Tempe, AZ Market Trends

Tempe is located in the East Valley part of the metropolitan Phoenix. This inner suburban city is densely populated, with a population of over 180,000, and houses the main campus of Arizona State University. 

With Phoenix and Guadalupe to the west, Scottsdale to the north, Chandler to the south, and Mesa to the east, Tempe’s real estate market is a lucrative deal for homeowners and investors alike. The city is also popular among tourists. The city has several national parks, zoos, live events, and festivals that attract over 3 million tourists annually. Since the hospitality industry is vital to the city’s economy, property prices are also high due to the influx of tourists.

• Population 195,816
• 40 square miles
• 4,898.2 people per square mile

Market analysis of real estate in Tempe:

It is quite difficult to get a more accurate idea of just how active real estate investing in Tempe is, however, here are a few graphs and statistics detailing the various aspects of the Tempe, and the Phoenix Metropolitan Statistical Area in general:

September 2021 for Tempe

Housing Inventory

_{The count of active single-family and condo/townhome listings for a given market during the specified month (excludes pending listings).}

The line graph above shows the housing inventory over time for the Phoenix-Mesa-Scottsdale area. The graph indicates a gradual decline in the number of houses available for rent or sale over time. The decrease is particularly sharp after 2019. This means that there has been an increased interest in the real estate market for the region in recent years.

Beyond 2019, with the exception of a slight rise in housing inventory in 2020 due to COVID-19, the inventory of houses available for sale or rent follows a downward trend. This trend seems to continue in the long run.

Value

$323,600 Median value of owner-occupied housing units

• about 10 percent higher than the amount in the Phoenix-Mesa-Chandler, AZ Metro Area: $283,500

Market Hotness: Median Listing Price

_{The median listing price for a market during the specified month.}

Since housing inventory represents the supply side for the real estate market, a decrease in inventory is expected to lead to result in an increase in the price for houses. The median listing price graph above indicates this very same phenomenon. The line graph for the median list price shows a continuous upward trend. The median price for a house in the Phoenix-Mesa-Scottsdale area was nearly $330,000 prior to 2018. By 2021, however, the median list price had reached nearly $480,000. That is an increase of $150,000 in a three-year period. 

Particularly interesting is the fact that the price starts to increase at an accelerated rate at the same time as housing inventory goes down drastically after 2019.

New Private Housing Units Authorized by Building Permits

This series represents the total number of building permits for 1-unit structure types. The 1-unit structure type is a single-family home or house. A single-family home or house types include fully detached, semidetached (semidetached, side-by-side), rowhouses, and townhouses. For attached units, each must be separated from the adjacent unit by a ground-to-roof wall in order to be classified as a single-family structure. These units also must not share heating/air-conditioning systems or utilities. Units built on top of one another and those built side-by-side that do not have a ground-to-roof wall and/or have common facilities (i.e., attic, basement, heating plant, plumbing, etc.) are not included under single-family structures.

Taken from the US Census Board, the number of building permits authorized for private housing graph shows a trend over a 30 year period. The graph shows how building permits initially followed an upward trajectory. The number of permits issued peaked at over 6,000 units in the year 2005, after which there was a drastic decline and a downward trend in the permits granted. 

The lowest number of permits issued was in February 2009, when only 293 were issued. After this low point, however, there is a steady increase over time in the number of permits issued. There could be a number of different reasons for the increase in permits, though encouraging and supporting the tourism industry seems to be the main one. Many real estate investors are profiting off buying and developing sites for Airbnb. 

Rental Rates

Talking about Airbnb and other rental properties, it is essential to examine the rental rates. As indicated by the bar graph above, for different types of rental properties, from studio apartments to one, two, three, and four-bedroom apartments, the median rental rates are nearly double the fair market rents. The situation with rental rates indicates just how high rents in the Phoenix-Mesa-Scottsdale region are. Tempe is a densely populated suburb, one that welcomes millions of tourists each year. On top of all that, the Arizona State University campus means that demand for rental properties is high among university students as well. Real estate investment in Tempe is a beneficial venture for the long run since the demand for rental properties like Airbnb is expected to remain high.

Short Term Rentals

Short-term rentals are particularly popular since these cater to tourists. Airbnb and similar rental properties are geared specifically towards tourists. According to the graphs above, most of the short-term rental properties consist of entire houses, followed by private rooms. Shared rooms are minimal in demand.

The reason for the greater preference for entire houses or private rooms is because tourists coming on vacation have the money to afford such living spaces. Shared rooms, on the other hand, are usually suitable for students who prefer to stay in a place for longer periods. Students do not want to deal with the hassle of moving constantly and therefore prefer to opt for long-term rentals, about one year or more.

