December 2014 - Phoenix Real Estate Review

Happy Holidays to all our clients.  May we all have a happy, healthy and prosperous 2015!


To our valued clients:


I hope you enjoy this monthly newsletter. Remember whether you are buying a new or resale home it is important to have a realtor to represent your interests. If you know of anyone who is thinking about buying or selling please let me know.  You can search the MLS from my website at www.greathouseaz.com.


Do you want instant updates on the Phoenix Real Estate market? Follow me on Twitter


Do you have a rental property and need a property manager?  Please call or email Karen Van Vugt at 602-316-7028 or ftr9558@cox.net


Sincerely,

Pat Hune

Broker

greathouseaz@gmail.com

1st Southwest Realty

www.greathouseaz.com

Search the real MLS from my website!

Cell 480-703-1976

Fax 480-304-9099

Equal Housing Opportunity



2014 Year End Review Overview -  As 2014 draws to a close the real estate experts, analysts and me are dusting off our crystal ball, consulting with our favorite psychic and reading Tarot cards to see who can accurately predict what will happen in the Greater Phoenix real estate market in 2015.  


First let’s see how we did with our 2014 predictions. a) Interest rates will rise. Nope. Interest rates continued to be historically low hanging around 4.5%.  b) & c) Inventory and prices will continue to increase. Right on these two but just barely.  At the end of November there were 27,422 active homes versus 26,845 from a year ago for a piddly 2.1% increase year over year and a drop of 0.6% month over month. Average prices increased 6.1% while the median price increased 4.3% year over year.  d) Short Sales and Foreclosures will continue but will be a small amount of the overall inventory.  This was based on 500,000 homeowners who were still under water at the end of 2014.  This was correct as the amount of monthly distressed sales were less than 10% of the market.  Overall not bad on these predictions.  But as Laurence J Peter said “An economist is an expert who will know tomorrow why the things she predicted yesterday didn’t happen today."


Predictions for 2015 -  Millennials will drive another real estate boom. By 2020 there will be 4.6 million Millennials between the ages of 18 to mid-thirties which is typically prime home buying years. Economist Stan Humphries thinks the lack of home-buying is because younger Americans have delayed getting married and having children. 


Home Starts will increase 20% while Home Sales will increase 5%.  The increases will come from the millennials and boomerang buyers.  My personal observations from driving around the valley is building activity is way up from a year ago.  TW Lewis, K Hovnanian,  Beazer, Meritage and Taylor Morrison have communities underway throughout the valley.  


Prices will increase 3% to 3.5%.  There is a common theory that long-term appreciation rates have to be close to the general rate of inflation. Inflation is hovering between 2.0 and 2.5%.  


Interest rates will rise above 5% which was the prediction in 2014 and everyone was wrong. But sooner or later interest rates will go up.


Mortgages will be easier to obtain.  Refinances have made up about 50% of the new loans originated. This is expected to drop to 23% making mortgage bankers compete hard for the home buyer mortgages.  In 2014 lenders started allowing lower credit scores and higher levels of debt industry wide.  This is expected to continue.


Articles

1)  STAT Newsletter, PPI and Rent Check Link 

2)  Investor pays $16.8 million for 106 Valley Rental Homes

3)  Valley New Home Building Slows in November and 2015 Predictions

4)  Phoenix Housing Market Ready to End a Relatively Flat Year 

5)  Real Estate Briefs

a) Elevation Chandler to be Razed on November 20, 2014    

b) Multifamily Construction Continues Rapid Pace in Tempe and Scottsdale 

c) Mortgage and Tax Changes

6)  Tales from the Real Estate Trenches 

Does staging make a difference when selling a house?

 

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1) STAT Newsletter Link - STAT is produced monthly  by the Arizona Regional Multiple Listing Service - the database realtors use to list homes for sale and that have sold.   ARMLS® COPYRIGHT 2014


December STAT


November STAT


STAT Newsletter Highlights

Commentary by Tom Ruff, Information Market


There were only 17 working days in November, October had 23. (No wonder I didn’t have time to get my newsletter out.) The first two days and last two days of the month were a weekend and there were three holidays in between. November 2014 had the shortest number of working days possible for a November. November 2014 had less working days than February 2014 (19 working days). Many real estate agents would say they worked 30 days in November while we know mortgage, Title and the County Recorder’s offices only worked 17 days. Fewer business days means less business activity.  You could say the numbers in November look bad but taking the above into consideration, November is a repeat of the same boring patterns. When we change the numbers from monthly totals to daily averages we paint an entirely different portrait:


November 2014 had 7,501 new listings, the lowest number of new listings for a November in the 14 years of our reporting. This now becomes the 5th time in the last six months we’ve hit the historic bottom for a month with low new inventory. To say it quickly, November 2014 had historically low new inventory with home prices remaining incredibly stable. This month’s PPI speaks to this stability.

