November & December 2017 Phoenix Real Estate Update

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Season’s Greetings to our valued clients. We hope you had a great 2017 and your 2018 is filled with happiness, good health, prosperity and peace.


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.  


If you are thinking about buying you can 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

1st Southwest Realty

“Working hard for our clients to keep them in 1st place!"

greathouseaz@gmail.com

480-703-1976

www.greathouseaz.com

Equal Housing Opportunity

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Articles

1)  The Greater Phoenix Real Estate - Will Price Increases Continue?

2)  STAT Newsletter

3)  Five Best Phoenix Zip Codes to Buy Money Making Rentals 

4)  Bill Gates Bets Big on I-11 Future Freeway 

5) Arizona’s Population Tops 7 Million for the First Time 

6)  Downtown Phoenix's Roosevelt Row One of Most Popular Neighborhoods

8)  South Mountain Freeway to be Completed Three Years Early

9) Tales From the Trenches - If it smells it won’t sell!


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If you have not paid your Property Taxes they are over due! Second Half Property Taxes are due on October 1 and becomes delinquent after November 1.  


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1)  The Greater Phoenix Real Estate - Will Price Increases Continue?

Pat Hune, Broker, 1st Southwest Realty, October 2017


If you think Phoenix home prices are going up too fast you are not alone.  Tom Ruff, Founder of the Information Market said "The one thing I do know is the 8% to 9% price growth we’ve seen in the median sales price over the last three Novembers is not sustainable.”  Phoenix home prices are continuing to rise, clocking in at a 6 percent year-over-year increase, according to the S&P CoreLogic Case-Shiller index report. Through October 2017 the Valley’s home prices were continuing an upward trend.


A key factor pushing housing prices higher is the lack of supply and increasing demand.  According to a report from AZBig Media rising rent prices are pushing would-be renters to actually buy homes rather than rent especially in high-priced areas. This trend could be considered an inversion from what is common practice for the decision-making process in housing. Typically, renters are those who cannot obtain mortgage financing, or those who plan to move before buying a home would make long-term financial sense. But in this era of rapidly rising rents and ultra-low interest rates, a new type of buyer has been born – those who have given up trying to rent and decided to buy.


The resale and homebuilding market is benefitting significantly.  Tempe-based homebuilder Fulton Homes has experienced an uptick in sales this year similar to other builders.  Doug Fulton attributes that gain to an influx of would-be renters. He also expects the trend to continue. “New home prices have stayed relatively flat in our East Valley Communities while interest rates have held pretty firm. That means housing payments on brand new homes have not seen the 20% increases that rents have in the last few years. And our new communities in the Maricopa have homes that start under $200,000 which come with some extremely attractive payment options for would-be renters.“ If you can stand the commute.


Greg Vogel, CEO of Land Advisors Organization, said "Homes on the lowest end of the price spectrum are experiencing the strongest appreciation due to a lack of supply in the market. Meanwhile, the opposite is true for homes at the highest pricing levels."  Although, Phoenix approved 19,282 single-family homes permits in 2017, Vogel says, the market is still under permitted. In fact, he said, of the 373 subdivisions currently under construction in the Valley, 229 will be built-out in the next 12 months.  Vogel predicts housing growth is headed to the south and west parts of the Valley and that construction labor shortages will partially be solved by new building systems. He also expects to see more garden-style apartments being developed along the outer edges of popular submarkets.


Rental Homes With Private Backyards


When will prices slow down?  At the 8th Annual Phoenix Land and Housing Forecast, presented by Land Advisors Organization, John Burns, CEO of John Burns Real Estate Consulting, says the greatest factors always impacting the housing market are: job loss, construction levels and affordability. Another factor is the rise of “build for rent concepts.” When new homes are built the developers put them on the market as rentals instead of waiting for a sale.  This allows the real estate investor to start recouping their investment. These can already be seen at Verrado in Buckeye and Eastmark in Mesa, two of the state’s top-selling master-planned communities.  Although Phoenix currently is in its third largest expansion cycle ever at 8.3-years, Burns predicts an end to the expansion cycle once it reaches 10.5-years.  Looking ahead, he’s forecasting “an economic hiccup” in 2020, which he describes as a slowdown but not a full downturn.  


