Welcome to Motor City - Phoenix, Arizona
Buy a nice condo for the same price as a car!
April Fools. No really it's the sad reality of the housing market in Arizona right now. The housing meltdown will have a lasting effect on the US economy for years to come. When in our lifetime have we been presented the opportunity to purchase property for the same price or less than that of a car. Now you can get a Mercedes condo for about $200 000 to $300 000 in Scottsdale, Arizona, but if you are thinking about buying a newer reliable Ford Escape or Chevy Malibu for about $35000 to $45 000 then that is exactly what you'll find for your money in Phoenix right now. Welcome to Motor City - Phoenix, Arizona.
Excessive borrowing on the part of the US consumer and excessive spending by the US government have created a truly remarkable once in a lifetime opportunity for Canadians to buy property in Arizona. No offence to Detroit, they have great music and all and their hockey team has been pretty good over the years, but if I'm looking for a place to live, retire or work - Phoenix is tops on the list. 300 plus days of sunshine, a long list of fortune 500 companies with head offices and more golf courses than you can shake a stick at. Oh and by the way, Phoenix is also suffering from the same good time corporate hangover that is evident in Las Vegas, where big company retreats and schmoozefests are a thing of the past. Hotels and conference centers are definitely suffering, but so are all those golf courses. So what does that mean for the average golfer? It means deep discounts on green fees, and the once high initiation fees for private clubs have been evaporating.
Back to the car analogy, how much do you think that a Ford or Chevy will be worth in ten or fifteen years? Can you rent the car out for income like a property? Both will allow you to finance, but a Canadian can get a mortgage on a property in Phoenix for 30 years at a fixed rate of about 5%. That means no change in rate for 30 years and you can pay it in full after 1 or 2 years with no penalty. They don't offer those terms in Canada. And the condos are in Volvo neighbourhoods - safe, gated communities with all the bells and whistles.
What is similar with the car and the condo is the fact that there is ongoing maintenance and repairs, and interest costs as well. Come to think of it, I would bet the costs would not be that far off. HOA (Home Owners Association, or maintenance) fees are around $135 to $175 monthly, insurance costs $30 monthly and property taxes of about $100 monthly. So whether you buy on your line of credit in Canada at a rate of 3.5%, 100% financed on $40 000 (did anyone say 100% financing interest only - inside joke) add another $125 a month - or let's make it $170 if we are paying down a mortgage over 30 years guaranteed. All in we are looking at costs of $450 plus $45 for property management a month to make it that much easier to own a piece of American Pie. What about the income you can generate by renting? Sure, there is a 15% vacancy rate. So a condo that used to rent for $895 will now rent for $600. It is still going to cash flow. Can you now see why Canadians are flocking, with cheque books in hand, south of the border?
So what about the process to buy? Our clients typically come down for a 2 to 3 day visit to view property. Some advanced research online and input from us, will give them a good idea of values and what is available. It is really impossible, however, to know what where the deals are until you do the visit and take a test drive. The market is changing constantly. I told many of you to buy the incredible deals in Las Vegas for $40 000 last summer - those days are gone. Values have increased on those properties significantly. Make no mistake, the foreclosure situation in the US, and in particular Phoenix, is far from over, but the demand for condos for the price of a car is high and growing every day.
We encourage our clients to identify multiple properties as the process in buying short sale properties can be anywhere from two weeks to three months to get a response. Ideally properties that are "bank owned" are ready for sale, but be ready for a little competition, especially if priced well. Do not expect to go down and bid really low on the good ones that are already priced right - you'll walk out of the showroom with nothing for your efforts.
Statistically, Phoenix home sales are up month over month. The price per sq/ft is flatlining after months of rolling down the hill with no brakes. So has the emergency brake finally been pulled? Or is there some grand master plan on the horizon to fix the brakes on the nations housing woes. It would be smart if they did. What is a car without breaks? Listen up Canadians - the Toyota's are now selling for 25 to 50% of the values that they once were in Phoenix. Most of these properties are gently used, and Phoenix is still a great place to live and work. In fact, it is one of the best with the lowest maintenance costs (taxes) in the whole country. Are you starting to get it? Top it all off with a dollar on par or close to it. You need to be ready. It will not stay this way forever. Preventative measures are available to protect against currency swings. If you are going to make the flight or drive to Motor City - Phoenix, AZ, remember to bring proof of funds. The showroom is beautiful and the deals jaw dropping - at least that is what everyone tells us. One other thing, the Greater Phoenix area is made up of more than twenty five cities and towns better known as Maricopa county. It's the largest County in the country. Folks often ask about property in Queen Creek which is outside Maricopa, in Pinal County. When gas prices were high people moved closer to core because of the extra expense of gas driving to work. I suspect that trend to continue, given the insanity of growth. Our advice is always to stay close to the core. The drive until you qualify days of 100% loans, is part of the new Phoenix, AZ, Motor City, USA. You're in the driver's seat.
Mark Dziedzic, CrossBorder Realty, mark@crossborderrealty.com, 602-882-5702
March 14th, 2010.