April 2017 - Phoenix Real Estate Update



Articles

1)  The Greater Phoenix Real Estate Market is on Fire

2)  STAT Newsletter

3)  Housing Prices By City - 2016 to 2017

4)  Arizona Property Taxes Are Due 

5)  Tales From the Trenches -  Do you have the right insurance on your rentals?


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1)  The Greater Phoenix Real Estate Market is on Fire

Pat Hune, Broker, 1st Southwest Realty


The Greater Phoenix real estate market is on fire in general and especially in Tempe, Chandler, Gilbert and Mesa.   Contract ratios  created by Michael Orr of the Cromford Report as a means to communicate the relationship between supply and demand in a given market area. Cromford translates the contract ratio as: 0-20 is Cool, 21-40 is Warm, 41-74 is Warmer, 75-99 is Hot and 100+ is a FRENZY!  An example would be 85033 where currently there are 108 homes under contract and 73 active listings leaving a contract ratio of 147.  What driving factors are creating the real estate frenzy? 

 

1)  Many companies are moving to the greater Phoenix area - especially the Southeast Valley. Several major employers, like State Farm, Rogers Corp and others  are moving their employees to the Southeast Valley. Intel is expanding Fab 42 which will add 3,000 direct and 7,000 support jobs.  The draw is cheaper housing when compared to Silicon Valley in California or Portland, Oregon.  

 

2)  Several of the Southeast Valley cities are landlocked. Tempe has been built out for years.  Chandler is close to being built out. Any new developments require tearing down existing properties.  The Cities of Tempe and Chandler has been assembling some properties for future development like the ARC Thrift Store.   Some developers are assembling older properties in Chandler and elsewhere.  Assemblage often takes years because many residents or businesses do not want or cannot afford to move. 

 

3) Phoenix population continues to grow - and quickly. During the bust the greater Phoenix area kept growing, albeit a lot slower than it had been.  In March 2016 Phoenix was one of the top 10 cities for population growth. Since 2010 (the bottom of the real estate market) Phoenix has had an 8.8% increase.  Maricopa County ranked second in 2014-2015 population growth and has added 8.9% since 2010. Growth Nation predicts Phoenix will go from 1.6 million people and the fifth largest city to the fourth largest city by 2020.  The greater Phoenix area has over 4 million people including the adjacent cities like Scottsdale, Mesa, Chandler, Gilbert, Glendale, Goodyear, and Surprise.   All of these people have to live somewhere.


Growth Nation - Why Phoenix?


Phoenix Population Growth


4) The single family housing inventory is at an all time low.  Why? Because none of the builders were building during the crash. They were too busy filing bankruptcy. In the first quarter of 2005 alone builders pulled 15,381 permits according to RL Brown.  Builders set a record in 2005 at 63,570 permits for the year.  Compare this to the paltry 19,942 construction permits pulled in 2016.  Though the good news is this is up 12% from 2015.


New Home Permits


Metro Study Phoenix Housing Report


5)  Investors were shopping like mad at the bottom of the market.  One property manager had a client who purchased 45 single family homes in Maricopa.  Other investors, include REIT’s (real estate investment trusts) also bought literally hundreds of properties both condos and single family homes.  Some condo conversions were reapartmentized meaning the apartment complexes were converted from individual owners back to one owner.  Does the housing shortage mean condo conversions will be back in vogue?  I think yes.


As Tom Ruff of The Information Market said in this month’s STAT report "With insufficient supply and strong demand from entry level buyers, I see no relief in sight. We are just now seeing the beginning ground swell of millennial buyers. Boomerang buyers who short sold or let their houses go to foreclosure are now ready to buy again. Couple a large population base of looming buyers with a median new build price of $320,000 and I see little to no immediate relief of added inventory for homes priced below $300,000. Home prices in these areas will continue to rise as will our overall median sales price. Properties listed in these areas and price points find the selling agents confident and the buying agents frantic."


The hot market is great for sellers as long as they are moving out of Phoenix or into a different living situation like a retirement community.  It is not great for buyers as the low inventory often results in multiple offers, offers over list price and sellers who do not want to make repairs.  And of course low supply and high demand makes the prices go up.