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2) STAT Newsletter Link - Commentary by Tom Ruff, Founder of the Information Market 

(Note the numbers are reported one month behind.)  STAT is produced monthly by the Arizona Regional Multiple Listing Service.  This is the database realtors use to list homes for sale and the source for historical sales. ©ARMLS 2017


Will the Phoenix housing market continue to appreciate?  Is the run up in prices going to continue or will the prices stabilize? Tom Ruff, Founder of the Information Market said "The one thing I do know is the 8% to 9% price growth we’ve seen in the median sales price over the last three Novembers is not sustainable. To put this in perspective we’ll employ the rule of 70. The rule of 70 is a way to estimate the number of years it takes for a certain variable to double by taking the number 70 and dividing it by the appreciation rate. At the 8.5% annual appreciation we’ve seen over the last three years in median price growth in November (70/8.5), prices would double in less than 8 years and three months.  Conclusion: Our current market is in balance and our median sales price is in line with our reported median household incomes. Our current appreciation rates will need to fall back in-line with our long-term appreciation rate.”


Editor’s note:  If housing prices followed mathematical formulas I would agree with this conclusion.  Housing is driven by supply and demand.  Median household incomes are a factor but not a price limiting factor.  If there is a particular area where people want to live the prices will continue to increase regardless of income.  For example San Francisco has a median income of $88,518.  The median house price is $1.5 million.  Phoenix is no San Francisco but there are cities where housing is in high demand like Tempe.  There is no cheap single family housing in Tempe and there never will be. Tempe is landlocked so supply is fixed.  Developers are tearing down old properties and building new apartment complexes rather than single family housing. If someone wants to buy in Tempe they will have to have enough income or they will have to live somewhere else. The high demand will continue to push Tempe prices up.


November STAT


November Rent Check


October STAT


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3)  Five Best Phoenix Zip Codes to Buy Money Making Rentals 

Catherine Reagor, The Republic, November 2017


Finding bargain homes in metro Phoenix is a lot tougher now that foreclosures have plummeted and home prices have nearly returned to peak levels.  But five ZIP codes made a new top 25 list for the best U.S. communities for investors to make money buying homes and turning them into rentals.  All of the Phoenix-area neighborhoods that rank on the list are affordable areas with many newer homes.  


The Laveen ZIP code 85339 ranked No. 11 on the Attom Data Solutions list, the highest of any Valley area. According to the national real-estate research firm, the southwest Valley neighborhood has an average rental return of 11.3 percent and a vacancy rate for investment homes below 1 percent.


The Queen Creek ZIP code 85143 ranked No. 13, with an 11.1 percent average return for rental owners and a vacancy rate for investment properties below 1 percent.


No. 20 on the list is the El Mirage ZIP code 85335, with a 10.4 percent return and an investment home vacancy below 1 percent.


The south Phoenix ZIP code 85043 came in at No. 21, with a 10.3 percent return rate and an investment home vacancy rate below 1 percent.


The city of Maricopa's 85319 ZIP code ranked No. 25, with a 10 percent return rate for investors and an investment home vacancy rate below 1 percent.


The Phoenix-area neighborhoods that made the list all have median home prices well below the Valley’s overall median of $245,000. Four out of the five have median home prices below $200,000.


Investors looking for bargain homes to buy and flip or rent out have gotten more aggressive in metro Phoenix. Homeowners who have equity again are regularly getting calls, letters and knocks at the door from groups that want to buy their homes fast for cash.


The Atlanta suburb of Jonesboro's 30238 ZIP code topped Attom's list for best neighborhoods for buying homes to turn into money-making rentals. The area posted a rental return of almost 18 percent and an investment home vacancy rate of almost 5 percent. The median price of a home in the Georgia neighborhood is $90,000.


