May 2014 - Phoenix Real Estate Newsletter

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?  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 Overview - The average rate for a 30-year, fixed-rate loan fell to 4.14% from 4.2% last week, Freddie Mac said Thursday.The average rate for a 15-year mortgage, a popular loan for refinancing, fell to 3.25% from 3.29% a week earlier.  Real estate analysts hope this will encourage people to buy houses before rates increase.


Home sales in the greater Phoenix area dropped 20% in March 2014, and 12.5% in April 2014 compared to the same time last year. This is largely the result of investor purchases dropping sharply in conjunction with price increases and a lack of “native” demand to make up for it. As a result of these and other trends, the Phoenix real estate market will likely begin to favor buyers over sellers, as we move into summer 2014.


Home prices, on the other hand, were higher in March and April 2014 as compared to the same months last year. April was 10% higher than a year ago.  Meanwhile, inventory within the Phoenix housing market has grown considerably. Each month, Realtor.com issues a metro-level housing report with data compiled from their own property listings. According to the March report, the number of homes listed for sale in the Phoenix metro area rose 47% over the last year. That put the city in the top ten for inventory growth, among 146 metro areas across the United States.


The median age of inventory, aka Days on Market, also rose significantly over the last 12 months. This means homes are taking longer to sell today, compared to a year ago. It’s further evidence that a market shift is underway but is not unexpected as prices have increased.


Articles

1)  STAT Newsletter, PPI and Rent Check Link 

2)  Mortgage Rates Hit Lows Not Seen Since October 2013 

3)  75 Million Dollar Luxury Condo Project Planned for Downtown Phoenix

4)  Real Estate Briefs

     a) Tempe's transit center poised for business

     b) OdySea Aquarium construction to start by August

     c) 10 tips to help sell your home

5)  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.


May Stat


STAT Newsletter Highlights

Commentary by Tom Ruff, Information Market


Price - The median sales price for April 2014 landed at $189,000, which is up 1% month-over-month and 10% year-over-year. Taken at face value, these numbers indicate rising home prices but I would caution against this conclusion. In order to get a better idea of price movement we need to look at the July 2013 median sales price of $185,000. July 2013 signaled the end of a 20-month period of rapid price appreciation when the median sales price rose 70%. Over the last 10 months sales prices have remained relatively flat, wobbling between $180,000 and $189,000.  


The ARMLS Pending Price Index for May projects the median sales price will remain relatively unchanged at $190,000. At present, the current number of pending sale contracts are very comparable to last month indicating the sales volume in May will be similar to the volume in April.  I have my suspicions that the number of UCB listings are overstated leaving the number of pending sales understated. I expect 1,400 fewer sales this May compared to last year when 9,436 sales occurred. Working in a vacuum in terms of current population numbers I find our present market challenging to interpret, or in the words of Yogi Berra, “It's tough to make predictions, especially about the future.” 


Volume - Sales volume in April 2014 was down 12.5% with 1,095 fewer sales taking place this year compared to April 2013. There were 7,659 closed sales in April 2014 compared to 8,754 last April. The decline in sales volume occurred entirely on the distressed side of the market with short sales down 809 and bank sales down 496 year-over-year. Comparing normal sales, we actually saw an increase with 210 more normal sales year-over-year.  


Total inventory fell for the first time this year down 1% from March but 47.5% higher than last year at this time. Last month we discussed pent up demand in detail and at present, demand is still our primary challenge.  Demand can change quickly but in the short term remains constant.  Expect the imbalance between supply and demand to exert downward pressure on pricing later this year, most likely in August when demand historically declines and inventories historically rise.   


Where are the buyers? - I see demand as our primary challenge. As an analyst I can state I believe housing demand is 25% below normal, while an individual broker or agent may be in the midst of a very good year tilting their perspective in a more positive direction.  While I see demand at present lacking I also see three potentially large pools of future buyers like millennials, boomerang buyers, and retiring baby boomers desiring an Arizona resort lifestyle.  The logical question now is when will these potential buyers become homeowners?  Last month in STAT we talked extensively about the boomerang buyer and their potential time frames.  This month, Stephen Kim, an equity researcher with Barclays, talked about the return of the first time buyer, a trend he expects to emerge later this year. He further expects over-all demand to return to normalized levels in 2016.  Mr. Kim addresses the national housing market from a new build perspective, but much of his analysis can be applied to our local resale market as well.  A summary of Mr. Kim’s comments by HousingWire are:


