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The Hidden Market Heat Wave Out West that Most Investors Will Never See Coming

By Carole Ellis

Phoenix, Arizona, recently tied all-time heat records for the area with 117-plus degrees battering the landscape, but that’s nothing compared to the heat that a nearly entirely-overlooked area outside of Phoenix is about to start generating for investors in cash-flowing rental property. This “corridor” of land, known to locals as the Pinal County Corridor, is nothing glamorous to look at from the sky or on the land. In fact, much of the corridor is presently little more than sparse desert vistas, beautiful to look at and possibly exciting to hike through, but nothing that says overtly, “Rental investors, put your money here!” However, if you look in either direction down the somewhat deserted stretch of Interstate 10 that runs between Phoenix, Arizona, and Tucson, Arizona, you can see, just over the horizon, an exciting glimmer of things to come if, that is, you know what you’re looking at.

jobs2_txtMost investors are not, at present, particularly interested in or even aware of the pending activity in Pinal County. To real estate investors interested in the “crystal ball” variety of investing, however, wherein one moves far in advance of existing trends to land solid, cash-flowing investments with highly favorable odds of growing in value, Pinal County and the Pinal County Corridor sparkle with promise. While much of the Phoenix and Tucson areas are already “hot” for investing, the area between them is, at present, sitting at something of a simmer, verging on a low boil. On either side, metropolitan areas are expanding upward and, more importantly outward, bringing more jobs, more national interest, and more money to the area. Thanks to pro-business policy on both state and local levels, the area already plays host to Honeywell Aerospace and will soon boast a $2-billion Apple “command center,” and a new Microsoft data center. These corporations are already bringing thousands of IT jobs to the Phoenix and Tucson areas and, with those jobs, thousands of other “multiplier jobs” that are created as a direct result of the influx in the IT population. In fact, given that every IT job brought into an area creates an additional 4.3 jobs in other sectors, such as service, leisure, and manufacturing, you can see that Apple’s estimated 2,000 IT jobs, for example, will likely result in nearly 10,000 jobs coming into the area over the next few years.

jobs_txtThat huge influx of jobs is the biggest key to the future of real estate in the Pinal County Corridor. According to state departments like the Arizona Department of Transportation (AZDOT), the only place for those future employees to go is, well, into Pinal County. At present, the state of Arizona identifies roughly 50 “activity centers” in the state. This term indicates an area in which people are, essentially, actively living, working, building, or playing, and the intensity of such a center can be high or low. Not surprisingly, most of the high-intensity centers are located in the Phoenix and Tucson areas, where business is booming and the population is growing rapidly. However, the state projects that the Pinal County Corridor alone will develop eight high intensity activity centers in the next few years where presently the activity is low or nearly nonexistent. Essentially, the corridor is heading for an unprecedented boom in the residential sector, and, even more intriguing for investors, experts at AZDOT predict that the boom will last for the next 25 years and are developing infrastructure for these areas accordingly.

carole_discountSo what does this mean for the savvy, “crystal-ball” investor? In a nutshell, it means that the Pinal County Corridor is ripe for multiple investment strategies, particularly cash-flowing rental properties. At present, the rental market in the area is already booming thanks to an influx of new households resulting from the area’s burgeoning employment opportunities. At this point in time, one of the biggest property management companies in the area is reporting that vacancies are at one percent and the average time it takes to fill a vacant property is a mere nine days. Furthermore, projected growth in the area not only makes rentals a great source of cash flow, but the region appears to be a very solid bet for strong long-term appreciation as well. Phoenix real estate values have been on a steady, relatively steep rise since 2011 and began to stabilize in 2014 with an appreciation rate of 5.4 percent. However, Pinal County has lagged behind, in large part because foreclosure rates in the area have been much lower than in Phoenix and Tucson, where lenders moved more quickly to liquidate inventory and recoup losses. Now, Pinal County Corridor real estate is set to mirror what has already happened in its flanking metro areas.

Clearly, the real estate market in the Pinal County Corridor area is ideal for the savvy investor. Foreclosure properties are available at steep, steep discounts thanks to rising foreclosure activity in the area as banks and other lenders spot an opportunity to recoup their losses by selling to investors and developers. This past summer, foreclosure activity in Pinal County rose by nearly 80 percent year-over-year due to lenders using their own “crystal balls,” and, thanks to an unusual practice in Arizona in which trustees hold foreclosure auctions nearly every day of the month, investors with the right contacts in the area were able to purchase those properties quickly, easily, and often extremely cheaply. Of particular note, Eloy, a city pinpointed as the “fastest-growing activity center in the region” by AZDOT, is experiencing massive foreclosure activity and sell-off due to lenders’ insight into future property trends in the area.

If you followed the news on the state of Arizona last month, you would have seen the state swelter under a record-setting heat wave and then choke in the midst of a massive dust storm that left more than 10,000 homeowners out of power for days before experiencing what the media dubbed a “monsoon” rainstorm that actually flipped small planes upside down at Phoenix airports. However, in the middle of all the chaos, the Perseid Meteor peaked in the dark Arizona skies, showering the state – and the Pinal County Corridor – with brilliant shooting stars. It was only appropriate, as crystal-ball investors know, since the corridor is indisputably headed for a meteoric rise in real estate in the coming months and years.

bio pic Carole EllisCarole Ellis

Carole Ellis is editor of and chief market analyst for REI.today, a real estate research publication focused on identification of burgeoning trends and market factors that accelerate wealth accumulation for real estate investors. To see Carole’s latest list of Hot Topics for savvy investors, visit http://www.REI.today or email her at editor@rei.today.

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