February & March 2015 - Phoenix Real Estate Review

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



Market Overview -  

How will the winter weather effect the Phoenix Housing Market? "I knew the record would stand until it was broken." Yogi Berra. Record low temperatures and high snowfall have hit much of the nation.  What does that mean for the Phoenix real estate market? The second bitter winter in the midwest and east coast may be enough to drive herds of retirees who can afford a second home to  warmer climates like Phoenix.  Condos, town homes, patio homes and inexpensive single family homes that don’t need a lot of maintenance are selling quickly.  Condo buyers still have financing issues as there are few communities with condo certifications.  These buyers either have to pay cash or get a loan on their current principle residence to buy.  There are very few bargain priced condos in the greater Phoenix area, i.e. $60,000 or less, so the competition is fierce for condos in desirable areas with reasonable HOA fees.  Condo and town home median prices have increased by 11.6% from a year ago.  A discouraged buyer recently told me he would wait until summer when the prices would drop because the Phoenix market slows down in the summer.  Summer is our busiest selling season in the Phoenix area despite the heat.  My feeling is this buyer will continue to be disappointed when he returns in the summer.


What is going to happen to prices and inventory? Prices in the greater Phoenix area have increased 3.4% from a year ago on average.  The median price increased 8.3% from a year ago.  Most of the experts expect prices will still increase albeit in small amounts as we head into the busy summer selling season. The price increases will be driven by the increase in sales volume which is up 9.4% and the continue low level of supply which is down 11.4% as of February 2015.  There are 38% more pending contracts as of the end of February 2015 than in January 2015.  New construction sales are helping the inventory situation a little with a 6.4% increase year over year.  The severity of the inventory shortage is highlighted by the people camping out for days to buy Blanford homes in Mesa (see article below).  


Boomerang Buyers could have a big impact.  RealtyTrac says there are as many as 350,000 boomerang buyers in the Phoenix area that could purchase homes between 2015 and 2022.  National Housing analyst John Burns calls Phoenix the 3rd biggest US market for these buyers.  Boomerang buyers are the ones who lost homes during the bust through short sales or foreclosures and had to wait for seven years before they could buy again.  


Rental rate Increases will encourage renters to turn into buyers. Over the past 12 months rents have increased by nearly 6% across the Greater Phoenix area.  Property managers report even higher increases in desirable areas like Tempe and Scottsdale.  In addition the time it takes to rent a property in good condition is shorter. 


Articles

1)  STAT Newsletter, PPI and Rent Check Link 

2)  People Camping Out to Buy Blanford Homes in Mesa 

3)  Peoria Tops the Valley in New Home Construction

4)  How Do Home Buyers Shop?   

5)  Real Estate Briefs

     a) Home Buyer’s Ten Mortgage Commandments

     b) Big Changes Coming to Real Estate Closings 

6)  Tales from the Real Estate Trenches 

        Who Owns Pre Paid Rent? 

 

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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 2015


February 2015 STAT


March 2015 STAT


STAT Newsletter and Real Estate Market Highlights

Commentary by Mike Orr, WP Carey School of Business at Arizona State University


Expect to see a stronger spring this year in the Phoenix housing market than we saw last year. January was the “lull before the storm,” according to the latest monthly report from the W. P. Carey School of Business at Arizona State University. Here are the highlights of that report on Maricopa and Pinal counties for January:


The median single-family-home sales price went up 5.6 percent from January 2014 to January 2015 -- $197,000 to $208,000.

Condos and townhomes continue to gain a larger share of the market.  Preliminary February figures show demand about to boom, with the number of homes under contract dramatically rising.  After the housing crash, Phoenix-area home prices quickly rose from September 2011 to summer 2013. Then, the median single-family home price went up about another 5.6 percent from last January to this January – from $197,000 to $208,000. Realtors will note the average price per square foot gained 5.1 percent.


