Is Arizona Headed for a Repeat Real Estate Slump? Report Says No

Back to the 80s: Are We In for a Real Estate Repeat?

The amenities of desert living have long brought a strong inflow of new residents to Arizona, which is good for the real estate market but bad for institutional memory: Those who have not lived very long in the Grand Canyon State might not know about the great real estate downturn of the late 1980s and early '90s.

Arizona recovered from those rough years -- which saw large drop-offs in home prices, construction, construction employment, rental occupancy rates, land prices and a host of other indicators.

As the state and national real estate boom (some call it a bubble or a balloon) fueled by the low-interest policy of the Federal Reserve 2001-2004 cools off, investors, homebuyers and real estate professionals with long memories may be wondering if the approximately four-year plunge of 1987-91 is about to repeat.

Experts at the W. P. Carey School of Business advise some caution. But even though prices still are rising, a repeat of the '87-91 plunge is very unlikely because of a number of factors, they say, and Arizona will fare better than the rest of the nation in the next few years.

Conclusions:

-Arizona's economy and real estate market are faring better than the rest of the nation, and that trend is most probably will continue, so a repeat of the 1987-91 slump is very unlikely.

-Homeowners wishing to sell will have to wait a bit longer to close a deal and perhaps settle for slightly less than their asking price.

-Home buyers enjoy more choices and softening prices but face higher interest rates.

-Real estate professionals face a drop in activity from recent years' frenzy but still can enjoy a good year by historical standards.

-Investors, after years of short-term bonanzas, are advised to think more about the long term.