Rising Arizona

Phoenix has now surpassed Atlanta as the largest single-family housing market in the country, with 58,865 single-family permits issued in the 12 months ending in March. Eighteen of the largest 20 Giants have operations in Phoenix, with D.R. Horton and Pulte each reportedly selling more than 5,000 homes per year in the metropolitan area.

Phoenix's economy is very strong. More than 66,000 jobs have been created in the last 12 months, and unemployment stands at 4.2 percent. People are flocking to Phoenix from all over the country. One of our favorite Web sites for tracking migration is UHaul.com, where the migration flow is readily apparent in its truck pricing. The cost to rent a U-Haul truck from Los Angeles to Phoenix is more than 7 times the cost of a return trip, and the cost to rent a truck from Chicago to Phoenix is more than 3 times the cost of a return trip (see sidebar).

Despite the significant growth in primary and active adult new home communities, builders have not been able to keep up with demand. The median resale home price in Phoenix has risen more than $53,000 in the last 3 years, to a new record high of $208,000.

Featured Up-and-Coming Market: Tucson

Tucson, which is located two hours south of Phoenix, has been growing just as fast. Single-family permits now exceed 10,000 per year in Tucson, and prices have risen $55,000 over the last three years, to a median resale price of $195,277. Job growth is also strong, with 13,300 jobs created in the 12 months ending in March. Tucson builders are expanding south, east and north into areas that have seen very little housing in the past.

While we were completing an analysis in Tucson recently, the locals seemed very concerned that a housing bubble was emerging. In addition to the incredible price appreciation that had occurred, their "warning signal" was that California developers were now moving into the area. Are they paranoid, or are their gut instincts correct? Only time will tell.

jburns@realestateconsulting.com

Top 20 Metro Areas

			Employment			Affordability			Permits
		Short-Term Outlook/Grade	1-Year Payroll Employment Growth	1-Year Growth Rate	Unemployment Rate	Median Resale Home Price	Resale Housing Costs as % of Income	Housing Cycle Barometer	12-Month Single-Family Permits	1-Year Single-Family Growth	12-Month Total Permits	Total Permits as % of Peak Permits
1	Phoenix	A	66,300	3.99%	4.2%	$208,000	34.6%	5.6	58,865	19.2%	65,934	100%
2	Atlanta	B	17,900	0.80%	4.9%	$158,174	24.1%	4.9	57,744	1.6%	73,869	99%
3	Houston	B+	26,300	1.15%	5.5%	$135,200	24.7%	2.9	46,034	4.8%	57,926	88%
4	Riverside-SB	C	27,900	2.45%	5.0%	$320,000	55.8%	6.4	42,802	16.2%	51,127	89%
5	Las Vegas	A+	59,800	7.56%	3.9%	$280,000	49.2%	5.4	29,864	0.9%	34,107	83%
6	Dallas	B+	33,300	1.76%	5.5%	$151,800	26.1%	2.4	29,849	4.4%	36,470	49%
7	Orlando	A	45,800	4.76%	4.0%	$185,950	33.9%	5.4	27,863	17.4%	34,119	96%
8	Chicago	C	28,900	0.78%	6.1%	$210,000	34.3%	4.5	27,144	-3.7%	37,994	89%
9	Tampa	A	32,900	2.59%	4.1%	$159,000	31.6%	5.5	24,135	16.4%	31,262	82%
10	Washington D.C.	A+	66,000	2.91%	3.6%	$350,000	39.8%	5.6	22,904	-4.0%	30,778	81%
11	Minneapolis	B	27,200	1.60%	4.5%	$225,000	31.6%	6.1	19,739	-2.1%	26,740	95%
12	Charlotte	A	25,400	3.33%	5.1%	$150,000	26.3%	1.3	17,860	8.6%	21,230	93%
13	Fort Myers	C+	9,300	4.57%	3.4%	$210,426	38.9%	7.4	17,798	65.8%	23,415	98%
14	Sacramento	C	11,400	1.34%	4.9%	$350,000	55.0%	6.2	17,380	-5.6%	21,010	88%
15	Denver	A	24,900	2.17%	5.7%	$235,000	35.3%	5.6	16,831	14.9%	21,434	74%
16	Fort Worth	B+	11,700	1.49%	5.2%	$106,600	19.4%	2.5	15,595	10.8%	18,814	49%
17	Jacksonville	B	15,100	2.62%	4.2%	$152,000	26.7%	5.2	15,343	15.4%	21,093	97%
18	Austin	B	17,500	2.65%	4.6%	$154,800	28.0%	4.0	14,775	8.8%	18,254	69%
19	St. Louis	C	12,900	0.98%	6.0%	$142,500	25.6%	5.0	13,225	1.2%	15,152	83%
20	Nashville	B+	13,800	1.96%	4.9%	$122,050	22.2%	0.8	13,186	6.5%	16,377	89%
Sources: Bureau of Labor Statistics: Census Bureau through the month ending March 2005; John Burns Real Estate Consulting