March 2014 - Phoenix Real Estate Newsletter 

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March Madness has struck and the Phoenix Real Estate market is not immune.

March madness did not start out related to college basketball playoffs. It originally referred to the breeding season of the European Hare aka the brown hare.  It looks like a rabbit which is related but in a different family.  They rely on speed to escape from predators and have longer legs. Not too much different than the college basketball players.



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.


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Do you have a rental property and need a property manager?  Is your Homeowner's Association is looking for a new management company?  Please call or email Karen Van Vugt at 602-316-7028 or ftr9558@cox.net. Karen manages many rental units and several Homeowner's Associations in the greater Phoenix area.

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

Tempe, AZ

Equal Housing Opportunity



Market Review - Inventory levels have continued to increase and home buyers are breathing a sigh of relief while sellers are wondering what happened.  The adult communities are enjoying a renaissance as the rumbling noise being heard in Phoenix is the stampeed of midwest baby boomer retirees escaping from the worst winter on record.  Interest rates continue to bounce around with no significant upward or downward movement.  The Valley's overall housing confidence index is 66.7%, higher than the national figure of 63.7%, according to the first Zillow Housing Confidence Index.  The survey also found 15 percent of current renters in metro Phoenix want to buy a home within the next year. That's higher than the national average of 10 percent.


Articles

1)  STAT Newsletter, PPI and Rent Check Link 
2)  Light Rail Housing Fund Spurs 15 Projects in Metro Phoenix

3)  Momentum Builds for I-11 route through Arizona

4)  Tales from the Real Estate Trenches


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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.


March STAT



STAT Newsletter Highlights

Commentary by Tom Ruff, Information Market


The volume of home sales in February has always been higher than in January for as long as we can go back. Sales in March have always been higher than in February and this year will be no exception. In MLS, 5,474 total homes were sold in February, 14.1% higher than 4,797 in January 2014. As the monthly sales volume comparison is clearly seasonal, one must look at the year-over-year comparisons to get a clear view of sales activity. The February 2014 sales total was 17.4% lower than the total in February 2013 of 6,630. The last time we saw a lower sales volume in February was 2008 where only 3,448 sales were reported. Last year at this time total inventory numbers were dropping. This year they continue to climb, up 4.2% to 29,661.  With low demand and rising inventory, there are few doubters left - we are in a buyer’s market. Our transition from a balanced market to a buyer’s market is further evidenced by a record number of price reductions among active listings


Pending sales contracts are increasing as expected, but this is a seasonal normality.  Pending sales contracts are 36% lower than last year at this time at 6,654. Looking ahead to the March sales volume, it would not be unreasonable to expect that 1,400 fewer homes will be sold this year than last.  The ARMLS Pending Price Index successfully predicted a median sales price of $180,000 for February, down 1.4% from the median in January of $182,500. For March, the PPI is projecting a slight up tick to $184,000. The median priced home value has been wobbling between $180,000 and $185,000 since June of 2013.  The projected increase in value for March should not be viewed as an indication of price appreciation, but is most likely contributed to seasonal factors. The imbalance we are seeing between supply and demand will exert downward pressure on pricing which will likely appear later this year.


Defining Normal

This month I’m going to attempt to compare our current market to what is considered a normal market. This is something which I consider to be impossible. For the purposes of this discussion I need to choose the last normal year in our market, which I’m going to pick as 2003. Defining normal is clearly unscientific. 2003 was a before the .com bubble burst, after 9/11, and prior to the housing bubble forming. Also, in 2003 Norah Jones won the Grammy for Don’t Know Why and when you don’t know why you’re choosing 2003 and calling it normal, I’m figuring a Grammy award is as good a reason as any.