 

The Pending Price Index

Over the past few months our projections have been trending slightly more pessimistic than the actual reported results. Looking ahead to December 2014 we expect minimal increases in both the median sales price as well as the average sales price. The Pending Price Index projects a median sales price of $193,000 and an average sales price of $251,600 for December. As expected, sales volume in November 2014 was lower than in October 2014. Sales volume in December 2014 will be in line with seasonal patterns and will definitely be higher than November. We are projecting sales volume for December to be in the 5,600 range.


Rent Check - Rent Check is an ARMLS's  publication tracking single family home rentals.  Click on the link for the statistics.


Rent Stats


Commercial Real Estate Trends


Current Phoenix market trends data indicates an increase of +0.4% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of +14.1% compared to last year's prices. County-wide, asking prices for Multifamily properties are 1.8% higher at $54,513 per unit compared to the current median price of $53,501 per unit for Multifamily properties in Phoenix, AZ.


Loopnet Commercial Trends


(The areas and property types  included in the MLS  statistics are:  The figures shown are for the entire Arizona Regional area as defined by ARMLS. All residential resale transactions recorded by ARMLS are  included. Geographically, this includes Maricopa county, the majority  of Pinal county and a small part of Yavapai county. In addition, "out  of area" listings recorded in ARMLS are included, although these constitute a very small percentage (typically less than 1%) of total  sales and have very little effect on the statistics.  All dwelling types are included. For-sale-by-owner, trustee auctions  and other non-MLS transactions are not included. Land, commercial units, and multiple dwelling units are also excluded.  In addition very few new new home builders list their new homes in the MLS so these numbers are tracked separately in the RL Brown Reports.)


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2)  Investor pays $16.8 million for 106 Valley Rental Homes

Catherina Reagor, Arizona Republic, December 17, 2014


A Scottsdale investor has bought 106 metro Phoenix rental houses for $16.8 million, or about $158,255 a home.  Scottsdale-based Pacific Rim Properties purchased the houses from a Denver group called Wymont. The deal is one of the biggest sales of a rental-home portfolio since the investor home-buying spree of 2010-12.


Of the 106 houses sold, 101 currently are leased. Most of the homes were built in 2004 and have four bedrooms. The purchase price-per-house is about $50,000 less than metro Phoenix's current median home price.


Investing in Valley houses and other markets hit hardest by the housing crash was a big Wall Street play during the downturn. Large institutional investors including New York-based Blackstone Group and smaller private groups purchased more than 100,000 bargain foreclosure homes and turned them into rentals. Most of the Valley investors paid cash.  Real estate market watchers are tracking what investors do with their many Valley rentals houses because if too many try to sell at the same time, it could push down home prices again.  Pacific Rim plans to hold the properties for investment.


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3)  Valley New Home Building Slows in November and 2015 Predictions 

RL Brown and Greg Burger, RL Brown Housing Reports, November 2014


Metro Phoenix's home building slump continued in November.  The new-home permit tally for last month was 612, down 6.3 percent from November 2013, according to RL Brown Housing Reports.  In November, 803 new houses sold across the Valley. That's down 12 percent from a year ago.


During the spring, the recovery of the Valley's home-building market appeared to be finally underway. But then new home construction began slowing again over during the summer. Builders have been offering deals including no payments for a year and discounts of 10 to 20 percent on houses already built as they try to sell inventory before the end of the year.  But housing analysts RL Brown and Greg Burger, publishers of the report, don't think December new home sales or permits will see a big "bounce."


The slump in construction employment also worsened in November, with the industry losing another 900 jobs. Over the past 12 months, Arizona has lost 4,300 jobs.  Brown's early tally for 2014 home building permits in the Phoenix area is 10,500. That's down from the record 64,000 in 2006, and the normal pre-boom level of 25,000 to 30,000 from 2002-03.


Home building across metro Phoenix could be flat or climb by as much 30 percent during 2015.  New home permits will range from 12,000 to 16,000 in 2014, according to a consensus estimate presented at Scottsdale-based Land Advisors 6th annual forecast on Wednesday. Land Advisors CEO Greg Vogel believes the home building forecast for 2015 is low based on Phoenix's population and job growth.  "We now have a population of more than 4.3 million and are creating more than 50,000 jobs this year," he said.  Vogel said the area's growth calls for more new housing because empty houses from the boom and crash have been bought and filled with owners or renters.


