July 2016 Phoenix Real Estate Update

1st Southwest Realty July 2016 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


Fortunately, or unfortunately when looking for some interesting news, the Phoenix market is, well, boring. Though this is good news it does not make for thrilling headlines.  Inventory levels are still very low in the entry level market which is hanging around the $250,000 mark. In this price range it is definitely a sellers market.  Prices continue to increase with the average sales price up 4.3% and the median price up 7% year over year.   Inventory is still an issue with a drop of 0.9% month over month and up slightly at 5.6% year over year.


A small increase in inventory may be coming from two sources - Institutional Investors who own about 12,629 homes in the valley and Canadians who own about 18,674 homes.  Investors like Invitation Homes expects to liquidate 5% of its properties annually per a recent Bloomberg article.  The reason is 25% of their tenants are purchasing homes. Colony  Starwood has lost 23% and American Homes 4 Rent has lost 30%. All three of these companies have significant holdings in the Maricopa County.  Canadian may decide to sell because the Canadian Dollar (called the loonie)  is trading the lowest it has in years.  However the Doug Porter, Bank of Montreal chief economist said in July 2016 the loonie  has been trading higher than it was a year ago.  The drop is because the loonie largely moves with the price of oil.  The loonie was recently trading at around 76.5 cents US.  


More inventory may come available due to changes on the restrictions for condominium financing.  The biggest change is a reduction in the ratio of owner/occupants vs investors from 50% to 35%.  Things that did not change is one owner cannot own more than 10% of the community and the HOA needs to be financially sound.  Condo’s will still need to complete the condo certification process but even it has been redesigned to be easier and less expensive. This still needs to be signed into law by President O’Bama and it is expected he will sign.  One can only hope this will help ease the shortage of entry level housing.


Condo Legislation


Articles

1)  STAT Newsletter

2)  Rental Market

3)  Multifamily and Commercial Real Estate Trends

4)  HOA Conflict Resolution Moves to the Arizona Department of Real Estate

5)  Uber Co-Founder Sets Sets Sights on Real Estate Industry

6)  Forbes Expects Arizona Real Estate to Increase 25%

7)  Tales From the Trenches -  Are pre and post-possession agreements a good idea?


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1) STAT Newsletter Link - Commentary by Tom Ruff of the Information Market

(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


June STAT


ARMLS Pending Price Index (PPI)

Our last Pending Price Index projected a May 2016 median sales price of $227,000 with the actual median coming in at $230,000 (off by 1.3%).  MLS sales volume in June was 8,861 which was 187 more sales than June 2015 of 8,674.  Looking ahead to July, the PPI Index projects a median sales price of $223,000.  Last year between June and July we saw the median price dip and our model suggests a similar occurrence this year. I personally expect a modest decline in the median sales price in July, but probably not as low as $223,000.


We began July with 6,990 pending and 4,007 UCB listings giving us a total of 10,997 residential listings practically under contract. In comparison there were 10,761 of the same type of listinga at this time last year.  There are two fewer business days in July this year than last so don’t be surprised if sales volume is slightly lower than the total last year of 7,914. Even though we have a higher number of residential listings practically under contract a slightly smaller percentage will be successful.



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2) STAT Rental Market Link


The June median lease was $1,375 as compared to the May median lease of $1,340. The June average lease was $1,568 as compared to the May average lease of $1,505.  The June average days on market was 26 as compare to the May average of 25 days on market.  August is typically a slower month for rentals as schools start and the weather is extremely hot making it painful to move.


June Rent STAT


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3) Multifamily and Commercial Real Estate Trends


Multifamily vacancy rates are at the lowest point in decades. This has created high interest in building new multifamily properties as well as buying an refurbishing old properties.  San Diego-based Sunrise Management has began a $1 Million renovation of Park Tower that is a 180 unit, 10.73 acres property located at 1283 W Parkland Blvd.  According to Globe St.  Kevin Pennel, regional vice president for Sunrise Management, said the multifamily market in the Phoenix metro area continues to be in a high-growth mode with vacancy rates the lowest in years.  This is the reason Sunrise Management took on the project.