Sales Volume

The ARMLS Pending Price Index successfully predicted a median sales price of at $180,000 for February. In January 2003 there were 4,760 homes sold on the MLS, in 2014 we saw 4,797 sales. In February 2003, there were 5,493 homes sold compared to 5,474 in 2014. For the first two months combined, 2003 reported 10,253 sales compared to 10,271 in 2014. However, identical sales volume between the two years does not translate into our current sales volume as being normal. There were 1,010,912 homes in Maricopa County in 2003, today this number has risen to 1,264,844 (we define homes as single-family residences, condos and mobile homes). There are now 25% more homes in Maricopa County than in 2003. I would contend that demand this year is 25% below what should be considered normal as a more normal sales volume number in February would be 6, 802. Giving credence to this assertion, the average number of sales for February for the four prior years was 6,907. Our current sales volume is well below normal.


Normal/Prices

There is a common theory that long-term appreciation rates have to be pretty close to the general rate of inflation. Having defined 2003 as normal and thereby our base year, we will apply the US government published inflation rates.  Based on this theory, our median priced home is pretty close to normal. The average inflation rate for the years listed above is 2.38%.


New Construction

A low percentage of new builds are listed on the MLS. As mentioned above, this sales volume this year was nearly identical in 2014 and 2003. Looking at public records data, new construction paints an entirely different picture. In February of this year 582 new homes were sold in Maricopa County, compared to 2,322 in 2003. New construction is off to a very slow start this year. The reason given nationally for these declines has been bad weather, an explanation unacceptable in our market. Most forecasters called for an increase in new builds this year, I would not be surprised to see these expectations revised downward in the coming months. In

the first two months of 2014 our records indicate 1,142 new builds sold in Maricopa County, last year 1,522 were sold which is 25% lower. 


Foreclosures

In February of 2003 there were were 1,243 residential notices of trustee sales recorded in Maricopa County, this year 846 new residential notices were recorded.  In terms of existing homes, .123% of homes received a notice in February of 2003, compared

to only .067% this February.  As recent as three years ago our market was the poster child for foreclosures, today the number of properties entering foreclosure is well below normal. This month shows the total foreclosure inventory down 48.8% year-over-year and

5.3% lower than last month. I fully expect the number of foreclosures to continue to decline throughout 2014.  


Conclusion

The current 29,661 home listings are very close to what we would define as typical. Our current imbalance rests solely on the demand side of the equation. The pricing chart on the previous page would suggest our home prices are close to normal, but the right side of the chart would suggest our buying behavior is anything but normal. Three years of strong appreciation and a combined 250,000 foreclosures and short sales have restored our current level of distressed housing to a healthy level. The lack of new construction is disheartening from a jobs perspective, but in turn, we are not adding to our existing supply. As I’ve stated in earlier commentary, I see 2014 as a transitional year, with my short term pessimism offset by longer term optimism. At present the question we should be asking ourselves is - where are the buyers?  Next month, I’ll try attempt to answer this question. 


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Rent Check - Rent Check is an ARMLS's  publication tracking single family home rentals.  Rental statistics are changing so little from month to month no commentary is needed.  Click on the link for the statistics.


Rent Stats



Commercial Real Estate Trends


Current Phoenix market trends data indicates an increase of +0.7% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of +21.9% compared to last year's prices. County-wide, asking prices for Multifamily properties are -1.4% lower at $46,836 per unit compared to the current median price of $47,420 per unit for Multifamily properties in Phoenix, AZ.


To see more trends in commercial real estate click on the link below:


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)  Light Rail Housing Fund Spurs 15 Projects in Metro Phoenix

Catherine Reagor, The Repubic, February 22, 2014Broker at 1st Southwest Realty, March 2013


