November 2016 Phoenix Real Estate Update


1st Southwest Realty Real Estate Update


Happy Thanksgiving!


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 - Mortgage and Consumer Interest Rates Going Up

Commentary from Pat Hune, Broker, 1st Southwest Realty,  and various sources


November was an interesting month.  The presidential election was over (finally!).  Prior to the election many felt the real estate market slowed down as people focused on the campaigns and speculated on what would happen if Trump was elected.  All the political uncertainty had a lot of people “on hold” until after the election.  Indeed the election results rippled through the economy as the stock market dipped early the day after and predictions of doom and gloom were rampant. The stock market crash many predicted did not materialize.  Instead the market recovered by the end of the trading day.   In the weeks after the election the markets rallied in anticipation of Trump’s massive government infrastructure spending and tax cuts.  


According to Bankrate the post-election 30 year mortgage interest rates increased from 3.5% to 4.125% in just under a week.  Though increasing from a 3% interest rate to 4% only translates to a $100  increase in the principal and interest payment it could be enough keep the buyer from qualifying. This is due to the strict debt-to-income ratios lenders now require. It also means potential buyers are more nervous about taking the plunge at all. "Let it be known that the recent surge in rates is more than a mere post-election knee-jerk. Financial markets are fully repricing their expectations of the future, and we can't even begin to assess how that future might actually pan out until Trump takes office," wrote Matthew Graham, chief operating officer of Mortgage News Daily.  Sean Becketti, Freddie Mac’s chief economist. said “If rates stick at these levels, expect a final burst of home sales and refinances as ‘fence sitters’ try to beat further increases, then a marked slowdown in housing activity.” However mortgage rates change daily.  Home buyers should be ready to lock the interest rate as soon as they have a signed purchase contract.


The Federal Reserve announced in November it will probably increase short term interest rates in December 2016.  The last increase was .25% in December 2015.  An increase in the short term interest rates means it will be more expensive to buy things using consumer credit.  Car payments, credit cards and lines of credit (often taken out on real estate) will be more expensive.  Per Federal Reserve Chairman Janet Yellen the increase will be small.  But there could be more increases in 2017.  On November 29, 2016 the Consumer Confidence Board reported a nine year high.  This number can be an indicator of American’s future spending which makes up more than two thirds of economic activity.  Higher short term consumer interest rates means people will have less disposable cash which in turn could have a negative impact on the US economy and a decrease in consumer confidence.


Clear Title predicts the inventory in the greater Phoenix area market will experience typical seasonal slowdown in December and then increase in Q1 2017.  "The number of active single family listings without an existing contract was 16,206 for the Greater Phoenix area as of November 1, 2016. This is up 4.8% since October 1. The inventory of single family homes under $150,000 stands at 44 days, up from 37 a year ago. Overall we have seen 4.4% more new listings created in 2016 than at the same stage in 2015. We expect active listing counts to fall during December and then rise sharply again during the first quarter of 2017. New supply has been strong at the upper price points but remains inadequate below $200,000. In the mid range between $200,000 and $500,000 we are seeing plenty of supply but current demand is more than strong enough to cope with the new listings. Supply has been stronger in the West Valley recently and weaker in the Southeast.”  Click on the link below to view the entire report.


Clear Title Market Update



Articles

1)  STAT Newsletter

2)  Rental Market

3)  Multifamily and Commercial Real Estate Trends

4)  Is Casa Grande Poised for a Real Estate Boom?

5)  Phoenix #1 In Investor Owned Homes 

6)  Tales From the Trenches - Downtown Gilbert has gone from sleepy to sleek 


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1) STAT Newsletter Link - Commentary by Mike Orr, Founder of the Cromford Report

(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 2016


Last month STAT projected a median sales price for October 2016 of $228,000, with the actual median coming in at $229,900. The actual median was 0.8 % higher than the $228,000 projected by our model. Looking ahead to November 2016, our model projects a drop in the median sales price. The ARMLS Pending Price Index projects a median sales price of $225,000. Our mathematical model projections have been trending slightly lower than the actual results. I’m guessing the median might well head lower in November but most likely not as low as our mathematical model suggests. 


