Maricopa is a town with a brief but wild real estate history. According to 2000 US Census data the population was a little over 1000. Today a conservative population estimate is 37,000. The area included farms, dairy’s, and feed lots as well as the train station. Most Arizonan’s rarely ever came through the area unless on a road trip to Rocky Point or San Diego as Highway 347 is a prime link to I-8 from the Valley. This report will focus on how the Maricopa real estate market has evolved over the past decade but for those that want to know more about the history of the area here is a link to the City of Maricopa’s history page.
Reason’s to the incredibly quick rise of the Maricopa real estate market can be traced back to May 2, 1997. The Clinton Administration made significant changes to the way real estate profits are taxed. This legislation not only gave us the 2 in 5 rule but also lowered long term capital gains rate to 15%. Both these had a major effect on the housing market. The 2 in 5 rule allowed primary home owners to pocket all real estate profits from the sale of one’s primary residents with tax free profits limited to $250,000 for single individuals and $500,000 for married home owners as long as they had lived in their home for 2 of the past 5 years as of close of escrow. This was the first layer of grease that began the unprecedented rise in property values and ultimately their crash.
The effects of the new legislation started to show signs of helping many real estate markets. One of the first to boom was San Diego. San Diego offered housing near the ocean for under $300,000. This first wave was lead by investors whom with the lower capital gains rate and a shorter learning curve started buying in masses. This propped up the San Diego market allowing many home sellers to join in the buying frenzy as they where able to sell upgrade their home using the tax free profits as a down payment for their new home. For some this became a 2 year thing. Buy a home watch it go up in price sell the home pocket some of the profits use the rest for a down payment on a better home.
The boom then started to slowly spur markets across the nation with the next boom in the west moving to Orange County, California. In 2002, Orange County home prices began to sky rocket, leading to many being priced out of Southern California and a large scale exiting from the Southland. In mid 2003 the first choice for the masses exiting was Las Vegas, NV. On June 16, 2003 the Bush Administration enacted “The American Dream” legislation that basically allowed banks to bundle Mortgages into Securities that where then sold to investors. This added a second layer of grease which prompted a dramatic rise in many real estate markets across the nation. Las Vegas recorded the highest recorded one year median gain on record at 52.7%. Las Vegas saw incredible demand for new homes from both investors and primary home buyers. The demand was so incredible that lotteries where the norm. Builders went even further to restrict new homes sales to primary and second home buyers only. No rentals no investors. The Vegas market was too small and no match for this wave of buyers so the wave looked elsewhere, Arizona was next.
The South East Valley and in particular Gilbert, Arizona saw a huge boom quickly. At the same time Anthem and Queen Creek (Pinal County) started to become read hot markets as well. Anthem held a higher price point so much of the wave was targeting on Queen Creek. The West Valley quickly jumped in as builders swallowed up land and began to build at a record pace. Lotteries became normal especially in the most popular new developments. In the spring of 2004 many investors where shut out of the new home market. Not all but many. This lead to an incredible run on resale homes as investors raced to purchase as many as they could and with the added layers of grease many did buy several properties. Maricopa by late 2004 was in a frenzied market. New home builders could not build quick enough.
The Maricopa real estate market was at full throttle until about August of 2005. Inventory began to sharply rise and sales slowed significantly. The average price per square foot peaked in December of 2005 at $150.03. The real estate market shifted very quickly from a Seller’s market to a Buyer’s market in the fall of 2005. In 2006 resales dropped off significantly in Maricopa lead by a sharp decline in New Home Prices. New home builders lead in sales throughout the area from mid 2006 throughout 2007. Resale homes where slow during this time with the best priced well kept homes being the few to sell. The regular resale market has been very slow for more than 2 years. At this time it is practically on hold as the area works through distress sales.
In late 2007 Short Sales and Foreclosure Listings began to steadily enter the market. By February 2008 these distressed listing where coming on the market in masses. The estimated supply for the area in January 2008 was greater than 20 months. Buying activity was a little slow in January and February 2008. In March of 2008 home sales in Maricopa skyrocketed to record levels. Sales activity has been dominated by the Foreclosure market for all of 2008. Sales activity continued to break monthly records peaking in June of 2008 at 156 based on MLS data. This has lead to the estimated supply dropping to under 8-months. Currently sales remain near record levels in Maricopa and foreclosures are continuing to dominate the sales totals.
The US Government is at this time working out the details of the largest economic bailout in history and facing the most serious National economic crisis since the Great Depression. Maricopa in its brief history echoes a similar story for growth areas from Nevada to Florida and the dramatic rise and fall of the US housing market. The reality is that this collapse is devastating for many of these growth areas. The damage has already been done. So where is the future for Maricopa and these growth areas? The market is already starting to recover as we see in the increase sales activity at the peril of banks as they have slashed prices to move inventory leaving huge losses on many properties. This does not suggest the market is healthy but simply starting to heal.
At this time a lot of the buying activity in Maricopa is coming from deep pocket investors and second home buyers. Canadians in particular have had a significant presence in the Maricopa market. These buyers are often using cash to purchase. Investors are more limited with lending options and many if they can find lending are required to put down greater than 30% to obtain financing and rates are significantly higher than owner occupied loans. This has actually slowed some investing as many investors would like to buy and manage more properties however they too have become cash strapped with the higher down payment requirements. The buying activity is even more impressive considering that there are very few primary home buyers purchasing at this time. Many are still on the sidelines as the dust has yet to settle across the Valley.
The reality of the crash of the Maricopa housing market has more than settled in for many in the area. One fortunate change from the fallout is something that too many individuals overlooked during the run and that is homes are now actually affordable for working families. Investors have begun to figure out that at current prices there investment can now actually generate a positive cash flow. Primary home buyers will at some point begin to enter the market for very logical reasons hopefully sooner than later. In Maricopa’s case buyers can actually purchase a home for nearly the same amount as they can rent a home. It will soon be the most economical way to provide shelter. Primary home buyers will also have to in masses become more aware of new lending guidelines and in particular FHA loans. The new rules will likely drive more population towards the areas with the most affordability because buyer’s incomes will be verified to prove the ability to repay the loan. With the prevailing wages in the area for many Maricopa will be one of a few viable options until either wages rise or home prices fall in the higher priced areas of the valley.
It is easy to say today the Nation is just now coming to grips with the economic realities we face. In Maricopa this reality has been upon us for a little while now. The housing market has been absolutely devastated over the past 2 and ½ years. It has taken a serious toll on the entire community. Still the community continues to grow and life goes on. Maricopa offers a lot today for many families. The area is within a 35 minute commute of the main work areas of the Valley. Families will find nice homes and a safe community centered environment at affordable prices.
For more information please visit www.SearchMaricopa.com
John Guthrie
DPR Realty, LLC
520-282-5102
john@347homes.com