Should you utter the words Phoenix with Investment yet?

I believe it is time.
Couple of key indicators are pointing the needle back to Phoenix.
It's been a long time since the red hot investor needle was pointing to the desert.

So, what is it that has changed?

1. Builders have virtually stopped building. Limiting the increase in supply.
2. Inventory is shrinking. Sales are up 60% Nov-Dec 08 and 135% 07-08
3. Population is still increasing faster than national rates. 2.5% projection vs 1% US
4. Still plenty of jobs to hold in the population. Only 6.3% unemployment. US 7.2%
5. Affordability of homes. Median prices come down, renters gravitate toward buying.
6. Investor levels are rising. No one wants to be the first and be wrong.
But if you wait too long, you are the last and hold all the regret.

Not only have builders stopped building, many have gone out of business. Those that are still in the game, have lost the large credit lines that allowed them to stretch their reach from 100 homes per year, to 1000 homes per year. This will keep the new housing inventory to a level of normalcy. Also, the population projections appear to be lower than the previous decade. Builders get overzealous with building permits when population expectations are above 3% growth rate.

Housing monthly inventory index is shrinking. Part of it has to do with the builders not building. But that seems to be offset by the massive foreclosures that are piling up. What is changing is the buyers are buying again. Prices have reached affordable levels that have made home buying attractive again. The question of rent vs buy now is being answered with BUY!

The actual number of houses on the market is fluctuating at 45,000 to 48,000. Which is not a low number. How the monthly index is determined, is by the amount of buyers entering the market each month. Stats are showing sales keep increasing. In Phoenix the monthly index has been slowly dropping and now is at a 10 month supply. In many markets around the country, the montly supply index has simply been increasing all year and the national average is now over 11 months supply.

Prices have been pounded in Phoenix, and there will be more foreclosures, which will keep these prices low. Investors have taken notice. The rate of investors in the market this month is 15%. A number Phoenix hasn't seen since 2005. Investors were part of the problem for the Phoenix decline, but mostly speculative investors. Combined with over-building, and a sub prime lending spree. This time investors are looking at an attractive 1% price to rent ratio. Cash flow is the difference. Let's face it. Rent doesn't change that drastically in 3 years. But prices in Phoenix have been a roller coaster. They have now rolled back to roughly half of their peak.

Properties like this example are available:
Avondale, West Valley Suburb.
Master Plan Community
Homes all built post 2000
Variety of home prices ranging from $120k-$400k
2005 levels, homes were minimum $200's
One bank owned REO cuts the $99,000 mark.
3 bedrooms, 2 baths, tile floors, covered patio.
Rent estimates $900-$1000

1% Price to Rent Ratio = Cash Flow

Since, today's investors are less speculative, and more cashflowcentric, then this is a healthy addition to the reason Phoenix could be on the road to recovery sooner than later.

Some of the markets that were first to bust, are going to be the first to recover.
Phoenix will be one of those markets, the signs are already pointing in the right direction.