October 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



First Half Property Taxes are due!  If you own your property free and clear or your mortgage company does not pay your property taxes they will be due no later than November 3, 2014.  To view the tax bill got to http://treasurer.maricopa.gov and enter the parcel number.  Call 602-506-8511 if you have questions.   

Market Overview -  Real estate experts predict the Phoenix Real Estate Market will grow significantly in 2015.  The various factors include a) higher rents, b) people who had a short sale or foreclosure will be able to buy again, c) prices are stable, d) more baby boomers are retiring and are ready to down size or move to a warmer climate, e) low interest rates and f) a stable economy.  The details are: 

a) As rents go up buying a home will become more attractive. If a typical 3 bedroom, 2 bath, 1500SF single family home is renting for $1400 per month it makes sense to buy.  Using an online mortgage calculator an FHA loan of $150,000, 3.5% down, 4.5% interest rate, mortgage insurance of $60, estimated insurance and taxes of $250,  HOA fee of $50 and Home Warranty of $50 the monthly payment would be approximately $1,200 per month.  A buyer would need to save about $9,000 for the down payment and closing costs. This amount could be lower if the seller will agree to pay part of the closing costs.  The down payment could be gifted from a family member.  There is also a program called Home in Five offering a non-repayable downpayment for buyers who qualify for an FHA, VA or USDA-RD loan.  The maximum loan amount for an FHA loan is $271,000.  


There is also down payment assistance program for conventional loans with a maximum loan amount of $353,000.  These loans are attractive as the buyer may be able to buy with zero down and the mortgage insurance is lower than FHA.  Renters have a lot of options to become home owners for less than the rent payment with low interest rates.  


b) The waiting periods have fluctuated over the years but it typically takes 7 years after a short sale or foreclosure before someone can buy.  If the short sale or foreclosure occurred in 2008 or earlier, the buyers paid their other financial obligations regularly and have job stability they should be ready and anxious to own a home again.  


c) Prices are stable which is good for both buyers and sellers.  Sellers who watched the prices increase rapidly may have waited to put their house on the market until the price increases slowed.  It is expected sellers with equity who want to move up or down size will list them in 2015.


d) The baby boomers are on the move and they have a lot of money to spend on a home.  In Tempe a townhouse development named 4 TwentyOneWest, for its address on Sixth Street, start at $365,000 and go up to $534,000. Architect Bing Hu has developed several townhouse communities in north Scottsdale with a price tag of one million dollars and up.  The first community sold out and another, Silverleaf,  is scheduled to break ground in 2015.  Silverleaf caters to the retiree who wants an upscale lock and leave home.  (See article below.)  


e) Experts say just as many homes sold when interest rates were 18% as are selling at 4.5%. While this is true the size of the home someone can buy changes when interest rates go higher.  Buyers qualify based on their monthly income.  When the monthly payment increase significantly buyers may be discouraged and decide to keep renting.  Interest rates are not expected to rise in the immediate future but this can change at any time.


Articles

1)  STAT Newsletter, PPI and Rent Check Link 

2)  US Regulators Ready for Relaxed Mortgage Rules

3)  Downtown Mesa may get 50-unit artist colony 

4)  Real Estate Briefs

a) Chandler breaks ground on new downtown apartment complex  

b) State ready to buy homes for Loop 202 extension 

c) DriveTime Corporate Headquarters headed to Tempe

d) Upscale condos to open in north Scottsdale’s Silverleaf

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.   ARMLS® COPYRIGHT 2014


October STAT


STAT Newsletter Highlights

Commentary by Tom Ruff, Information Market


As we expected, there were no surprises this month. Sales volume in September came in as expected while prices remained flat. Sales volume for this year had been running 14% lower than 2013, but the sales volume this month was only 1% lower than September 2013. There were 6,252 sales this September compared to 6,314 sales for September 2013. Keep in mind there were 21 working days this September compared to 20 working days in September 2013. Discounting the number of working days, the year-over-year sales volumes were very similar.  With year-over-year sales volumes being in lockstep, we are afforded a clear picture of the year-over-year changes as to the composition of sales. Normal/traditional sales are up, distressed/investor sales are down.


With September defined as more of the same, I thought it would be a perfect time to do some additional number crunching based on a question I saw on Facebook.  The Facebook question went something like this: “What’s the difference in sales prices between using a Realtor and selling a home via FSBO?” The question started a chain of calculations where we went from exploring off-market sales (see: Using a Subscriber vs. Not below) to where we ended up calculating the added value of using an ARMLS Subscriber (see: The Value of a Subscriber below).


First, taking the question at face value, it’s a series of calculations and simple enough. But diving deeper it’s a question spawned by the constant threat REALTORS perceive when a disruptive real estate venture moves into the market. Predictions of the demise of the real estate industry rain down whenever a new real estate venture, new business model or syndication du jour launches. Lay on the couch, everything is going to be okay. The REALTOR® / MLS model isn’t going anywhere. The numbers have your back.