  1. Job growth is reaching an important threshold for improved household formation - The cumulative number of jobs created over the past several years has now reached the point where each new job will drive greater household growth. 
  2. Credit availability starting to loosen -  Lenders' willingness to extend credit to borrowers in the entry-level "sweet spot" of 600-700 FICOs is gaining momentum. 
  3. Affordability still favorable -  Buying a home is still ~20% cheaper than renting, and affordability is unlikely ever to be better, given rising interest rate and home price trends. 
  4. Student debt remains a problem - Our analysis reveals that burgeoning student debt is the thorniest problem for the industry, particularly in light of new QM regulations. 
  5. "While the recent slowdown seems to have caught many observers by surprise, we have been expecting a 'mid-cycle correction' to emerge in FY14 since early last year. Thus, this period of slower growth is largely consistent with our view for how the housing market will recover back to normalized levels by 2016," Kim predicts. 

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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


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Commercial Real Estate Trends


Current Phoenix market trends data indicates an increase of +2.8% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of +9.6% compared to last year's prices. County-wide, asking prices for Multifamily properties are 4.4% higher at $49,081 per unit compared to the current median price of $48,719 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) Mortgage Rates Hit Lows Not Seen Since October 2013 

Les Christie, CNN Money May 2014


The average rate for a 30-year, fixed-rate loan fell to 4.14% from 4.2% last week, Freddie Mac said Thursday.Interest rates have been pushed down as investors , skittish about the economy, have abandoned stocks for U.S. Treasuries, according to Mike Fratantoni, chief economist for the Mortgage Bankers Association.  But lower mortgage rates have not boosted the housing market. Applications for mortgages used to purchase homes have been running about 10% behind the pace of a year ago, according to Mortgage Bankers Association stats. There are several reasons why.  In some markets, home sales have been hurt by shortages of inventory, leaving buyers with few homes to choose from.  Further, lending standards continue to be strict. And that is leaving some potential homebuyers on the sidelines.


There are some positive signs for housing, according to Frank Nothaft, Freddie Mac's chief economist. In April, the number of permits to build new houses and the number of new homes that started to be built rose more than expected, he said. Lower rates have also spurred a slight increase in refinance applications, but those are still well off year ago levels. The average rate for a 15-year mortgage, a popular loan for refinancing, fell to 3.25% from 3.29% a week earlier


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3) 75 Million Dollar Luxury Condo Project Planned for Downtown Phoenix

Emily Overholt, Phoenix Business  Journal, May 2014


Downtown Phoenix is about to get $75 million in new luxury condos as Habitat Metro announced it will begin construction on Phase 2 of its Portland Place condominium community later this year.  The new project, called Portland on the Park because of its location between Portland Park and Margaret T Hance Park bordering Central Avenue, is expected to be completed in 2016. The project will have 170 units in 4-story, 12-story and 14-story towers with condo prices ranging from the low $200,000s to roughly $1 million. Homes range from 745 square feet to 2,381 square feet. “We’ve had a lot of interest for the project and people are very happy with what we built in our first phase,” said Tim Sprague, principal of Habitat Metro, developer of both projects. “It’s time to continue.”


Habitat Metro is partnering with Sunbelt Holdings and Davis Architecture on the project. Davis designed the first phase, winning the Golden Nugget Award for the best multifamily project in the West for the design. Marketing for the project is split between Vancouver-based Braun Allison and the Scottsdale-based James Agency.  In addition to the 170 housing units, the development will include commercial space on the first floor.  Sprague said, as an infill project, Portland on the Park has unique struggles. The neighborhood surrounding the development has its own aesthetic with which the new structure needs to blend. However, Sprague said he isn’t worried. As president of the Hance Park conservancy, he is already involved in the neighborhood.


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4) Real Estate Briefs


a) Tempe's transit center poised for business

Dana M Nanez, The Republic, May 2014


Tempe opened its $28.2 million transportation center in 2008 with plans for a cutting-edge facility to house municipal transit operations as well as privately leased space that would make money for the city.  Six years later, the government real-estate venture has had mixed success. The economy was booming when the facility, next to a transit hub for light rail and buses, was envisioned. Tempe budgeted $5.5 million in federal grants and $1 million in state transit grants for construction, but city officials could not immediately confirm whether that entire amount was spent on the project.


Government leaders saw an opportunity to cash in on the high-profile downtown space only one block east of Mill Avenue on Fifth Street. The plan was to lease some suites to private businesses and use that revenue for city services.  Several suites, including prime space on the transit center's first floor facing the street, have long been vacant. City officials are touting a restaurant that recently signed a lease for much of that space. City Manager Andrew Ching said the business is making improvements to the space before it opens.