Sales volume in October as reported by ARMLS was 6,981, which was 10.7% higher than last year’s total of 6,304. October sales came in as expected with our projection of 6,850 missing the mark by only 131 sales. We begin November with 6,021 pending and 3,459 UCB listings giving us a total of 9,480 residential listings practically under contract. This compares to 9,149 of the same type of listings at this time last year. There are 19 business days in 2016 compared to 18 business days in 2015. Sales volume projections are always tricky during the holiday season, that said, November 2016’s sales volume will exceed last year’s total of 5,311. STAT is projecting 5,950 sales. Month-over-month sales volume will continue their annual descent with November volumes lower than October, sales will pick up in December. Sales volume for the first 10 months of 2016 is 3.71% higher than 2015, ARMLS has reported 74,873 sales this year compared to 72,197 sales last year. 


Click here for the latest STAT Report


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2) STAT Rental Market Link


The September median lease was $1,295 as compared to the October's median lease of $1,300. The September average lease was $1,477 as compared to the October average lease of $1,476.  The September average days on market was 30 as compared to the October average of 33 days on market.  Rental activity typically decreases in December as people get ready for the holiday season.


Rent Check


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3) Multifamily and Commercial Real Estate Trends


Last month multifamily prices seem to have leveled off after an increase of 14.5% year over year. This month the median asking price increased 3.4% and year over year prices have increased by 14.5%.   The prices are averaging $68,231 per unit.  


Loopnet Commercial Trends


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4)  Is Casa Grande Poised for a Real Estate Boom?

Phoenix Business Journal, November 2016


Casa Grande in Pinal County is the new home of a 500-acre, $700 million, 2,000-employee automotive manufacturer.  Menlo Park, California-based Lucid Motors will build an electric vehicle manufacturing facility in Casa Grande and has plans to build its luxury electric vehicles for first sale in 2018. It is gearing up to compete with Mercedes, Audi and BMW, not positioning itself as an alternative to Tesla Motors or Faraday EVs. “It took a serious partnership of the state, (Pinal) county and (Casa Grande) to bring this deal together,” said Arizona Gov. Doug Ducey in an exclusive interview. “We made an extra effort to bring another major manufacturing facility to Arizona.”  Ducey essentially closed the deal for Arizona, according to Lucid Motors.  


Lucid had to weed though more than 60 markets in 13 states before selecting Casa Grande. Company officials did not want to name the finalist markets, but a report in the Sacramento Business Journal said the California capital city was the runner-up for the selection. Lucid would not confirm or deny that report.  Key decision factors were the availability of a 500-acre, shovel-ready site with heavy rail access, the Pinal County and Valley workforces and Arizona’s quality of life.  “While all the markets wanted an automotive OEM facility, Arizona was the state that made us feel as if it were a partner in the process,” said Brian Barron, director of manufacturing for Lucid Motors, formerly Atieva. “We were impressed that Gov. Ducey made a trip to California to meet our team and was so accessible when we were in Arizona. This was one of the key deciding factors in choosing Casa Grande.”


Another factor is that the ground was shovel-ready with all backbone utilities in place.“Finding a property this size with utilities was an important part of the decision process,” Barron said.

The company will begin hiring around 400 people in 2017 to start the training process in concert with Central Arizona College and technical and community colleges in Maricopa and Pinal counties.   “Just as happened in South Carolina and Alabama, we’ll need to train a non-automotive workforce to become an automotive workforce,” said Peter Rawlinson, Lucid’s chief technical officer.  Construction is scheduled to start the middle of 2017. 