Loopnet Commercial Trends


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4) HOA Conflict Resolution Moves to the Arizona Department of Real Estate

Paula Serven, Arizona Realtor Voice (c), June 2016


Anyone who has ever lived in a community with a Homeowners Association (HOA) probably has a story or two about a conflict between the owners and HOA board of directors and/or management company.  Most HOA’s hire a professional management company.  The owners elect a board of directors to oversee the activities of the management company and manage the HOA finances to ensure the community is maintained.  If there was a conflict and the owners could not resolve it on their own the only recourse was the Department of Fire, Building and Life Safety (DFBLS).  The person filing the complaint filled out a form and paid a $750 fee.  Then they waited for the complaint to grind its way through the system.


In 2016 the Arizona Legislature moved the HOA Dispute Process to the Arizona Department of Real Estate.  The Arizona Office of Administrative Hearings (OAH) will accept all cases as referred by the ADRE, and schedule a hearing before an Administrate Law Judge (ALJ).  The cost is lower at $500. Complaints must be about a dispute between the owner and association not other owners.  The ADRE will review the case and make a decision to have the complainant go to mediation or to go in front of a judge.  


It will be interesting to watch as the first complaints are processed.  Click on the link below for more information on the process.


HOA Dispute Process


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5)  Uber Co-Founder Sets Sets Sights on Real Estate Industry

RisMedia, July 2016


The co-founder of Uber today introduced a new platform that considerably boosts transparency in real estate transactions.  The venture, named Haus, is an “open and fair real estate platform” that grants real estate agents and homebuyers access to all of the offers in front of a seller, among other permissions. The platform was developed by Expa, a startup studio helmed by Garrett Camp, co-founder of Uber.“Most aspects of life have been improved by technology, yet buying or selling a home is still a manual process,” said Camp in a statement. “Haus is creating a platform we believe can revolutionize the way people buy real estate. The open and clear communication creates a more efficient and fair process for everyone involved.”

The goal of the platform is objectivity—it not only notifies agents, buyers and sellers when a new offer is submitted, but also allows them to view the price and terms of the offer, and all other offers, at any given point in the transaction. Names attached to the offers remain confidential. Access to this information could catalyze bidding wars, with the potential to shortchange sellers, who may receive bids that only just trump the second-best offer. “We think the openness will create a more efficient market and that the number of offers and price will ultimately be dependent on demand,” Sarah Ham, the general manager of Haus, told TechCrunch. “Bidding wars are a common, almost accepted, part of the real estate process today—but with our approach, buyers will know where they stand.”


“If Garret Camp thinks I am going to give away my seller’s negotiation position he is dreaming,” said Pat Hune, Broker, 1st Southwest Realty.  “My job is to negotiate the best offer for my sellers.  Sometimes the highest offer is not the strongest offer.  For example a cash offer with no contingencies will be far stronger than a financed offer from an FHA buyer.  FHA appraisers may sometimes require the seller to spend money in order for the property to qualify for financing like floor coverings or appliances or even a new roof.  There are already auction sites out there like HUBZU and others.  My buyers don’t like them because it takes forever to get a response and they would prefer to have me talk to the seller’s realtor to understand the seller’s position,” Pat said.  “Phoenix is in a seller’s market.  Investors are outbidding owner/occupants on the lower priced homes so having visibility does not help the buyer that has a limited home buying budget."


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6)  Forbes Says Buy Arizona Real Estate

Ingo Winzer, Forbes, July 2016


The strongest economic growth, and therefore the strongest demand for housing, is in Phoenix, where jobs are being added at twice the national average.  Many of them are in healthcare, retail and the large financial section. Job growth has also been strong in Prescott, mostly in the retail and healthcare sections as many retirees are moving to Prescott for the mild weather.  Growth in Tucson has been slow.  Flagstaff depends heavily on the cyclical tourist trade with ebbs and flows with the state of the economy.  