Condos and townhomes picked up even more momentum, with their median price up 11.6 percent – from $121,000 to $135,000. While single-family home sales activity dropped 7 percent from last January to this January, townhome and condo sales activity rose 6 percent. In fact, the amount of money spent on mid-range townhomes and condos was up an incredible 54 percent. Orr credits interest in easy-to-maintain homes.


Despite the attached-home phenomenon, though, the Phoenix market experienced relatively weak home-sales activity both last year and in January. However, things finally appear ready to change.  “January is always a quiet month, but we believe this was a lull before the storm,” explains the new report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business at Arizona State University. “We have already seen early signs of much stronger activity from buyers in February and March. Looking at the number of homes going under contract, there was significantly increased demand in the lower and middle price ranges.” 


Orr notes that listings for non-distressed homes under contract in the Phoenix area were up 26 percent from last year on a typical day in February. Listings from $150,000 to $600,000 were up more than 30 percent. He attributes this largely to lenders starting to relax their tight loan-underwriting guidelines and “boomerang buyers” who went through foreclosure or short sale being able to come back into the market.


Rental homes are also doing well.


“With relatively fast turnover and low vacancy rates, rents have been increasing in the most popular locations,” says Orr. “We are currently seeing a 5.8-percent rise over the last 12 months across the Greater Phoenix area.”


However, supply is an issue when it comes to all types of homes, including affordably priced rentals, which Orr says are at the lowest level he has seen in 14 years. Single-family home listings (excluding those under contract) were down 7 percent on Feb. 1 from the already depressed level at the same time last year.


“Supply remains relatively low except at the high end of the market,” Orr says. “At the moment, we are seeing early signs that demand is likely to recover quite a bit faster than supply. It would only take a modest increase in first-time home buyer demand to overwhelm the current weak level of supply, making it tougher to find affordable homes for sale.”


Don’t expect more supply to come from foreclosures. Completed foreclosures were down 43 percent from last January to this January.


One last note: Orr says home builders aren’t enjoying 2015 much yet. In January, newly built single-family homes hit their lowest monthly sales total in three years. However, he expects that trend to reverse, too.


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 +0.2% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of +12.7% compared to last year's prices. County-wide, asking prices for Multifamily properties are 1.6% higher at $55,373 per unit compared to the current median price of $53,610 per unit for Multifamily properties in Phoenix, AZ.


Loopnet Commercial Trends


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2)  People Camping Out to Buy Blanford Homes in Mesa 

Philip Haldiman, Rose Law Group Reporter, March 5, 2015


When people are camping out to buy one of your houses, that’s a good sign for your new development and the industry.  Four people were in line by mid-week and by Thursday morning nearly 20 couples were waiting to buy a home at the new Mulberry community in Mesa, officials said.  Builder Blandford Homes will begin selling Saturday, 9 a.m., at Signal Butte and Guadalupe Road.  Sales associate Gale Richardson told Dealmaker she anticipates Blandford Homes to sell more than 40 spec homes this weekend.  “I don’t know the exact number, but it wouldn’t surprise me if it’s closer to 60,” she said.


The 192-acre development is slated for 546 homes with four collections, starting at the low 200s, ranging from 1,700- to 4,300-square feet. The development also includes a shopping center anchored by a Fry’s Marketplace.  Richardson said residents will have no more than a five minute walk to a centralized park, which includes sport courts, playground, pool, fitness and multi-purpose rooms as well as a lawn area for events.  One of the Mulberry models by Blandford Homes in Mesa.

 

Desert Ridge junior and high schools as well as two elementary schools are also nearby.  Sales associate David Falk told Dealmaker one of the biggest draws for buyers is Mulberry sits outside the nearby Eastmark Community Facilities District. Municipalities form CFDs in cooperation with private developers to finance public infrastructure improvements, with future costs to residents to pay the developers back. Falk said not having the CFD will give residents lower property taxes.