Using a Real Estate Subscriber vs. Selling on your own

Second, we can do the calculation we were asked as The Information Market compiles public records data and then matches it to MLS data, giving us a unique database. We looked at single-family sales this year from January to September for Maricopa and Pinal counties. We removed new construction as our comparison will be of the resale market. Here are the findings:


• 83.76% of all resale homes sold using an ARMLS Subscriber and the MLS

• 90% of all resale homes that sold over the median price used an ARMLS Subscriber and the MLS

• Single men are slightly less likely to use a Subscriber and the MLS but did 82.53% of the time

• Single women fit the norm using a Subscriber and the MLS 84% of the time

• Married couples are more likely to use a Subscriber and the MLS at 86.08% of the time


Fix & flip investors used an ARMLS® Subscriber 84.34% of the time. These investors clearly know how to value property and their price points as their livelihood depends on buying low and selling high. They don’t need an agent to tell them property values but they need a Subscriber to ensure arms-length transactions. This should be a shock to you! The perception of many is that they don’t use REALTORS®.


The Value of a Subscriber

Subscribers were used in 84% of transactions – but did they add value? It would be easy but flawed to look at the median and average sales prices of MLS vs. Non-MLS sales like the Facebook question above suggests. To show why, we did the calculation for August with new construction and distressed properties removed:


                                    Non-MLS       MLS            Difference   

Median Sales Price   $161,000        $218,000     + 35%

Average Sales Price  $210,537       $271,716      + 29%

Price per SqFt:           $107.15         $126.26       + 17.8%


The numbers above are flawed because it is more common for owners at lower price points to attempt a FBSO while it is less common for FSBOs to be attempted at higher price points. This is a natural bias we must account for.  There is a fair solution to remove the bias, by using the Full Cash Value Ratio (FCVR), where we compare the sold price versus the county tax assessor’s value. A property that was valued at $100,000 by the assessor and sold for $100,000 would have a FCVR of 100%. In our calculation, the FCVR acts like an index, giving a more accurate picture when we make our comparison. Looking at the same August sales for single-family homes and removing new construction and distressed properties we feel confident in saying using an ARMLS Subscriber increases value for the seller by 9.6%.


SOLD BY   AVG SOLD PRICE     AVG FCV  AVG FCV Ratio

FSBO         210,573                     174,978     1.203426

REALTOR  271,716                     206,150     1.318051

 

The Pending Price Index

The PPI projected the median sales price in September to be $190,000 with the actual median price coming in at $194,000. Home prices can best be described as stable and flat. Our sales volume projection for September came within 1.6%. We projected 6,150 sales and the actual sales for the month landed at 6,252. Our projections have been trending slightly more pessimistic than the actual reported results.


Looking ahead, the ARMLS Pending Price Index is projecting declines in both the median sales price as well as the average sales price. Anticipated declines in October can be attributed to modest downward pricing pressure as well as seasonable patterns. We’re projecting a median sales price of $191,000 with sales volume of 5,850.


Rent Check - Rent Check is an ARMLS's  publication tracking single family home rentals.  Click on the link for the statistics.

Rent Stats


Commercial Real Estate Trends


Current Phoenix market trends data indicates an increase of +5.2% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of +14.0% compared to last year's prices. County-wide, asking prices for Multifamily properties are 5.5% higher at $53,781 per unit compared to the current median price of $53,716 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)  US Regulators Ready for Relaxed Mortgage Rules

Alan Zibel and Andres Ackerman, Wall Street Journal, October 15, 2014


Later this week (October 24, 2014), after several years of back-and-forth debate, U.S. regulators are finally set to finalize a more relaxed set of mortgage standards. This new set of rules will be a win for the real estate industry, with the projected agreement much more moderate than the mortgage security standards proposed back in 2011. The federal reserve is scheduled to hold an open meeting on Wednesday, October 22, with five other regulators signing off before the end of the month.


“NAR has strongly advocated for a Qualified Residential Mortgage rule that encourages sound and financially prudent mortgage financing by lenders while also ensuring responsible homebuyers have access to safe and affordable credit,” said NAR President Steve Brown, co-owner of Irongate Inc. REALTORS® in Dayton, Ohio. “We hope that the final rule will align with the broadly defined Qualified Mortgage / Ability-to-Repay rules that were implemented in January. Synchronization will provide lenders with much needed clarity and consistency as they apply the new standards to loan applications.


These new set of rules will hopefully avoid a repeat of the real estate melt-down in 2008 by slashing the pre-existing requirement—extending from the 2010 Dodd-Frank law—that borrowers make a 20 percent down payment to get a qualified residential mortgage. New, lighter rules will instead require that loans comply with a separate set of mortgage standards written by the U.S. Consumer Financial Protection Bureau. These standards will evaluate allowed debt a borrower can take on in relation to their monthly income.


