August 2016 Phoenix Real Estate Update

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1st Southwest Realty August 2016 Phoenix Real Estate Update


I hope you enjoy this monthly newsletter.  Are you thinking about selling a property?  If you want to know the true value of your home, not just Zillow’s opinion, please call or send me an email.  You can also search the MLS from my website at greathouseaz.com


Are you looking for a rental property manager?  Please call or email Karen at 602-316-7028 or ftr9558@cox.net.

Sincerely,

Pat Hune

Broker

greathouseaz@gmail.com

480-703-1976

www.greathouseaz.com

Equal Housing Opportunity



Market Overview

Commentary from Clear Title Agency and Pat Hune, Broker, 1st Southwest Realty


Clear Title Agency reported (based on information from the Arizona Regional MLS) "The number of active single family listings without an existing contract was 15,137 for the Greater Phoenix area as of August 1, 2016. This is down 3.0% since July 1. The inventory of single family homes under $150,000 stands at a mere 31 days, although up from 29 days a year ago. Overall we have seen 5.1% more new listings created in 2016 than at the same stage in 2015. We expect active listing counts to be little changed for the next month before starting to rise again in September. New supply has been excessive at the upper price points but inadequate below $200,000. In the mid range between $200,000 and $500,000 we are seeing plenty of supply but demand is more than strong enough to cope with the new listings. We saw a slight decline in non-distressed transactions (-2%), with investor flips down 7%. New home sales were up sharply by 22% but distressed transactions fell 38%. We saw a 30% fall in third party purchases at trustee sales, but new notices of foreclosure are at very low levels. Reversions to lenders declined by 33%.   During July, average single family pricing moved a little lower, as they do most years, reading $286,779, down from $292,878 last month and up from $273,416 in July 2015. Average new single family home prices were 5.9% higher than last year while the average new single family home size has declined by 4.9% over the past 12 months.”  Click on the link below to view the full report.


Clear Title Link



Articles

1)  STAT Newsletter

2)  Rental Market

3)  Multifamily and Commercial Real Estate Trends

4)  Installing a New HVAC Unit?  Be Careful You Don’t Get Burned!

5)  Where Are Good Real Estate Investment Properties?

6)  Tales From the Trenches -  Why Don’t Good Houses Sell?


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1) STAT Newsletter Link - Commentary by Mike Orr, Founder of the Cromford Report

(Note the numbers are reported one month behind.)  STAT is produce monthly by the Arizona Regional Multiple Listing Service.  This is the database realtors use to list homes for sale and the historical sales. ARMLS 2016


I have read a number of comments that July’s sales numbers were weaker than expected, showing a 3 percent fall compared with July 2015. People tend to think all Julys are created so a comparison of July 2015 and July 2016 sounds like apples to apples, right?


Wrong! When a month starts and ends with a weekend it can end up with far fewer working days. It is working days that title companies, escrow officers and the county recorders’ offices require to get sales closed. When you have been watching the market as long as me and Tom Ruff, you notice that one of the biggest factors in determining the end of month sales count is the number of working days – sometimes less than the levels of supply or demand. Real estate agents often do not expect this, because they tend to work weekends.


July 2016 had only 20 working days, while July 2015 had 10 percent more – 22 working days in total. For July 2016 to end up down by only 3 percent means it had to close 6 percent MORE sales per working day. Any month that ends on a weekend tends to start the following month with an unusually large number of listings under contract and this was true of August 2016. Lots of pending sales exist for everyone to close in August.


I can confidently predict that any disappointment with July’s sales will be blown away by the sales counts that come in at the end of August. Why? August 2016 has the maximum 23 working days. It also has almost 10 percent more working days than August 2015 (with 21), so I would expect some positive headlines in September.


Click here to see the full article from Michael Orr


Click here for the July STAT


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2) STAT Rental Market Link


The July median lease was $1,350 as compared to the June median lease of $1,375. The July average lease was $1,512 as compared to the June average lease of $1,565.  The July average days on market was 27 as compare to the  June average of 26 days on market.  July and August are typically a slower months for rentals as schools start and the weather is extremely hot making it painful to move.