Light rail has spurred the development of several housing, office and retail projects in Phoenix, Tempe and Mesa. But more than a dozen of the new developments might not be open or under construction without the help of a $20 million non-profit fund created to support housing and redevelopment near the tracks.  The Sustainable Communities Collaborative is a partnership of more than 35 entities powered by money from the Local Initiatives Support Corp. and the Raza Development Fund. Leveraging that money has helped finance about $150 million in projects along metro Phoenix’s light-rail corridor.  Since 2011, the collaborative has spent $11 million of its funding on 15 projects, including redevelopment of the old Beef Eaters restaurant on Camelback Road in Phoenix, affordable housing with a day-care center above a thrift store along Tempe’s Apache Boulevard and a senior residential project across from the arts center in downtown Mesa.  More than 900 apartments and condominiums that have gone up near the 20-mile light- rail line have been developed with funds from the Sustainable Communities Collaborative. The group still has $9 million to spend. “Sustainable Communities has been a complete game-changer for all types of development along the light-rail line,” said Brian Swanton, Arizona president of Gorman & Co., the developer of three projects with the group’s funding aid, including the Tempe thrift-store project called Gracie’s Village.  “The collaborative has worked directly with us to solve complex political issues transit-oriented developments often raise, especially the issue of introducing density to areas.”


Building partnerships - The Valley’s light-rail system began service as the economy and real-estate market were crashing in 2008. Several projects planned during the boom to go up along the emerging transportation corridor suffered or failed with the rest of the region’s housing market.  Arizona growth analyst Shannon Scutari believed the needed housing and commercial development along the light rail could be built during the downturn if the cities and other entities involved banded together.  The former growth adviser to Gov. Janet Napolitano was working for the Arizona Department of Transportation in early 2011 when the opportunity came up to receive money from the national non-profit LISC and create a fund to spur development along metro Phoenix’s light rail.  Scutari worked with LISC’s Phoenix leader, Teresa Brice, to plan a daylong trip on light rail for Michael Rubinger, the non-profit’s New York-based CEO. The first stop was a meeting with then-Phoenix Mayor Phil Gordon, then lunch in Tempe with Hugh Hallman, then Tempe mayor. And the last visit was with Mesa Mayor Scott Smith.  “All three mayors were enthusiastic about a partnership to develop vibrant urban environments and transit-oriented communities with a mix of housing starts, new community-health centers and entrepreneur startups along the rail line,” Scutari said.  LISC, a non-profit community-development financial institution created by the Ford Foundation, committed $10 million. Rubinger called his colleague Tommy Espinoza, CEO at Phoenix-based Raza, the largest national Hispanic community-development loan fund in the country, which then also committed $10 million.  Scutari, who left ADOT in mid-2011 to start a collaborative with its funders, calls the group “a confluence of money, momentum and community leadership coming together to reshape the Valley’s development patterns.”  She said the group works with all levels of governments, real-estate developers and neighborhood and community associations.


Funding infill - Developing projects, especially affordable housing, in central-city areas is usually more expensive and difficult because of higher land costs and detailed zoning and construction requirements. But infill projects are important for growing metro areas because they save residents money on transportation.  “We know that people who drive to qualify for a home on the fringe may pay less for their home, but their combined housing and transportation costs average 65 percent of their gross monthly income,” said Michael Trailor, director of the Arizona Housing Department, a partner of the collaborative.  He said combined housing and transportation costs for people who live closer to their jobs are only about 45 percent of their income.  The Housing Department has awarded developers federal tax credits administered by the state agency to help finance several projects near light rail.  The type of funding developers receive from the collaborative varies by project.  “Each project comes to us with a developer who has a set of partners and financial institutions they already have relationships with,” said Brice, executive director of LISC Phoenix. “Our funds can be used for acquisition, predevelopment and bridge financing if needed.”