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3)  Peoria Tops the Valley in New Home Construction

Whitney Woodorth, The Republic,  March 2015


With numbers still a fraction of what they were before recession, construction of new homes has dragged and sputtered Valley-wide. But one West Valley city has deviated from the slump.  Residential building permits in Peoria jumped 21 percent from 2013 to 2014, the most of any city in the West Valley, according to a report by the Home Builders Association of Central Arizona. There were 1,056 permits issued in 2014.  "We are seeing a huge influx right now," Peoria Mayor Cathy Carlat said. "The entire Valley is moving west."


Peoria was one of only four cities in Maricopa County to see in an increase in residential building permits. The other communities include Paradise Valley, Queen Creek and Scottsdale.  Empty stretches of desert, like those in northern Peoria, attract developers and homebuyers.  "The most popular spots are those with plenty of land and developed lots," real-estate analyst Michael Orr said.


Orr tracks real-estate trends as the director of the Center for Real Estate Theory and Practice‎ at the W. P. Carey School of Business at Arizona State University. In a recent report, Orr found that although both new home sales and residential construction permits decreased overall in 2014, Peoria ranked second after Gilbert in cities with the highest number of new home sales. Buckeye, Goodyear and Surprise also ranked in the top 10.


Overall, new homebuilding permits dipped 12 percent Valley-wide during that period. Surprise, Goodyear and Glendale all followed the downward trend. Orr attributed the slump to a variety of factors. Centrally located cities, like Avondale, are already built out and have less room for expansion.  In other areas, builders don't see high demand, Orr said. Homebuilders and buyers want to be near schools, shopping centers and community services. Although Goodyear has open land to support growth, the number of building permits fell 14 percent in 2014.


Glendale experienced the largest drop in new home permits. Between the 2013 and 2014 fiscal years, building permits decreased from 225 to only 39.  A lot of development stopped during the recession, Glendale Building Safety Official Stephen Dudley said. New developers came in and took over the building projects in 2012.  "By 2014, our inventory of empty lots disappeared," Dudley said. "We are going to see more availability in the coming years."  Dudley pointed to the active Copper Cove and Tesoro neighborhoods, which will add more than 200 homes to west Glendale when completed.


Bob Goodhue, Peoria's deputy director of development, said most of the city's growth was in the region northwest of Loop 101.  "Most of the development is occurring in the Vistancia area," Goodhue said. "It's a very nicely laid out, planned community. It's aesthetically pleasing."


The pristine desert landscape and mountainside location initially attracted builders to the area, said Ken Peterson, a Shea Homes vice president of sales. Shea Homes started construction in Vistancia in 2004. The 3 1/2 miles of walking trails and access to outdoor recreation draws a diverse crowd of buyers, he said.  "We attract all types of demographics," Peterson said.


Older buyers want a quiet, secluded community that is still connected to the Valley. Generation Xers and older Millennials want a safe environment to raise their families, he said.  The Vistancia community saw growth even during the recession, Carlat said. Plans are underway to add a community park, retail hubs and a commercial core to support jobs.  "Peoria is only halfway built out right now," Carlat said. "The value of the land is exceptional. People can get larger houses and more land, along with a higher quality of life."  Regardless of the growth, Orr said the new permits are nowhere near their pre-recession levels.


"The rise is very small compared with what it used to be," Orr said. "The numbers are better than that of the 2008-2011 post-crash era, but it is still half of what we'd expect to see."  For example, new home permits in Peoria peaked at more than 3,000 in 2005. By the bottom of the recession in 2009, they had reached a low of 297. Coming out of the housing bust, Peoria has seen a steady increase. Buyers consider several aspects when looking for a home: proximity to their workplace and other amenities, the price and amount of space, Goodhue said.  


Residential construction permits in Maricopa and Pinal counties total over 11,700 last year. The number is a stretch from the 55,858 permits recorded in 2004, but Orr said the gradual increase in the past years indicates recovery.  "The economy is expanding but fairly slowly," he said. "This year will be better."


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4)  How Do Home Buyers Shop?