July Rent Check


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3) Multifamily and Commercial Real Estate Trends


Multifamily vacancy rates are at the lowest point in decades while multifamily prices are the highest. Current Phoenix market trends data shows increase of +3.4% in the median asking price per unit for Multifamily compared to the prior 3 months with an increase of +14.5% compared to a year ago.  In Maricopa County the asking price is 4.8% higher at $68,231 per unit compared to the current median price of $66,964 per unit.  


Loopnet Commercial Trends


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4) Installing a New HVAC Unit?  Be Careful You Don’t Get Burned!

Angies List and various sources, September 2016


You’ve just bought a home.  The previous owner replaced the entire HVAC system three years ago. They assure you they purchased a 20-year extended warranty, so you should be covered, right?  Not necessarily.


Most major HVAC manufacturers warranty their work and offer extended warranties for five, 10 or even 20 years. But when you purchase a home and the HVAC system with it, you need to take steps to properly transfer the warranty to your name. Otherwise you could be in for some unpleasant and expensive surprises a few years down the line when your air conditioning or heating system develops problems.


“The biggest ramification could be that you’re not getting your warranty repair,” says Jeremy Anderson, general manager for Aire Serve Heating & Air Conditioning in Henderson, Nevada. “The warranty company isn’t obligated to honor that warranty at all if the paperwork isn’t up to date. Manufacturers don’t want to give away money, so they’re becoming sticklers on this more and more. I’ve seen this happen with clients who ended up having to pay out of pocket on equipment they thought was under warranty.”


Here is a direct quote from the Trane website. Trane is one of the most expensive HVAC units on the market.  There are many reviews on the internet about how unreliable the systems are but Trane will not transfer their warranty without paperwork and money.  "Your reliable Trane system may help you sell your home. During either the 60-day Product Registration Period or within ninety (90) days following the sale of the home (if such 90 day period is still within the Registered Limited Warranty period) you have the opportunity to purchase a Registered Limited Warranty Transfer Option** which may allow the balance of your Registered Limited Warranty to be transferred to a subsequent homeowner. **The Registered Limited Warranty transferability option is available for a $59 fee during the initial 60 day Product Registration period. If purchased outside of the Product Registration Period, but within the 90 days from the sale of your home when the Registered Limited Warranty period is still in effect, a $99 fee will apply. Regardless of when the transferability option is purchased, either you or the new homeowner must notify Trane of the transfer within ninety (90) days of the home sale for the transfer to be effective. Failure to complete the limited warranty transfer by such notification within 90 days of home sale will result in the limited warranty expiring on the date of home sale. Transferability restrictions may vary by state."


Shame on Trane for being one of the highest priced HVAC manufactures trying to weasel out of covering the system if the seller sells the house and doesn’t do the proper notification and pay more money.  Goodman is another one that will not transfer the warranty.  According to local HVAC companies several HVAC manufacturers will not transfer the warranty or will charge to have it transferred.  I am appalled at the lack of confidence the HVAC manufacturers have in their own products.  Would consumers put up with this from auto manufacturers?  


Before you buy a new HVAC make sure the warranty is transferrable.  Otherwise the installation of a new HVAC unit will not have the added value you thought it would have if you have to sell your home during the warranty period.  Instead it could be a total waste of money.



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5)  Where Are Good Real Estate Investment Properties?

Pat Hune, Broker, 1st Southwest Realty, September 2016


Recently I met with a group of investors who asked me where should they buy as they wanted to increase their portfolio.  I told them there was not much available that made sense.  And as always the three rules of real estate apply: location, location, location.


Multi-family housing (duplex, triplex and fourplex) prices have gone up so much they don’t make sense.  The only fourplexes  selling for less than $200,000 are in communities with very high HOA fees or HOA fees that are high and don’t cover much other than pool and common areas, or are in undesirable areas. One example is a fourplex in Mesa with all 4 units consisting of 3 bedrooms and 2 baths that sold for $415,000.  The rents were $3,425 per month.  There was no HOA and the tenants paid all the utilities.  The vacancy rate used in the listing was 3% which is a bit low even though vacancy rates have dropped significantly as the economy has improved.  Using a 5% vacancy rate the property was expected to generate $39,000 in income and expenses were estimated at $11,457 for a cash flow of $27,000 a year.  At this price the CAP rate was about 7% which is not too bad but does not consider potential major expenses coming.  This is a 1986 building that may have 30 year old HVAC units and roof.  