To date, rent from a new unopened restaurant, to be called Revo Pizza, amounts to $12,731, according to Tempe finance officials. The city expects $789,946 in rent payments through the anticipated 10-year lease. City officials said Revo would open in September in a 3,000-square-foot space on the first floor. That would leave 1,000 square feet vacant for private leasing in the transit center.  Under Revo's lease deal, Tempe offered the pizza place six months free rent and $104,880 for tenant improvements. The space is being rented on an increasing scale, which starts at $23.30 per square foot for the first year. In the third year, the rate will be $24.40 per square foot for the restaurant space and $12 each for 317 square feet of storage space.  Prior to the pending restaurant, at least two business deals fell through on leasing that first-floor space.


Rebound might help - City leaders blame the poor economy for the slow-going efforts. But now that the commercial and retail market is rebounding, they believe it won't be long before the last of the vacant space is filled with a rent-paying business. "In the recession, the issue was people just didn't have the financing at the time to get these things up and running," Councilman Corey Woods said. "I know it's beginning to pick up to where people are expanding and opening new businesses.”  


Of the two private businesses that are open in the building, one received a hefty city contribution toward tenant improvements. The other operates under a revenue-sharing model with the city to cover lease payments.  The transportation center was 2 years old in 2010 when the city spent $176,729 to fund tenant improvements for Dixon Golf.  The manufacturer of eco-friendly golf balls had signed a lease for an estimated 5,300-square-foot office space on the transportation center's third floor. Dixon Golf moved from its Mesa facility to Tempe.  To date, Dixon Golf has paid $238,766 in rent to Tempe, according to city finance officials. Tempe officials estimate the city will receive an additional $120,250 through the expiration of the current lease on June 30, 2015.


b) OdySea Aquarium construction to start by August

Edward Gatley, The Republic, May 2014


A massive aquarium complex will be under construction by August on the Salt River Reservation, with completion expected by Christmas 2015.  OdySea Aquarium, the 16-acre indoor attraction, will be adjacent to Butterfly Wonderland and OdySea Mirror Maze/Laser Maze, at the northeastern corner of Via de Ventura and Loop 101. When completed, the overall OdySea in the Desert entertainment complex will encompass 35 acres on land leased from the Salt River Pima-Maricopa Indian Community east of Loop 101 near Scottsdale.


OdySea Aquarium will be a two-level facility that will span more than 200,000 square feet, said Amram Knishinsky, OdySea CEO. Visitors will move to each level via acrylic tunnels while viewing sea life from around the world. It will employ more than 250 people and accommodate up to 15,000 visitors daily, he projected.  An OdySea Aquarium Visitor Center and showroom has opened next door to Butterfly Wonderland as part of pre-construction efforts. It is open from 9:30 a.m. to 5:30 p.m. seven days a week. "What we have created there is the various images and galleries that we're going to build in the aquarium," Knishinsky said. "Each monitor is devoted to a specific area. They're illustrating everything from jellyfish to the penguins area, and the largest monitors show the variety of sharks that we're going to have because we intend to have one of the largest selections of sharks in the country.”  In addition, the visitor center is showing a documentary on the making of the Newport Aquarium, which Knishinsky and his investors built 15 years ago in Kentucky.  


Also during pre-construction, lifetime memberships can be purchased for both individuals and families, and will include a VIP entry line, behind-the-scenes tours and invitations to special events throughout the year. They are being sold at three different levels and pricing begins at $995 for a family of four. Annual memberships and corporate memberships also will be available. "This is limited-time gift to the community and a rare opportunity to help build something historic in Arizona," Knishinsky said.


c) 10 tips to help sell your home

Dolores Tropiano, Special for The Republic, May 2014


The days of putting your house on the market one day and breaking up bidding wars the next are probably gone. It's a buyer's market in most parts of the Valley right now. Increased inventory translates to greater competition, and that often makes selling a home a longer process.  But, experts say that the right steps can lead to a successful home sale in a shorter time. The trick is to invest time before the for-sale sign goes up, and it will come down a lot sooner.  Here are 10 tips to help sell your home more quickly:


1. Price it right. Price is a top priority when selling a home. To determine the right price, he researches recent sales in the immediate neighborhood and surrounding area when he lists a property. An appraiser also can help get an accurate estimate of how a home should be priced. Your listing realtor should create a market analysis for your property looking at the number of homes for sale in the area. The more homes on the market, the more aggressive the pricing needs to be. It always comes down to price, condition and exposure.  Of the three, pricing is paramount. You can overcome the other two if the home is priced appropriately, but if the price is off, it's going to be a long stay on the market, regardless of how nice the property is.