Local realtors report a severe shortage of rental housing and predict it will only get worse when the Lucid factory is completed.  Many large employers have open near Casa Grande including  PhoenixMart, Frito Lay and Abbot Labs.  There are few apartment buildings and even less single family home rentals.  Very few new homes have been built in Casa Grande since the real estate bust.  The shortage of housing has forced people to commute from Phoenix.  Real estate analysts predict more new home developments will spring up along with luxury apartment complexes.


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5)  Phoenix #1 In Investor Owned Homes 

Phoenix Business Journal, November 2016


Maricopa County — which includes Phoenix and its suburbs — has just under 253,000 homes owned by investors.  That’s the most in the country.  Maricopa also has the most homes of any U.S. county owned by out-of-state investors.  Close to 89,000 single-family homes in the Phoenix area are owned by out-of-state parties, according to the real estate research group.  Out-of-state owners hold 35 percent of the Phoenix region’s investment housing stock.


Los Angeles County is next with just over 199,100. Wayne County, Michigan, which includes Detroit, is third with close to 195,200 investor-owned homes, according to ATTOM.


Clark County, Nevada (Las Vegas) is next with more then 73,600 homes owned by out-of-state investors. Lee County, Florida (Fort Myers) is third.  


Southern California counties — Los Angeles, San Bernardino, Orange, Riverside and San Diego — make up five of the U.S. counties with the most investor-owned houses.


Cook County, Illinois (Chicago) has the 11th most investment homes, according to ATTOM.


Cape May, New Jersey and Shelby County, Tennessee (Memphis) are among the U.S. counties with the most out-of-state investors owning homes.


County  - Total investment homes  - Out-of-state investors


Maricopa (Phoenix): 253,890  -  88,947


Los Angeles: 199,190  - 12,648


Wayne (Detroit): 195,184  -  22,523


Harris (Houston): 170,072  -  19,640


Clark (Las Vegas): 154,441  -  73,629


San Bernardino: 136,138  -  9,021


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6)  Tales From the Trenches - Downtown Gilbert has gone from sleepy to sleek 

Pat Hune, Broker, 1st Southwest Realty


In 1902, the Arizona Eastern Railway asked for donations of right of way in order to establish a rail line between Phoenix and Florence. A rail siding was established on property owned by William "Bobby" Gilbert. The siding, and the town that sprung up around it, eventually became known as Gilbert. Gilbert was a prime farming community, fueled by the construction of the Roosevelt Dam and the Eastern and Consolidated Canals in 1911. It remained an agriculture town for many years, and was known as the "Hay Capital of the World" until the late 1920s. Gilbert began to take its current shape during the 1970s when the Town Council approved a strip annexation that encompassed 53 square miles of county land. Although the population was only 1,971 in 1970 the Council realized that Gilbert would eventually grow and develop much like the neighboring communities of Tempe, Mesa and Chandler. 


Gilbert has experienced a rapid transition from a historically agriculture-based community to an urban center and suburb in the Phoenix Metropolitan Area. In the last two decades, Gilbert has grown at a pace unparalleled by most communities in the United States, increasing in population from 5,717 in 1980 to over 215,000 in April 2009. 


The downtown Gilbert area has enjoyed tremendous growth due to the efforts of the city to make it a destination location.  Called the Heritage District the core of downtown Gilbert is now flush with popular restaurants like Oregano’s Pizza Bistro, Postino Wine Cafe East, Zinburger, Lo-Lo’s Chicken & Waffles and SoCal Fish Taco Company among many others. The Arizona Wilderness Brewing Company was Gilbert’s first brewery and was ranked number one of the ten best breweries in the world.  Though the nightlife is still lacking some restaurants are adding live music on the weekends.  


In the future Gilbert wants the light rail to connect to the downtown area. The Mesa light rail extension from Main Street and Mesa Drive to Main Street and Gilbert Road is scheduled to be completed in late 2018.  It appears Gilbert is going to wait until the extension is completed before beginning construction on the connection to downtown Gilbert.  Though the light rail connection may be several years in the future it will help the downtown Gilbert growth.


If you have not been to downtown Gilbert lately you will be amazed at the changes.