Home prices in all Arizona markets rose and fell sharply in the boom and bust; but afterwards prices in Phoenix - and somewhat in Prescott - went through a mini-boom of speculation in foreclosed properties.  It looks like those have been flushed through the system, so we can take at face value the recent price increases - stronger in Phoenix, Flagstaff and Prescott, weaker in Tucson and Yuma.  I expect Phoenix Prices up at least 25% over the next three years.  This means if you should not wait if you plan to buy there.  Precise have been strongest in Phoenix itself, slightly weaker in the southeast Suburbs.


The major employers in the Arizona are 1) State of Arizona with 49,305, 2) Wal-Mart with 28,800, 3) Banner Health Systems with 16,400, 4) City of Phoenix with 14,166.


Forbes AZ Real Estate Article


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7) Tales from the Trenches - Are pre and post-possession agreements a good idea?

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


Recently two colleagues, one a mortgage lender and one a realtor, told me about two instances where they needed a pre-possession agreement.  A pre-possession agreement means the escrow has not officially closed but the buyer wants to move in.  Conversely a post-possession agreement means escrow has closed and the sellers need more time to move out.  The two examples from my colleagues were where all documents had been signed, but the wire transfer from the buyer or the lender did not make it to the title company in time to close.  In one situation the seller would not agree to the pre-possession and in the other the seller did agree. 


I received a desperate call for a pre-possession form on a Friday afternoon from a fellow realtor. Everything had been received except the wire which was on the way. The Arizona Association of Realtors does a great job of developing boilerplate forms for realtors to use.  I was convinced there was one in the realtor forms database. But alas no form could be found. Luckily I had editable pre and post-possession agreements so was able to provide one to my fellow realtor. The seller agreed to the pre-possession so the crisis of having to pay two additional days rental on the U-Haul and find a place to stay was avoided.  


The other situation was where the wire was not on the way.  The lender guaranteed the money until the wire was received which was due on Monday. In this case the seller’s realtor could not contact the seller for permission so the buyers had to wait until Monday to move in.  


I searched the AAR website and found an article stating AAR has purposely avoided developing these form because they consider them too high risk.  They have developed checklists to allow the buyer and the seller to understand the implications of agreeing to pre and post-possession. The links to the checklists are below.  I compared my forms to the checklists and my forms include the key points.


Pre-Posession - On the pre-possession side if the only thing outstanding is a wire and there is confirmation the wire was sent then the risk is relatively low. If there are other issues like some underwriting condition that has not been satisfied and the money is not on its way then the risk begins to go up.  The longer the time period for prepossession the greater the risk. We always like to quote the horror stories like the neighbor down the street from me that agreed to pre-possession.  Then the buyer refused to complete the escrow.  As a result the owner had to evict the buyer as if they were a tenant.  This cost the seller legal fees, time and money for repairs as the buyer trashed the house. In this instance the buyer had no intention of buying the house. He was just looking for a way to stay somewhere for free for a few months.  This rarely happens but sellers should be aware of the potential pitfalls.


Post-Possession - A post-possession agreement is needed when the seller needs more time to move.  Typically this is when the seller’s next house is not ready, has not closed or those sellers need more time so it creates a domino effect. As with pre-possession if nearly everything is done then the risk of a problem is relatively low.  Once upon a time we bought a property from a hoarder. We agreed he did not have to more all the crap he had accumulated.  Even though escrow had closed we could not stop him from coming back to the property and breaking in to get all his precious things.  Finally we hired some help and did a massive trash out to get him to stop.


Given the potential for delays it is important to have the conversation with your buyer or seller if it looks like the escrow may not close as scheduled.  This way both parties have some time to decide rather than waiting until the last minute.  The question remains whether these agreements are a good idea.   The answer is it depends. Whether or not a property will close escrow is not guaranteed.  As Yogi Bera said “It ain’t over ‘till it’s over."


Pre-Possession Checklist


Post-Possession Checklist