Development diversity - Light-rail project needs vary greatly. - The Newton development is in a high-traffic area at Camelback Road and Third Avenue. Phoenix-based Venue Partners is redeveloping the former Beef Eaters restaurant. Beef Eaters, opened by Jay Newton in 1961, was for decades a favorite gathering place for diners who came for the prime rib, steaks and seafood. The restaurant closed in 2006 and had been vandalized many times before Venue took it over.  A Changing Hands bookstore, a restaurant created by the owners of Beckett’s Table and a workspace called the Lively Hood will anchor the Newton, and owners of the three businesses are also investing in the development project.  Alliance Bank of Arizona worked with the collaborative on financing for the Newton.   “The bank has a longstanding interest in downtown redevelopments.“ said Ed Zito, Alliance president. “Developments like the Newton will sustain Valley communities, and it takes bipartisan collaboration between many entities for those projects to happen.“


Union@Roosevelt in downtown Phoenix, another project getting help from the collaborative, soon will be under construction. The apartment/retail development will be built next to one of the Valley’s busiest light-rail stations at Roosevelt Street and Central Avenue.  “We had to assemble a number of smaller parcels that had been vacant for 50 years, relocate utility lines, water lines, etc., as well as abandon an entire lane for traffic that was running through the middle of our property,” said Matt Seaman, a partner with Union@Roosevelt’s builder, Metrowest Development.  He said the collaborative’s help allowed Metrowest to make the necessary improvements, which required more than a year’s worth of engineering and design work, to develop the project.  Gorman’s Gracie’s Village project is the redevelopment of a 60-year-old Tempe building, where Grace Community Church still operates a thrift store. The project includes 50 affordable apartments above the thrift store, a Wi-Fi lounge, roof deck, playground area and energy-efficient appliances.  In downtown Mesa, the group helped fund Encore on First, a five-story, 81-unit urban building developed to provide transit-oriented living for seniors. The new housing project includes a fitness room, reflection pool, lounge with a large covered balcony, storage lockers and barbecue area.


Expansion - A record number of riders boarding light rail last year is helping with the transportation line’s expansion, according to its operator, Valley Metro.  Construction is under way to expand the rail line farther into central Mesa and to northwest Phoenix along Interstate 17. A plan for light rail extending to south Scottsdale is drawing more supporters.  The collaborative could also expand.  “It’s exceeded our expectations,” said Brice. “We originally planned to spend $10 million on transportation-oriented projects in five years. We beat our own goal.”  To help spur development along the growing light rail line, the collaborative is working on growing its fund to $50 million from other non-profits and foundations.  “Raza and LISC really stepped up when no one else would,” Raza’s Espinoza said Friday from a conference in Northern California, where he is trying to raise more money.  “Affordable housing and health care wasn’t necessarily considered an economic-development tool before, but in the Valley we have shown they can be,” he said.  St. Luke’s Health Initiatives is also a member and big supporter of the collaborative, Scutari said.  Raza recently received a $6 million grant from the JPMorgan Chase Foundation to invest Valley-wide to help low-income families and communities in south Phoenix, Tempe and Mesa.  Espinoza said the success of the collaborative has put Raza on the radar of more big foundations and other community redevelopment funders.  “The collaborative shows what can happen when groups and governments work together,” he said. “Affordable housing and other special-use housing used to be the leper in the development game. But in the Valley, we are proving its an important part of the community’s fabric.”


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3)  Momentum Builds for I-11 route through Arizona

Sean Holstege, The Republic, March 2014


A prominent economic-environmental group has given the proposed Interstate 11 through Arizona a conditional green light, signaling growing acceptance of an ambitious project that was little more than an idea two years ago, transportation planners said Monday.  State transportation departments in Arizona and Nevada are wrapping up a two-year feasibility study into linking Phoenix and Las Vegas and beyond via a new interstate. Public comment on the study ends Friday, and findings are expected in July. The drive between the two cities currently takes about 41/2 hours.  The Sonoran Institute, an environmental group that promotes sustainable development in the Mountain West, will release its own findings today, hoping to influence future decisions on the project.  “The I-11 corridor, in its broadest sense — including the successful integration of multiple modes including utilities, rail, and highway infrastructure — presents an incredible chance to capture new economic opportunities and define a new approach to infrastructure development,” says the report, a copy of which was obtained by The Arizona Republic.