Attom used data on rents, property taxes, home prices, insurance and property management costs for its ranking.


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4)  Bill Gates Bets Big on I-11 Future Freeway 

Various Sources, November 2017


One of billionaire Microsoft founder Bill Gates’ investment firms has paid close to $80 million for a big piece of land in Arizona west of Phoenix according to a report from Business Real Estate Weekly of Arizona.  BREW reports an arm of Gates’s Cascade Investment LLC has bought a majority interest in just under 20,000 acres of land in an area west of Phoenix called Belmont. Belmont is located off of Interstate 10 at 339th Avenue.  The land could also be along the planned Interstate 11 highway.  This proposed freeway would link Phoenix to Las Vegas.  There are potentially thousands of homes that could come to the potential I-11 corridor.  BREW is reporting the sellers in the Gates deal are comprised of a number of different investors and real estate groups. 


In March 2014 Sean Holster of The Republic reported a prominent economic-environmental group had 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 in 2012.  State transportation departments in Arizona and Nevada wrapped up a two-year feasibility study into linking Phoenix and Las Vegas and beyond via a new interstate. The drive between the two cities currently takes about 4 and 1/2 hours.  The Sonoran institute released a report that said: “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.”


The idea is to build a trade route from Nogales, Arizona, 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  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 have made many visits to  Washington, D.C. 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. “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 felt there is 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. 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.”


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5) Arizona’s Population Tops 7 Million for the First Time 

AZ Central, December 2017


Arizona added more than 107,600 net new residents over the past year, topping the 7 million population mark for the first time, according to the latest government estimate.  Arizona also tied for the fifth-fastest growing state, gaining population at a rate of 1.6 percent. The total resident count grew to 7.02 million residents in 2017 from 6.91 million in 2016, according to the U.S. Census Bureau, which tracked changes from July 1 to July 1 both years.  Maricopa County includes Phoenix and has 4.2 million.


Arizona’s increase of 107,600 residents was the seventh-biggest numeric change. Texas, with 399,700 net new residents, led in this measure.  Arizona ranked 14th in total population both this year and last. Washington, with 7.41 million residents, is the state just ahead of Arizona.


Idaho was the nation’s fastest-growing state, increasing at a rate of 2.2 percent. Nevada was next, followed by Utah, Washington and then Arizona, which tied with Florida.  


California remained the nation’s most populous state with 39.54 million residents, followed by Texas, Florida, New York and Pennsylvania.


Eight states lost population over the year, led by a drop of 1 percent in Wyoming, though Illinois had the biggest numeric decrease — a decline of 33,700 net residents.


The U.S. population rose to 325.7 million as of mid-2017, up 2.3 million residents for the year.


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6)  Downtown Phoenix's Roosevelt Row One of Most Popular Neighborhoods

AZ Central, December 2017


Boarded-up buildings and weed-filled vacant lots were the norm in metro Phoenix’s oldest historic neighborhood not too long ago.  Now, the 100-plus-year-old Roosevelt District in downtown Phoenix has evolved before our eyes into Roosevelt Row, one of the most popular neighborhoods in not only metro Phoenix but the U.S.  The bustling Central Avenue and Roosevelt Street hub of Roosevelt Row was recently voted the sixth most popular metro Phoenix intersection by Urban Land Institute Arizona. The area didn’t even make the list 10 years ago.


Roosevelt Row garnered one of the American Planning Association’s “Great Places” designations last year – Phoenix’s first and only one.  Hotspots Rentals just ranked Roosevelt Row as the 24th “coolest” neighborhood in the U.S. based on transit, walkability, entertainment and cost of living. It was the only Arizona neighborhood to make the ranking.  Named Phoenix’s first “great place” by the American Planning Association for exemplary neighborhoods, streets and public spaces, Roosevelt Row is a downtown arts district that epitomizes growth and the future of Phoenix. 