Demographics

Population

Income

$66,297 Median household income

• about the same as the amount in the Phoenix-Mesa-Chandler, AZ Metro Area: $67,896
• about 10 percent higher than the amount in Arizona: $62,055

Poverty

17.2% Persons below the poverty line

• about 1.4 times the rate in the Phoenix-Mesa-Chandler, AZ Metro Area: 12.1% 
• about 1.3 times the rate in Arizona: 13.5%

_{All observations are July 1 estimates of each year.}

Job Postings on Indeed

_{Indeed calculates the percentage change in seasonally-adjusted job postings since February 1, 2020, using a 7-day trailing average. February 1, 2020, is the pre-pandemic baseline. Indeed seasonally adjusts each series based on historical patterns in 2017, 2018, and 2019. Each series, including the national trend, occupational sectors, and sub-national geographies, is seasonally adjusted separately. Indeed switched to this new methodology in January 2021 and now reports all historical data using this new methodology. Historical numbers have been revised and may differ significantly from originally reported values. The new methodology applies a detrended seasonal adjustment factor to the percentage change in job postings. For more information, see Frequently Asked Questions regarding Indeed Data.}

Unemployment Rate

Per Capita Personal Income

Geographical Mobility

31.6% Moved since the previous year

• about double the rate in the Phoenix-Mesa-Chandler, AZ Metro Area: 16.2%

• about double the rate in Arizona: 16.1%

Education

Sustainability

Average Price: Electricity per Kilowatt-Hour

All electricity.

Average consumer prices are calculated for household fuel, motor fuel, and food items from prices collected for the Consumer Price Index (CPI). Average prices are best used to measure the price level in a particular month, not to measure price change over time. It is more appropriate to use CPI index values for the particular item categories to measure price change.

Prices, except for electricity, are collected monthly by BLS representatives in the 75 urban areas priced for the CPI. Electricity prices are collected for the BLS for the same 75 areas on a monthly basis by the Department of Energy using mail questionnaires. All fuel prices include applicable Federal, State, and local taxes; prices for natural gas and electricity also include fuel and purchased gas adjustments.

Average Price: Gasoline, Unleaded Regular 

All unleaded regular gasoline.

Average consumer prices are calculated for household fuel, motor fuel, and food items from prices collected for the Consumer Price Index (CPI). Average prices are best used to measure the price level in a particular month, not to measure price change over time. It is more appropriate to use CPI index values for the particular item categories to measure price change.

Prices, except for electricity, are collected monthly by BLS representatives in the 75 urban areas priced for the CPI. Electricity prices are collected for the BLS for the same 75 areas on a monthly basis by the Department of Energy using mail questionnaires. All fuel prices include applicable Federal, State, and local taxes; prices for natural gas and electricity also include fuel and purchased gas adjustments.

Transportation to work 

22.2 minutes Mean travel time to work

• about 80 percent of the figure in the Phoenix-Mesa-Chandler, AZ Metro Area: 27.9 60,107,070
• about 80 percent of the figure in Arizona: 26.6

Rebates, Incentives, and Tools

Tempe Residential Recycling Program

Tempe Residential Recycling Program was launched to reduce waste by recycling, reusing items.

How to take advantage: Tempe residents can utilize this site to stay informed and up to date on their city’s recycling program.

Why we added this:

This site can be used as a guide for Tempe residents to properly separate their recyclable items. Incorrectly placing items in the recycling that do not belong contaminate the whole bin and make it unusable, so proper education on their program is crucial.

Arizona Discount Appliance

Arizona Discount Appliance offers “open box” appliances so users can get a discount and purchase something that would have been unusable in a traditional retail space.

How to take advantage: People can purchase appliances related to laundry, refrigeration, cooking, dishwashing, as well as accessories that are “open box” and weren’t going to be sold in a traditional retail space so they can now buy them at a discount.

Why we added this:

Buying appliances from places like these means these products were not made for the trash, it keeps them out of landfills and makes them “imperfect” useable, and serves as a more cost-effective route for purchasing appliances.

Conclusion

The market analysis for Tempe provides great insight into the current and future real estate conditions in the city. Real estate investments, such as Airbnb are expected to reap a lot of benefits. Tempe is already quite populated and is one of the most populous cities in Arizona. This means that the demand for housing is high. In addition to this, the city is popular amongst tourists. Short-term properties such as entire houses or private rooms are the most sought-after properties. Since the number of housing permits authorized has gone down significantly and the number of available houses has decreased over time, real estate prices have gone up drastically. 

Real estate investors rely heavily upon data in order to make their buying decisions. Yet data on its own can be confusing to understand and make sense of. This is why graphical analysis and charts are necessary to get the most accurate picture. Charts are easy to comprehend as everything is labeled and marked. To get the best available software to make graphs and charts to further your own investment business Dynamic.RE has it all. The company makes all kinds of software that are a must for any serious real estate investor. With graphs, you get a visual representation of the data, which enables you to see the full picture at a glance. Combining many different graphs, as shown above, for Tempe’s real estate market means you can examine anything from many different angles.

Explore the data of property sales value, rental rates, and short-term rental revenues on Dynamic.RE.