The idea is to build a trade route from Nogales, Ariz., to northern Nevada, bypassing metro Phoenix with an alignment through the Hassayampa Valley, about 40 miles west of downtown, and through Rainbow Valley south of the Sierra Estrella.  Elsewhere, it would follow Interstate 17, Interstate 10 and U.S. 93. Congress designated the route in 2012, officially putting it on planning maps.  The I-11 concept has no funding for detailed study or construction and would take decades to complete.  Arizona Department of Transportation Director John Halikowski said in a letter last week that the cost of future environmental analysis in Arizona alone would cost about $60 million.


Halikowski, officials at the Nevada Department of Transportation and planners at the Maricopa Association of Governments were in Washington, D.C., last week seeking support for the project on Capitol Hill.  The Sonoran Institute said I-11 offers an opportunity for visionary planning in a way that would boost Arizona’s economy, diversify it and do so in a way that least harms sensitive desert habitats.  The report’s author, Ian Dowdy, said the aim is to keep planners to their promise of building not just a highway but rail, power and utility lines, too, when they release a key document in July stating why the project is needed.  “If they say it’s only a highway corridor, they have fallen short,” Dowdy said.  He suggested that suitable land within 20 miles of the proposed route could generate enough electricity from solar panels to power 62 million homes.


Dowdy’s preference is to build one corridor all at once, rather than destroy habitat once for a road, another time for a power line and a third time for other infrastructure.  The Sonoran Institute favors a different alignment for I-11 from what local planners prefer. Its optimal route around the Valley would follow Arizona 85 and Interstate 8 through Gila Bend before tying into the proposed Hassayampa Freeway.  That way, the state could make the most of Gila Bend’s solar-power farms and avoid Rainbow Valley, which Dowdy said is one of the most sensitive habitats in the region.


Transportation officials at ADOT and MAG had not seen the findings but took the report as evidence of growing momentum behind the project.  “From the (ADOT) director’s perspective, this really is a matter of when,” ADOT spokeswoman Laura Douglas said. “He really wants this to happen. The governor supports it as part of her economic-development plan for the state.”  Eric Anderson, transportation director at MAG, said Nevada is so gung-ho about the project that it “is saying if presidential candidates want the state’s support, they will have to back I-11.”


In Arizona, numerous cities along the route, business interests, developers, landowners and most of the congressional delegation support the project. But not everybody does.  We still question the need, certainly, for a freeway,” said Sandy Bahr, executive director of the local Sierra Club, an environmental-conservation organization.  “This will just drive more sprawl development,” she said. “If you look who’s pushing this, it’s the sprawl developers.”  But technical problems present bigger problems than the pockets of opposition, Douglas said.  “There are a lot of unknowns,” she said. “How much will it cost? What’s the time frame? What is the specific route? How will it get built?We don’t aim to have all the answers. This is a jumping-off point.”


4)  Tales from the Real Estate Trenches

Pat Hune, Broker at 1st Southwest Realty, February 2013  (Editor’s note:  One of my clients suggested I include my real estate experiences in my newsletter.  Sometimes they will be humorous and sometimes educational.  Either way I hope you enjoy them.)  


Pigeons can be the worst pest a homeowner deal with.  Recently I listed a house for an absentee owner that had a terrible pigeon problem.  They were nesting on the pillars, entry light and window sills by the front door. Looking at a pile of pigeon poo is not the best impression for the potential home buyer.  My handyman and I started the fight and here is what we learned.  Pigeon spikes are useless.  The pigeons just roosted on top of them. We finally resorted to chicken wire on top the pillars. Success!  But they were still roosting on the window sills and light.   I went to the internet and found a suggestion for double sided commercial grade tape. Pigeons seemed to think this just made them feel safer as there was less chance they could fall off.  Back to the internet with a suggestion of Tanglefoot.  This is sticky like the double sided tape but clings to their feet which they do not like.  Success at last!  I have finally banished the pigeons.