Last week, plans for one of the area’s historic buildings – the Knipe House –  got City Council approval to be purchased and preserved as part of a $151 million project.  In October, construction started on the 30-story apartment tower Link Phx on the eastern end of Roosevelt Row. And one of the neighborhood’s new apartment complexes, Alta Fillmore, just sold for a record price for downtown Phoenix.


“We are flooded with requests for information and development proposals for Roosevelt Row,” said David Krietor, CEO of Downtown Phoenix Inc. “The biggest challenge is not squeezing out the area’s artistic vibe.”


Walking the art walk - While we Phoenix locals love “RoRo” for its bars and restaurants, most people know the area best for its First Friday art walk.  The tour now has dozens of venues and draws big crowds on Fridays. Many of Roosevelt’s vacant lots and rundown buildings have been filled up by galleries, restaurants and bars.  The neighborhood has evolved so much in the past decade because area business owners like monOrchid gallery owner Wayne Rainy and Carly’s Bistro owner Carly Wade Logan are fierce protectors of its art scene and historic buildings.


Developers are drawn to Roosevelt Row for both the art scene and historic buildings.  “We have a strong desire to save properties with significant history,” said Niels Kreipke of Desert Viking, which renovated the popular retail and eatery hub Gold Spot Center at 3rd Avenue and Roosevelt. “We want to ensure Roosevelt holds onto its vast history and local business ownership.”  Last week, the Phoenix City Council approved True North Holding’s $3.56 million purchase of the city-owned Knipe House and land around it.  The developer plans to incorporate the house on 2nd Street near Roosevelt Street into an office, retail and housing development. A 19-story tower and two smaller buildings are planned for the project, named Ro2.  The 1909 Knipe House is now one of the last remaining historic buildings in Roosevelt Row that hasn’t been redeveloped.


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8)  South Mountain Freeway to be Completed Three Years Early

Orion Investment Real Estate, December 2017


ADOT director John Halikowski said "We’re committed to delivering on a promise to Maricopa County voters to complete the Loop 101 and Loop 202 system that will connect communities and employment centers while helping position the Phoenix area for continued growth and opportunity.” The first phase of construction on the roadway began in 2016. It is expected to be finished by 2019, three years earlier than was originally planned.  The project was first approved by Maricopa County voters in 1985 — and again in 2004 — as part of a comprehensive regional transportation plan.


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9) Tales From the Trenches - If it smells it won’t sell!

Pat Hune, Broker, 1st Southwest Realty


Selling a smelly house is very difficult.  The most common odors are from pets and cigarette smoke. The fastest way to get rid of smoke and pet odors is to remove anything that has been exposed like carpet and furniture.  And of course get the pet perpetrator out and stop smoking in the house.  Paint over any surface that can be painted.  If it can’t be painted try washing the surface down with vinegar and water.  There are some great spray products that will remove some level of odor.  ZEP has a smoke odor eliminator and  PowerHouse Foam No Vacuum Carpet Refresher works on pet odor.  If the carpet is in good shape some carpet cleaners have odor neutralizers.  They will fog the interior and then run an ozone machine for 24 hours to further neutralize the odor.  All of these efforts will help but the HVAC duct work is a lot harder to clean.  


I listed a condo and the owners had replaced all the flooring and painted the entire house including the cabinets.  Despite all these efforts the condo still smelled like smoke based on the feedback from buyers and their realtors.  I purchased some ZEP and it seemed to help until the power went out during a storm.  The AC stopped working and the smell of smoke came back with a vengeance.  I finally figured out the smell was in the duct work.  Once the AC was back on I sprayed ZEP over the filter and by the cold air returns.  This helped and the condo sold.  But I was still in search of a better solution that would also remove odors from duct work.  


I found a company called SmellFresh Arizona.  They use a three step process to eliminate odors and they clean the duct work. Their pricing is flat fee based on the size of the house and results are guaranteed.  For example a house 3,000SF or under with a heavy smoke smell is only $600.  The best way to have the odors eliminated is the get out of the house for a couple days so the chemicals and equipment can do their job.  Once the house smells good it will sell a lot faster and for more money.


SmellFreshArizona