National Association of Realtors, January 2015


Every year, the NAR conducts a survey of home buyers. It’s always one year behind. However, this is valuable information if you are selling a home to help you understand what motivates people to buy a home, how they conduct their home search, what your realtor should do the help you get the house sold and some demographic stats. 


In summary the survey tells sellers they should: 

1) List the home in the MLS so it goes out to as many websites as possible. Ask your realtor if the listing will go to Trulia, Zillow, Home.com and others.  

2) Make sure their realtor has great photos and description in the MLS. Remember a cell phone is great for selfies but not so much for a home.  

3) Understand if the home is not in a desirable, high quality neighborhood it will take longer to sell and must be priced right for the location. 

4) Be willing to contribute money towards closings costs as a number one obstacle preventing buyers from buying is trouble saving for the down payment.  Typically a buyer has to have 3.5% to buy using an FHA loan.  On a $150,000 purchase price the buyer would need $5,250. Closing costs and mortgage fees are an average of 3% or $4,500 which means the buyer has to have at least $10,000 to buy a home.


Types of Homes Sold - 67% residential, 20% investment property, 13% vacation homes 


Home Buyer Demographics 

•Average age – 44 
•Average gross income – $84,500 
•Married couples – 65% 
•Single females – 9% 
•Single males 8% 
•Own a second home – 21% 
•First–time home buyers – 33% 
•Multigenerational households – 24% 


Primary Reason for Buying a Home – Order of Importance 

•Desire to own their own home 
•Job-related relocation 
•Home in a better area 
•Change in family situation 
•Need a larger home 
•Desire to be closer to family/friends 
•Retirement 
•Establish a household 
•Need a smaller home 
•Financial security 


Obstacles to Buying a Home – Order of Importance 

•Trouble saving for a down payment 
•Too much debt 
•High credit card debt 
•Student loans 
•Auto loans 
•Childcare expenses 
•Healthcare expenses 
•Tight inventory of homes on the market 


Type of Homes Purchased 

•Single-family home – 79% 
•3 bedrooms, 2 baths 
•1870 sq. ft. 
•Age of home – built 1993 
•12 miles from previous residence 


Where Homes Were Purchased 

•Suburbs – 50% 
•Small town – 20% 
•Urban – 16% 
•Rural – 11% 


Why Location Chosen – Order of Importance 

•Quality of neighborhood 
•Convenient to job 
•Affordable location 
•Close to family and friends 
•Convenient to shopping 
•Quality of school district 
•Design of neighborhood 


Searching for Homes 

•Buyers saw 10 homes before buying 
•Search time online/auto for 10 weeks 
•Contacted FSBO Seller- 15% 
•Online home search – 74% 
•Real estate agent home recommendations – 53% 
•Mobile apps – 34% 
•Yard signs – 16% 
•Open house – 12% 
•Homes magazines – 2%


Value of Website Features – Order of Importance 

•Photos 
•Detailed property information 
•Interactive features 
•Virtual tours 
•Neighborhood information 
•Comparing listing to sold homes 
•Bio of real estate agent 
•Videos 


Mobile Devices Used when Searching for a Home 

•iPhone – 52% 
•iPad – 46% 
•Android phone – 27% 
•Mobile app – 27% 
•Different tablet – 10% 
•Windows-based computer – 6% 
•QRcode–3% 


How Home Buyers Prefer Agents to Keep Them Informed – Order of Importance 

•Personal phone call 
•Send property info as soon as properties are listed 
•Email 
•Market reports on recent listings/sales 
•Text messages 
•Website pages 
•Mobile app to keep them updated on listings 
•Newsletters 
•Facebook/Twitter 
•Blog pages 


Real Estate Agent Used 

•88% purchased home using real estate agent 
•67% interviewed only one agent 
•20% interviewed two agents 
•12% interviewed three or more agents

 
How Buyers Found Agent to Work With 

•Referred by family/friend – 40% 
•Used agent they worked with before – 12% 
•Found agent online – 19% 


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5) Real Estate Briefs


a) Home Buyer’s Ten Mortgage Commandments 

Amber Kovarik, Caliber Home Loans, March 2015


Whether large purchases are made with cash or credit, any noticeable change to one's financial status can have a major impact on pending loans.