The lower priced single family houses are in high demand from both entry level owner/occupants and investors. This results in multiple offers and bidding wars.  There are no bargains here unless the location or condition is terrible. If the condition is poor then it will cost too much to repair just to rent as it will take too long to recoup the cash invested.  If the location is poor then it will take a long time to rent.  


My advice is to look at condos with reasonable HOA dues located near universities, community colleges and the light rail.  The Housing Opportunity Through Modernization Act of 2016 was signed into law on July 29, 2016.  Part of the bill was designed to make the FHA recertification process less complicated and reduce the owner occupancy percent from 50% to 30%.  If the HOA fees are reasonable and there are no big special assessments in the future condos could be an excellent investment.  Communities with no condo certs should be encouraged to get them which will increase the buyer pool and hopefully the value.


Housing Opportunity Act 



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6)  Tales From the Trenches -  Why Don’t Good Houses Sell?

Pat Hune, Broker, 1st Southwest Realty, September  2016


Recently visitors to my open house thought my listing was beautiful they wanted a single story.  They asked me to show them the other homes in the community as they loved the location.  They said they had a house to sell but did not need to sell to buy something else.  I asked them if they were working with a realtor and they said no because they used a flat fee company.  They made the comment “Listing realtors don’t sell the house. The Buyer’s realtors sell the house.  Therefore the listing realtor adds no value and should be paid very little money.”  Really.


Let’s look at a real life example of how a listing realtor adds value and helps sell the house.  About a month ago one of my clients, Zorro*, called me to help get his house sold.  (Note this is the same one on the open house mentioned above.) Zorro had listed the house with a different realtor who was a long term friend of the family.  Six months later only one lowball offer had been received despite over 50 showings.  I looked the listing online and went to the house. I came up a laundry list of things to be done to make the house more appealing including a better description and pictures.  There were no big mechanical issues just a bunch of little things preventing the house from showing its best. Vacant houses need to be pristine as every blemish shows as there is no furniture to distract the buyer.


As soon as the listing expired Zorro, me and my helpers went to work.  We painted, removed unattractive ceiling fans, got the fountain running, cleaned up the courtyard and removed 30 plus bags of leaves and branches from the landscaping (even though the HOA landscaper was supposed to do this) along with other misc small repairs.  Then we cleaned and cleaned and cleaned.  I staged the house. (I know, I know, I said I would never stage a house again.)  I took professional grade pictures and had a video made.  Zorro and I worked up a great description of the community and house.  One week after the prior listing expired the house was back on the market at the same price but with much better photos, description, interior condition and staging.  


I had several open houses and all the visitors said the house looked beautiful and would sell quickly.  One buyer who had looked at it before said he was sorry he did not give it more consideration as it looked so much nicer.   Fourteen days later the house was under contract with a full priced offer with no concessions.  Skeptics might say this was a fluke but I have done it before.  In November 2014 I took over a house in Chandler that had languished on the market for 215 days with zero offers and very few showings.  Everything mechanical was working. The house was very dirty, full of the sellers belongings so the house could barely be seen, the pool was green, carpet was dirty and back and front yards overgrown. The pictures in the MLS were taken with a cell phone which does not work for houses.  It took me, the seller and my helpers a week to turn the property around. Again a lot of painting and cleaning. I brought in better furniture and staged the house.  I put it back on the market at the same list price with better pictures and description.  Two days later we had a full priced offer less seller contribution to the buyer’s closing costs.  Note that in both examples the sellers paid for the labor to clean and stage.


I vehemently disagree with the opinion listing realtors do not add value and do not deserve to be paid much.  Most homebuyers start their search online using Realtor.com, Zillow, RedFin or one of the many other real estate website.  If the pictures are terrible and the description is lacking then the buyers will move on to a more desirable home.  Once the buyers are interested the next step is to make the home as appealing as possible when a potential buyer walks in the door.  Most people only sell a house once every 5 to 10 years.  They need the guidance and experience of an experienced listing realtor to market the home properly.


*Zorro is not the real name.