Title and mortgage companies report appraisals are not meeting the contract price. When this happens the choices are 1) seller decreases price to meet the appraisal, 2) buyer comes up with cash to make up the difference if they have the money, 3) buyer and seller negotiate some acceptable offer which may be the sellers come down on the price and the buyers come up with more downpayment, or 4) the buyer cancels.  If the sellers received multiple offers they may not be willing to reduce the price.  Sellers who see their houses languishing on the market for more than 30 days should realize they are priced too high for the condition or location.  


Home Buying Institute Phoenix Housing Forecast for 2017



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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


Sales continue to be hot, even taking into consideration the fact that we are in the high season. MLS sales volume for the first three months of 2017 was 11.54% higher than 2016. There were 21,483 sales reported in Q1 2017 compared to 19,261 for the first quarter of 2016.


Looking at public record resale sales volume in Maricopa County for the first quarter of 2017, we see that it was the third highest volume in the 19 years we’ve reported data. Only the peak bubble years of 2005 and 2006 had higher resale sales volume.


With insufficient supply and strong demand from entry level buyers, I see no relief in sight. We are just now seeing the beginning ground swell of millennial buyers. Couple a large population base of looming buyers with a median new build price of $320,000 and I see little to no immediate relief of added inventory for homes priced below $300,000. Home prices in these areas will continue to rise as will our overall median sales price. Properties listed in these areas and price points find the selling agents confident and the buying agents frantic.


This month’s Stat Report shows the “hot spots” with the most sales in the valley. Click on the link below to see the maps.


Click here for the latest Stat Report


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3)  Housing Prices By City - Q1 2016 to Q1 2017

Mike Orr, Cromford Report, May 2017


Click below to see the change in dollar revenue by price range for closed sales during the first quarter of 2017 versus 2016. Not the explosive growth in the ranges from $100K up to $3 million, but the declines below and above this range.  Every city is up except Tonopah, Tolleson, Wittman, Wickenburg and Carefree.


Housing Prices by City


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4)  Arizona Property Taxes Are Due  

Maricopa County, March 2017


Second half property taxes were due on March 1.   The second half property taxes are delinquent if not paid by May 1.  If your mortgage company pays the taxes on your behalf then you don’t have to send a separate payment. If you own your property free and clear with no mortgage or if your mortgage company does not pay the taxes on your behalf then you need to pay the taxes by May 1 to avoid late fees. To see if your property taxes have been paid you need your parcel number.  You can search by address on the County Assessor’s Office website for the county were the property is located.  The link to Maricopa County Assessor’s office is below.


Maricopa County Assessor


If you cannot afford to pay your property taxes there are some programs available to assist you.  In Maricopa County (see link below) there is a Seniors Valuation Program that freezes the full cash value of the primary residence based on income and age.  There is a Widows/Widowers/Disabled Exemption that exempts a personal residence from taxation but has some limitations.  Elderly Assistance Fund (EAF) was established to reduce the property tax of qualified elderly taxpayers.  Check the website of the county where your property is located to see if they have assistance programs.


Property Tax Assistance Programs


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5)  Tales From the Trenches -  Do you have the right insurance on your rentals?

Pat Hune, Broker, 1st Southwest Realty


If your rental property is damaged will your homeowners insurance pay?  The worst thing that can happen to a rental property owner is when their rental sustains major damage and the insurance company refuses to pay.  One example is when the property is vacant.  One of our owners had a vacant house that was rent ready but the new tenants had not moved in yet.  The house was vandalized. The thieves stole all the appliances, hot water heater, HVAC unit and all the electric wires were pulled out of the walls.  Because the house was vacant the insurance would not pay. Ouch!  


Another example is when an owner moves out of their personal residence and does not tell their insurance company the house is now a rental.  If the tenants cause the damages the insurance company may not pay.  Of course tenants should get rental insurance for their personal belongings but often they do not even though it is inexpensive.  


Landlord insurance has other benefits like covering lost rent if there is a flood or fire or the house is damaged by the tenants.  Moral of the story is call your insurance agent and review your coverages to make sure you have the right insurance.  


Landlord Insurance