A recent survey from Realtor.com named Phoenix one of the U.S.'s top 10 "hottest housing markets" to watch in 2015 because the area's home building market is poised to recover.  The new consensus forecast for Valley home building comes from data provided by RL Brown, Metrostudy and Belfiore Real Estate Consulting.


The real estate research groups and Vogel are cautious with their estimates for 2015 because recent annual predictions for Phoenix's new-home market to rebound haven't panned out.  "I see 2015 as the wild card as it may still be subdued," said Vogel.  Forecasts have called for 15 to 25 percent annual increases in home building during the past few years, but the recovery has yet to happen.  At the end of the crash in 2011, most real estate market watchers predicted Valley housing market would be back to a pace of 20,000 to 25,000 new homes by 2015 versus the estimated 10,500 that will be completed in 2014.


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4)  Phoenix Housing Market Ready to End a Relatively Flat Year 

Mike Orr, ASU WP Carey School of Business, December 2014


After several years of wild roller-coaster activity, the Phoenix-area housing market is ready to end a relatively flat year. That’s according to the latest monthly report from the W. P. Carey School of Business at Arizona State University. Here are the highlights of the new report on Maricopa and Pinal counties, as of October:


The median single-family-home sales price went up just 4 percent from last October to this October – from $200,000 to $208,000.


Demand remains lower than last year, with sales of single-family homes down 5 percent from last October.


The Valley is experiencing a very small bump up in two areas – investor interest and new-home sales.


After the housing crash, Phoenix-area home prices shot up from September 2011 to summer 2013. Then, the median single-family-home price rose just 4 percent more – from $200,000 to $208,000 – from last October to this October. Realtors will note the average price per square foot also went up 4 percent. The median townhome/condo sales price rose only 2 percent.


“We’ve seen very little change in the Greater Phoenix housing market for the last year, and stability is the order of the day,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “Price increases look tame over the last 12 months and even tamer if you examine just the last six months. There is no longer any real upward price momentum greater than the general level of inflation.”


Orr’s report notes that demand in the market remains lower than last year. In fact, the amount of single-family-home sales dropped 5 percent from last October to this October. Activity from first-time home buyers has been unusually low, in part because some people had their credit badly damaged during the recession and also because millennials are waiting to enter the home market until later in life than previous generations. These are also reasons the rental market is strong. Rents have increased 3.7 percent over the last 12 months in the Phoenix area.


Meantime, Valley foreclosures have dropped way down over the past year. Completed foreclosures of single-family and condo homes were down 19 percent from last October to this October. The lack of cheap foreclosures here has been largely driving investors to other areas of the country, where bargains are more plentiful. However, there was a little bump back up between this September and October. The percentage of residential properties bought by investors hit 15.5 percent, the highest level since May, but still well below last year’s levels.


“Investors and out-of-state buyers are showing a small recovery in buying interest, but to get our market back to what we would consider normal will still require a major increase in demand from local first-time home buyers,” explains Orr.  Some expect the coming introduction of conventional home loans with lower, 3-percent down payments next year to stimulate more interest, but Orr isn’t sure this will make a major dent. He anticipates small, incremental improvements.  “The big economic gains of the last few years have helped companies, but not necessarily the average person who might consider taking out a home loan,” says Orr.


One other note from Orr: The market share for new-home sales is doing better and has recovered to 14 percent – the same level as October 2013. Taylor Morrison, Pulte Homes and Meritage Homes are leading the way in the Phoenix area.


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5) Real Estate Briefs


a) Elevation Chandler to be Razed on November 20, 2014 

Logan Newman, East Valley Tribune, October 2014


Thursday, Nov. 20, will be a historic day for Chandler as a developer will begin demolishing long-time eyesore Elevation Chandler, which has sat tall, abandoned and in clear view of commuters who pass by the the Loop 101/Loop 202 interchange for nearly a decade.  Razing the structure will begin at 10 a.m. and should take roughly 24 hours, said Chris Anderson, managing director for Hines, the real-estate development company with new plans for the site. Construction crews will use an excavator to remove the structure in sections.  "By Friday end of the day ... the structure will be completely on the ground," Anderson said.  From there, it will take two to four weeks for construction crews to finish clearing the land, which includes cutting up the pieces and hauling them off to be crushed and salvaged, Anderson said.