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3)  Downtown Mesa may get 50-unit artist colony 

Parker Leavitt, The Republic, October 2014


Downtown Mesa's light-rail extension, set to open next fall, is driving new development in the area as plans have come forward for a 50-unit artist colony within walking distance of a future station at Mesa Drive.  Non-profit developer Artspace, which has opened 35 artist housing projects in 13 states, plans to open its first Arizona colony near 2nd Avenue and Hibbert within two years.


Artspace communities provide affordable housing for working artists who pass income and background checks. The apartments typically feature high ceilings, large windows, wide doorways and about 100 to 150 square feet of studio space, while the complex includes places for small businesses and community gatherings. Proximity to the light rail was a major factor in selecting the vacant lot at 155 S. Hibbert, said Heidi Kurtze, vice president of property development for Artspace. Also just two blocks away is the Mesa Arts Center, which the group hopes will provide opportunities for collaboration, she said.


While Mesa's Planning and Zoning Board on Oct. 15 cast its support for a zoning change to allow the mixed-use concept, the project is also contingent upon a successful application for a low-income housing tax credit program funded by the federal government and administered by the state, Kurtze said.


Artspace plans to apply for the tax credit early next year and could begin construction by fall 2015. The artist colony would likely open a year later.  Anyone who meets income levels can apply to live in the community, but Artspace gives preference to practicing artists who can demonstrate a body of work and passion for their craft, Kurtze said. They are interviewed by an Artspace panel composed of local artists.  Artspace has been pursuing a project in Mesa for about three years following a feasibility study in 2011. The organization asked about 600 local artists, primarily within the East Valley, if they would be interested in an affordable-housing project, and about 250 responded favorably, Kurtze said.


While designs for the project are still being worked out, Kurtze said the community would have a similar feel to one that opened in Elgin, Ill. in 2012. That project cost $15.2 million and included 55 units and about 6,000 square feet of retail space.  "Since it opened it has helped transform that downtown," Kurtze said. "It was a main street with a bunch of boarded up shops."  A successful launch of the Mesa project could lead Minneapolis-based Artspace to open additional communities in Arizona, Kurtze said. The organization has talked about building in Tucson, she said.


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4) Real Estate Briefs


a) Chandler breaks ground on new downtown apartment complex  

Logan Newman, East Valley Tribune, October 2014


Officials from the city of Chandler expect an incoming apartment complex will create a more urbanized feel to the downtown area.

The project, Alta Steelyard Lofts, is a 301-unit luxury apartment complex located along Arizona Avenue and Frye Road that is expected to become the first apartment complex in the downtown region with an elevator. The city and real estate developer Wood Partners broke ground on the location on Oct. 14.


The company and city are hoping that the apartments boost the economy while structuring a more urbanized downtown community.

“We have 301 units so we expect about 450 people to live here when it’s full,” said Clay Richardson, the development associate for real estate company Wood Partners. “That’s a significant presence in Downtown Chandler.”


Chandler Mayor Jay Tibshraeny said the apartment complex complements the city’s attempts to increase the downtown’s pedestrian presence and create a “cool urban vibe” in the area.  “This project creates a walkable experience that we hope will lure new city dwellers to our downtown businesses,” he said.  Wood Partners Arizona Director Todd Taylor said he envisions the complex will appeal to members of Generation Y, which he said wants the walkable experience Tibshraeny mentioned.  “Not all these people want to buy single-family homes in a suburban residence,” he said. “They’re looking for a more urban, walkable, amenitized location.”


b) State ready to buy homes for Loop 202 extension

AZ Business Magazine, October  2014


Plans to extend the Loop 202 freeway around the Phoenix area’s southern edge are nearing final approval, and owners of approximately 200 homes are being told they’ll soon have to find new places to live.  The proposed South Mountain Freeway would extend from Interstate 10 near the Ahwatukee section of southeast Phoenix with I-10 on the metro area’s west side.

The project has been on the drawing boards for decades, but the state Department of Transportation recently sent letters to people whose property lies in the path of the freeway.  ADOT spokesman Tom Tait says appraisal of homes is about to start but that ADOT won’t begin purchasing properties until the Federal Highway Administration approves the project.  ADOT expects that approval early next year. Construction could begin early as 2016. 


