After the U.S. suffered its worst housing crash in history, Phoenix is leading the charge to recovery. Following a rapid rise in housing prices in the mid-2000s, Phoenix experienced a punishing decline in 2008 with prices falling below year 2000 levels.
Once the dust settled after the drop, it became time for investors to make their move to capitalize on this unique opportunity.
And Canadians are leading the way, having become the largest group of out-of-state investors in Arizona.
Liquidation Sale, Sale, Sale
"No one has ever seen a market like this before," says Eben Calder, a Phoenix professional real estate investor. "Not since the great depression has there been a drop in housing value like the current one, and back then, only 2% of homes had mortgages."
So the market in hard hit cities like Las Vegas and Phoenix is unprecedented for Americans and downright foreign to Canadians.
Phoenix real estate has become a bank liquidation sale with 70% of homes currently sold since the bubble going through foreclosure.
This situation does not exist in Canada, due to different laws regarding foreclosure and power of sale, and with less than 1% of homes in mortgage default. Banks in the U.S. are struggling and over 250 banks have failed in the last three years.
With billions of dollars of non-performing mortgages on the books, and regulators tightening their rules, the banks have been desperately selling properties at a loss.
Professional Investors flock to Phoenix
As this process of liquidation, which began in the fall of 2008, moved forward, investment funds and sophisticated investors, recognizing a buying opportunity, moved into the market and began acquiring houses.
Sales to investors have accounted for 30% of all sales, which now total in excess of 50,000 homes, representing an investment in excess of $6 billion.
Much of this investment now comes from outside of Phoenix due to the fact that this market has been operating at this level for two years, and much of the capital available locally has been consumed.
This perfect storm of real estate trends has created new and rare opportunities for investors to profit. Single-family homes, which are not normally traditional investment properties for professionals, have fallen so far in price that they have become very attractive to the big boys: REITs, hedge funds and private equity groups.
To learn more about how to build a fortune investing in Arizona, download a copy of our June 2011 issue.
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