Demolition of the skeleton of the unfinished mixed-use complex was originally expected to take about three months and be completed next February, but the developer discovered it could be done sooner. "We were able to accelerate our schedule. Quite frankly, we wanted to get it down as fast as we could for the city and for our neighbors," Anderson said. "We think everyone is tired of looking at the Chandler industrial art project."  In September, the Chandler City Council approved an agreement with Hines to develop Chandler Viridian on the site, a mixed-use project that will include luxury apartments, a hotel, offices and retail space.  Anderson said the demolition would cost between $200,000 and $300,000.



b) Multifamily Construction Continues Rapid Pace in Tempe and Scottsdale

Various Sources including The Republic and ABI Multifamily, October  2014


The greater Phoenix area experienced tremendous growth as multifamily projects sprang up valley wide.  Twenty-seven properties for a total of 4,997 units were completed.  Forty-three project are under construction for a total of 11,013 units.  Seventy-one properties are in the planning stages and will deliver 16,952 units. 


Scottsdale saw a lot of construction due to the appeal of the downtown Scottsdale amenities, ASU, Tempe Arts Center and easy freeway access.  South Scottsdale will see 572 units at Mark-Taylor’s gated San Travesia near Sky Song.  Alta Scottsdale at Granite Reef and Indian School will have 218 units when it is completed by Wood Partners. Alliance Residential Co took over Triyar’s two planned apartments complexes and renamed them Stetson West and Stetson East  at Stetson Drive and 75th Street.  Broadstone Waterfront recently completed 259 high-end apartments and 8,000SF of restaurant space along Marshall Way.  The 369 unit Portals year Scottsdale and Chaparral Roads should be complete by early 2015. 


Tempe is getting it’s share of the multifamily action as well with 20 developments underway.  Tempe projects taller than 100 feet, or about 10 stories, under construction as of July 1.  

• Marina Heights: mixed-use, office, residential; 300 E. Rio Salado Parkway. 20 acres; 2.15 million square feet; 253 feet maximum height; $600 million; Ryan Companies and Sunbelt Holdings.

• University House - phase II: mixed-use, residential, commercial; 323 E. Veterans Way. 1.67 acres; 127,930 square feet; 72 units; 195 feet maximum height; $18.5 million; Inland American Communities Group.

• Hayden Ferry Lakeside III: mixed use, office, retail; 40 E. Rio Salado Parkway. 1.8 acres; 281,720 square feet; 172 feet maximum height; $28 million; Ryan Companies and Parkway Properties.


Traditional suburbs have room for more subdivisions that attract families. Neighboring Mesa covers 133 square miles, Scottsdale 184.2. Tempe covers 40.1 square miles.  Tempe leaders believed they had to take risks to stay competitive.  Those risks, which included building Tempe Town Lake on the northern edge of downtown, now appear to be paying off.  High-rise projects on the horizon at the lake include the third and final office building in Town Lake's 43-acre Hayden Ferry Lakeside development.


On the northeastern edge of downtown, on ASU-owned land at Town Lake across the street from Sun Devil Stadium, construction is underway on Marina Heights. At 2.15 million square feet, the project is touted as the largest office complex in state history. The sprawling development, expected to be completed in 2017, will house an estimated 8,000 employees at a regional hub for insurance giant State Farm.  And on the southern end of downtown on another ASU-owned parcel at Mill Avenue and University Drive is USA Basketball's headquarters and training facility, next to a proposed hotel-conference center.  Tempe's growth-and-development changes reflect a push to escape the shadow of Phoenix and a pull from an ASU brain trust that challenges the conventional.


Good to be landlocked - A 2012 report by the Urban Land Institute outlined a shift in traditional suburbs. The change, according to the report, reflects an "increasing appetite — especially among Generation Y — for higher-density living patterns and for transportation options that include transit, walking and biking."  "Today, (Tempe) being landlocked is its greatest virtue," Reiter said. "If you don't have constraints, you have sprawl."


Tempe, with an estimated population of 168,000, is benefiting from the recession having reset societal priorities, sparking the trend toward shorter commutes and easy access to metropolitan amenities.  Tempe is what Urban Land Institute researchers term a first-ring or inner-ring suburb: cities near a metropolitan core that often have mature transit development, roads, infrastructure and well-established neighborhoods.  "America's first-ring suburbs … could be the sweet spot for future growth," Urban Land Institute CEO Patrick Phillips said in the 2012 report.


Phoenix is among the nation's fastest-growing cities. ASU's Tempe campus is the nation's largest by student enrollment. That positions Tempe well.  “The centrality of Tempe — and this is very unusual — its proximity to the major hubs, especially an airport, and outer suburbs, are assets," Reiter said. "It's lucky to be surrounded, especially if you're at the center of the Valley's university knowledge."  Those characteristics often provide redevelopment opportunities that aren't typically seen in outer suburbs.  Tempe's wave of towering apartments near ASU incorporate retail or office space on the ground floor. Many cater to the thousands of students who want to live in luxury units near campus.


