve had previously with just their home in…their primary residence in somewhere like California. The year over year appreciation growth in Arizona was over 10% in most of the major cities outlining in the Phoenix metro area. So, it’s still a very, very good time to invest, even though the supply is short.

Alcynna Lloyd: Okay. Well, thank you for joining us on HousingWire Daily, I hope this information was helpful to our listeners. I’d like to thank you once again for joining us, and we hope to hear from you soon.

Vanessa Accra: Thank you very much.

Brandon Bialkowski: Thank you so much for having us.

Alcynna Lloyd: Thank you.

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