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c) DriveTime Corporate Headquarters headed to Tempe

Eric Jay Toll, Phoenix Business Journal, October  2014


The new corporate headquarters for DriveTime Automotive Group will be the third of five Class A office buildings in Liberty Center at Rio Salado.  The deal for a build-to-suit 96,000-square-foot office means construction will start before the end of the year. When completed next November, DriveTime plans to hire 300 new employees, bringing its headquarters Arizona workforce to more than 550. Christopher Piper, marketing communications manager at DriveTime says the company has around 1,550 employees in Arizona.  Two other buildings were already developed in the business center with Salt River frontage west of the new Tempe Town Lake dam. The 1.2 million square foot office park has one completed office building, a second under construction and a planned industrial/flex building at Priest Drive and Rio Salado Parkway, Tempe.


The new building will be designed and built to U.S. Green Building Council's Leadership in Energy and Environmental Design program Silver certification standards. Its features include 16-foot open ceilings, an atrium lobby, LED lighting and six parking spaces per 1,000 square feet of leasable area.  


In meeting LEED standards, 20 percent of the building's materials will come from recycled content – including concrete, steel, aluminum and drywall. A November 2015 completion date is proposed.  DriveTime has a Mesa Operations Center with 900 employees, six dealerships across the state and a Phoenix-based inspection center.  The architect for the building is Butler Design Group, the interior architect is Phoenix Design One and the general contractor is Wespac Construction. Fred Darche of Lee & Associates and Tom Adelson of CBRE represented DriveTime and Brad Anderson and Mike Strittmatter of CBRE represented Liberty in the transaction.


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d) Upscale condos to open in north Scottsdale’s Silverleaf

Catherine Reagor, The Republic, October  2014


A $350 million luxury condominium project, complete with a robotic valet and private elevators, is under way in what has become Arizona's poshest neighborhood, Silverleaf in north Scottsdale.  Sales will start in November for 213 units priced at $1 million and higher in the Sterling at Silverleaf development. Sterling at Silverleaf is located in DC Ranch at Pima Road and Thompson Peak Parkway. Construction is scheduled to start early next year, so the first residents can move in during 2016.


Scottsdale-based Cypress Development Group is developing a five-building condo project next to the 28 villas, designed by architect Bing Hu, it began building in 2011. The condos can range in size from 1,600 to 3,400 square feet. Penthouses on the top floor of the four-story buildings will average 2,500 square feet.  Cypress CEO Nathan Day and President Tanner Luster say the condos will be LEED-certified by the U.S. Green Building Council.


Cypress purchased the land for the villas and condos in 2008. Before designing the condo project, Day and Luster traveled to Los Angeles, Miami and other luxury condo hotspots to check out the latest high-end amenities and designs.

The Sterling condos will include Calcutta marble kitchen counter tops, Sub-Zero and Wolf appliances, natural stone and wood floors, 11-foot ceilings, walk-in closets with custom cabinets, deep-soak tubs and a built-in iPad system that controls home automation and security systems.  


Condo buyers also will have access to a 7,000 square-foot resident lounge with a demonstration kitchen, private dining room, library, fireplace, flat- screen TVs and a conference room.  The valet will use battery-powered robots to move cars onto steel trays to park them. Homeowners can call up their car in minutes. Day said the project will be marketed to empty-nesters currently living in Paradise Valley as well as to people 50 and older worldwide.


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5)  Tales from the Real Estate Trenches

Pat Hune, Broker at 1st Southwest Realty


There is an old saying the top three most important things about real estate is location, location, location.  I recently listed a home in the Biltmore area.  It is a great example of how location makes a huge difference.  The house was built in 1950, a spacious 1100SF with three bedrooms, two baths, 1 car carport plus a pool and spa.  The interior was completely original right down to the crank out casement windows and pink tile in the bathrooms.  Overall it was clean and in good condition with the exception of the roof which had "reached the end of it’s useful life”.  This is how home inspectors describe roofs that probably should have been replaced years ago.  Based on comparable sales (which was difficult as most homes had additions and were 300 to 400SF larger or more) I estimated the value at $225,000 to $230,000 with the caveat the buyer would probably ask for a repair allowance to replace the roof.  The seller listed it a bit higher as she felt the location would support a higher price than my estimated value.  The offers started coming in immediately.  Unfortunately all offers were significantly less than asking and much lower than my estimated value.  Part of the problem was buyers and realtors were using the price per square foot of much large homes to calculate the price of this significantly smaller home. They did not seem to understand when the square footage increases the price per square foot decreases.  Most of the recent sales did not have pools but the buyers and their realtors did not add any value due to the age of the pool.  Luckily a home in the neighborhood with a pool and only a few square feet larger closed at $230,000.  This was a great comparable and great news for the seller!


Shortly after the great comparable sale an acceptable offer was received.  As expected the buyer asked for a roof replacement allowance in addition to some other repairs.  After negotiating the repairs the final price was $224,000.  During the escrow period I continued to get calls from realtors and buyers asking if I thought the buyer was solid.  I received over 30 offers on this home!  Lesson learned is location is key when buying or selling real estate.