"I think Tempe, as a big university community, definitely has a younger demographic than some of the other family suburban cities," said Michael Kuby, a professor at ASU's School of Geographical Sciences and Urban Planning. "It makes sense that we should be building more multifamily, especially around Mill Avenue and downtown Tempe."


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c) Mortgage and Tax Changes

Various Sources including Academy Mortgage, Amerifirst Mortgage, and ABI Multifamily, December  2014


FHA Flip Policy Changes - FHA’s policy allowing less than 90 day flip transactions is set to expire at the end of 2014. For less than 90 day flip transactions, only fully executed contracts signed by all parties on or before December 31, 2014 will be eligible to be closed under the terms currently set forth in the FHA Credit Policy Manual. As of January 1, 2015, all FHA less than 90 day flip transactions will be ineligible. There is a possibility this policy could be extended, as it has been for the past few years.


97% Loan To Value Conventional Financing for First Time Home buyers and Limited Cash-out Refinances - This option will help home buyers who qualify for a mortgage but may not have the resources for the down payment.


The primary announcement in October 2014 was the final Qualified Residential Mortgage, or QRM, rule. Regulators decided to eliminate the highly controversial requirement of a specific down payment amount, bringing the rule in line with the Consumer Financial Protection Bureau’s existing Qualified Mortgage, or QM, rule. The latter was designed to protect borrowers from predatory lending practices.


What does this mean for home buyers? In part, it means they don’t have to fear being rejected outright for a mortgage if they don’t have tens of thousands of dollars saved up for a down payment. And this brings me to another victory for housing: Fannie Mae and Freddie Mac are considering allowing borrowers with less-than-perfect credit profiles to obtain loans with a down payment as low as 3 percent by considering “compensating factors.”


Additionally, Fannie and Freddie also plan to loosen demands on lenders to buy back defaulted mortgages, creating more stability, confidence and clarity for the lending industry. This ultimately encourages lenders to issue more loans to first-time buyers and those who might have faced hard financial times during the recession.


Mortgage Forgiveness Tax Relief Act extension was approved by the U.S. House and Senate and is headed to the President’s desk for signature.   This act prevents underwater borrowers from paying taxes on any mortgage debt forgiven or cancelled by a lender in a workout or after their home was sold for less money than was owed. 


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5)  Tales from the Real Estate Trenches - Does staging make a difference when selling a house?

Pat Hune, Broker at 1st Southwest Realty


In November I received a call from a friend asking me to help a family member who was desperate to sell his house.  He had the misfortune of buying from a predatory lender.  He had unknowingly signed up for an adjustable rate mortgage and could no longer afford the payments.  The house was listed with a realtor but after 215 days on the market there had been showings, open houses and six price reductions but zero offers.  Clearly something had to change. 


When I went to the house I saw it needed a heavy duty cleaning, yard work, touch up paint, algaecide in the pool and an improvement in the smell and overall ambiance. If you get showings and no offers the house is priced right for the market but too high for the condition of the house.  I told the seller either the condition had to go up or the price had to go down.  The seller did not want to reduce the price.    I warned him I am an aggressive realtor and he may not like what I was going to do.   He agreed he had to do something different.  He cancelled the listing with the current realtor and signed with me.  


Unfortunately the owner was not able to help much physically. I had to hire help. The next day my brother-in-law and one of his friends joined me and we went to work.  The three of us worked over 70 hours cleaning, touching up paint, removing curtains, cleaning the back yard, windows, screens, cabinets and staging the house. Family members were able to help for a few hours while the seller concentrated on sorting and packing.  I called in my yard guy for the front yard as it was overgrown from the heavy rains.  My carpet cleaner performed a miracle as the family room carpet looked like new.  


One week later we were done.  I staged the house and listed it at the exact same price as the prior realtor’s last listing price. I beefed up the description, added the house was walking distance from schools and that the community had a lake. I took high quality pictures including pictures of the lake and walking paths.  Though the house was not perfect it was a lot better than before.  After only two days on the market we received a nearly full priced offer and closed escrow 35 days later. The seller and his family was very appreciative of my efforts.  


What I did is far above and beyond staging or what a typical realtor would do to get a house to sell. Think of it as staging on steroids.  Maybe I did too much but one cannot argue with the results.  Take a look at the before and after pictures by clicking on the link below and let me know what you think.


Before and After Pictures