2. Update carpeting and paint. Skip the kitchen remodel if you are selling your home. Put your money into painting rooms throughout the house. And change that ratty carpeting.  Clients are often resistant to replacing carpeting, thinking a carpet allowance is the answer.  And often the buyer will immediately rip out the new carpet and replace it with a different type of carpet or flooring.  The problem with that is you never get that emotional impact when someone walks in and sees nice new carpet.

3. Take good photos. With a high percentage of buyers now viewing homes online, it is imperative that sellers have good-quality photos taken of the home's interior and exterior. Good photos will help the buyer take the next step and request a showing.  They should not be taken with a cell phone.  Your listing realtor should either have the camera equipment to take pictures  to show your home at it’s best or hire someone.

4. Stage your home. If the photos feature a professionally staged home, the house stands out among the crowd of online choices. There are local staging companies will provide consultations for do-it-yourself stagers or will stage your home for you. According to RESA, the Real Estate Staging Association, staged homes sell faster than non-staged homes. Staging involves putting just enough furniture in each room to show a potential buyer how they could use each space.

5. Depersonalize the space. Take down that kachina collection and pack your elk trophy. Unlike interior decorators stagers do not create a personal style that suits the homeowner, but rather a more neutral palette of colors, furniture and design to appeal to a broader group of buyers who can then better visualize themselves in the space.

6. Declutter. Rent a storage space for excess furniture, pictures, boxes and other belongings. Remove things from the floor (including some rugs and shoes in the closet) to make each room look more spacious. Clear off kitchen and bathroom counters, tables and desks.

7. Add curb appeal. Real-estate pros say that an inviting exterior will entice people into the house. Scottsdale resident Caroline Garcia discovered flower power by planting lantana and oleander around what had previously been a typical rock and dirt landscape. She trimmed bushes, raked leaves and removed dead plants. A pot of flowers on the front porch is a plus. "I hate flowers with all my heart because of the maintenance they require," said Garcia, who is moving to Mexico City. "But when I put them in, it made a big difference."

8. Make obvious repairs. Garcia went from room to room and throughout the garage and backyard making note of large and small repairs and fixing them. Too many visibly broken items in your home — regardless of the size — send a message to buyers that perhaps other hidden problems are lurking under the roof. Garcia's 2,200-square-foot home ended up selling in a week and a half.

9. Pick your fixes. Garcia had a Realtor tell her to put granite countertops in her kitchen, but she decided she would not get a return on her investment.  Experts agree. If you have already remodeled the entire house except for one room, then complete the remodel. But if upgrades are uneven, there is no point tossing money at random renovations. "It's just as important to know what not to do as it is to know what to do," Garcia said.

10. Clean up. "Q-tip clean" is what sellers should be striving for. Make sure floors, counters, tables, walls, sinks, bathrooms and windows are spotless. And don't forget to dust the fans. Selling a home is one time you should definitely consider a professional cleaning. A pro may spot things you've overlooked or neglected. When people walk into your home, they want to have a good emotional connection.People hate to walk into a messy, cluttered home. It reminds them of all the work they have to do.  The idea is to make the home as inviting as possible with few distractions.


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5)  Tales from the Real Estate Trenches

Pat Hune, Broker at 1st Southwest Realty,  (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.)  


Does anyone read all the paperwork received during a real estate transaction?  There is so much paper most buyers and sellers (as well as the realtors) are overwhelmed.  I make it a habit to always review the preliminary title report even though in the hundreds of transactions I have closed there has only been one issue.  When I received the title report for a house I was selling in Queen Creek located in Pinal County I was surprised to see the title company could not find any liens against the property.  This was strange because the sellers told me they had refinanced six months ago.  


I called the sellers to see if they had the deed of trust.  They did and immediately saw the problem.  The title company handling the refinance had recorded the deed and note in Maricopa County instead of Pinal County.  The seller called the title company that had made the error to get them to correct it.  The title company was very defensive and said the Maricopa County Recorder’s office should not have recorded it.  Really.  After a heated conversation they finally admitted they should not have submitted the document to the wrong county.  Unfortunately the close date was in three weeks and the title company said it would take them much longer to fix the error.


I called the title company handling the current escrow and explained the problem.  They researched and said the easiest solution was wait until the current escrow closed and record the release in both counties. That way when the property sold in the future the title would be clear. 


Moral of the story is always review or have someone review all the paperwork related to a real estate transaction.