That is why my Word to the Wise today calls for you to join me in educating clients before they find themselves in a pickle.  Get to know the following 10 Commandments, and you will always know how to advise your clients when financial matters are discussed.


1.  Thou shall not change jobs or become self-employed  

2.  Thou shall not buy a car, truck or van unless you plan to live in it  

3.  Thou shall not use your credit cards or let your payments fall behind  

4.  Thou shall not spend the money you have saved for your down payment  

5.  Thou shall not buy furniture before you buy your house  

6.  Thou shall not originate any new inquiries on your credit report  

7.  Thou shall not make any large deposits into your bank account  

8.  Thou shall not change bank accounts  

9.  Thou shall not co-sign for anyone  

10.  Thou shall not purchase anything  until (way) after the closing


Article courtesy of 

Amber Kovarik, 

AZ 0912411 BK-0909801

CA NMLS-184992 BK-0909801

Mortgage Loan Originator

amber@amberkovarik.com

(877) 220-466


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b) Big Changes Coming to Real Estate Closings

Amber Kovarik, Caliber Home Loans, March 2015


Did you know that there are big changes on the horizon that will change the way buyers and sellers close a purchase on a property?  

  • The HUD-1 (also known as a settlement statement) is going away and will be replaced by SEPARATE statements for buyer and seller. Buyer and seller will not see each other's cash due at close or proceeds back  
  • The LENDER will prepare the buyers statement, and if the buyer does not have the closing statement  3 days prior to closing THE BUYER WON'T CLOSE, and must wait for 3 days 
  • If the closing statement has any changes to it within 3 days of closing or on the closing date THE BUYER WON'T CLOSE.  The buyer must wait for 3 days once they receive the final closing statement 

The intent is to make the process more consumer friendly with a " know before you owe” initiative for home buyers. In addition it will offer the seller more privacy.  Buyers sometimes resent how much money the seller is receiving on the sale of a property which is not any concern of the buyer.  Plus the number typically does not reflect money the seller has paid into the property over the years in maintenance, updates and repairs.


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6)  Who Owns Prepaid Rent?

Pat Hune, Broker at 1st Southwest Realty


Once in a great while a tenant will prepay their rent.  Shocking, I know, but true.  So the question is what should happen to this money?  


Owners would argue they should get the money.  If you agree consider this:  The tenant has prepaid 12 months of rent. The property manager sent the rent to the owner who promptly spent every penny on a cruise to the Bahamas (true story).  Six months later the house catches on fire and burns to the ground. The house will not be habitable for several months so the tenant has to move to a new property.  Should the tenant get six months of prepaid rent back?  Absolutely!  But the owner has spent the money and does not have it to give back to the tenant.  Who is ultimately responsible for the payment of the rent?  The property management company would be responsible as the money should have been held by them in a trust account until the tenant actually owed the rent.  It should never have been sent to the owner.


Another variation on this theme is the tenant who barely qualifies for a property.  They offer to pay six months of rent if they can rent the property.  They move in and two months later ask for their prepaid rent money back.  Does the landlord and property manager have to return the rent?  Absolutely!  If the tenant does not get their rent back they can sue both the owner and the property manager.  There are tenants out there who have figured out this scam so they can rent a property that they would never qualify to rent without the added incentive of pre-paid rent.  


But the tenant signed an addendum to the lease saying they would not be required to give the money back.  What is in the lease does not matter. You cannot make someone give up their legal rights. In this case they have the legal right to the money and cannot sign it away.  Moral of the story - be very, very careful with prepaid rent.  If you decide to take it be sure to keep it in a separate account or have your property manager keep it until the rent is due.