By Don Kirkland
Tempe and West Chandler were among the metropolitan areas hardest hit during the recession, during which homeowners lost as much as 50 percent of their home values.
New residential and commercial construction ground to a near halt, many small businesses closed and major employers hunkered down to survive.
However, respected real estate broker Jeff Lucas, who is frequently consulted regarding real estate and market trends, says that positive signs glow brightly on the horizon.
The Phoenix metropolitan area has rebounded to become among the healthiest, most growth-oriented economies in the country, observes Lucas.
According to his studies, East Valley residential real estate has benefited significantly from the economic turnaround. Single-family home values have appreciated far beyond expectation. Measured from 2015’s first quarter through the same period this year are up 11 percent in Tempe, 7.7 percent in Chandler. Annual appreciation in a stable market is historically in the range of 3.5 percent to 4.5 percent.
“This is evidence that we’re in a good place, with no end in sight to the current market growth,” says Lucas—unless, of course, something catastrophic takes place.
“As of now, we are in a very healthy economic environment.”
The residential real-estate sector’s upturn, according to Lucas, is just one more element of an economy that has placed metro Phoenix among the ranks of some of the top U.S. markets—Dallas-Ft. Worth, Houston, Austin, San Antonio, Denver and the Silicon Valley region.
Feeding this revival has been the spurt of growth in commercial construction and its attendant job expansion, including massive construction by State Farm Insurance, which is expected to generate thousands of new jobs, and the seemingly endless reach by Arizona State University to further expand its presence.
These factors, among others, are said to be responsible for the in-migration of a new workforce, suggests Lucas—one with the buying power typically associated with jobs in such areas as banking, technology, high-end customer service and space research.
“All of this is fundamental to the growth of our economic engine, which in itself helps to make our area a great place to work and to live,” said Lucas.
Despite layoffs announced recently by some of the Valley’s biggest employers, notably Intel and Freeport-McMoran, Lucas says those staff reductions are related to worldwide factors, not the local economy.
“Even with news like this, our area remains one of the best job markets in the country,” Lucas said.
With the Valley’s continuing viability, he said—coupled with a boom in commercial and residential construction, business growth, climate and moderate cost ofliving—the Valley remains one of the top metropolitan areas of the country.
While Lucas’s conclusions paint a promising picture of the future, a roadblock that remains for some can be seen in the approximate 15 percent of homeowners who remain “under water” as a result of the downturn that occurred from 2006-2008.
That percentage also includes those who may have used funds from their home’s equity for other expenditures and who now cannot repay those dollars by selling in a marketplace that has not yet fully recovered.
“We’re still 15 to 20 percent below the peak values of the 2005-2006 real estate bubble, and it likely will take homeowners who are still “upside down” several more years to get past the negative-equity condition,” said Lucas.
“But when we look at today’s data, given all the positives we see, the outlook seems definitely bullish for the next three to five years.”