July 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.


Pat Hune



1st Southwest Realty


Search the real MLS from my website!

Cell 480-703-1976

Fax 480-304-9099

Tempe, AZ

Equal Housing Opportunity


Market Overview -  Basically I could just cut and past last month’s newsletter as not much has changed.  The industry analysts refer to the current Phoenix market as boring or humdrum.  Having lived through several real estate booms and busts I will take boring any day over the frenzy of housing bust.  The numbers were not pretty in March 2010 when 46,000+ houses were on the market, most were distressed with 17,519 short sales and 8,409  bank owned.  Monthly sales were around 7,000 per month barely making a dent in the inventory as about 3,300 houses were foreclosed on every month.  Buyers would not mind seeing the median price of $127,000 come back. Sellers are happy their homes are worth more as the median price is now at $195,000.  

Home sales volume fell for the first half of 2014 by 16%.  There were 7,219 sales in June 2014 as compared to 8,228 in June 2013.  The median sales price increased in June by 5.4% to $195,000 as compared to $185,000 in January.  There are 24,462 homes available for sale indicating 3.84 months supply of inventory.  Interest rates increased from 3.41% in January 2013 to 4.43% in January 2014 then dropped to 4.12% as of July 3, 2014.  There are fewer distressed sales along with fewer investor purchases.  New construction sales continue to be slow with 12.6% less sales than a year ago - 4,712 versus 4,117.  Homes in desirable neighborhoods priced right still sell within 30 days at or close to asking price.  Homes priced too high will sit on the market until the prices are reduced enough to attract a buyer.


1)  STAT Newsletter, PPI and Rent Check Link 

2) Phoenix improving on Forbes Best Places for Business list

3) Arizona Retail Spending Up Over 7 Percent in 2014

4)  Real Estate Briefs

     a) Tempe Denies 358-Unit Southbank Town Lake Apartment Development Plan 

     b) Huge Phoenix Multifamily Acquisition One day after $165M Portfolio Sale 

     c) Isagenix Coming to Rivulon Development 

5)  Tales from the Real Estate Trenches


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


STAT Newsletter Highlights

Commentary by Tom Ruff, Information Market

Boring, flat, tedious, tame, humdrum, and meh are just a few of the terms local writers have used to describe the first six months of our housing market. If our current housing market were a color, it would most likely be beige. Home sales volume for the first half of 2014 was 16.4% lower than the same period last year. There were 47,012 closed sales from January through June 2013. In the first six months of this year, only 39,306 closed transactions were reported. The first six months of 2014 were characterized by low demand and a supply that typically left in its wake a market which slightly favored the buyer. The median sales price in June was $195,000, 5.4% higher than where we began the year at $185,000. As we have cautioned a number of times this year - we are not viewing this increase as an indication that home values are appreciating, but rather as an indication of the homes that are selling. It is this pundit’s opinion that home prices for the first six months are best described as stable and flat. 

Interest rates: Between January 2013 and January 2014 we saw the average 30-year fixed interest rate rise from 3.41% to 4.43%, an increase of over 1%. The largest portion of this increase occurred in May and June, just over one year ago. This year we’ve seen interest rates move subtly and consistently downwards. As stated, we began January of this year with an average 30-year fixed rate of 4.43%.  The last reported rate from Freddie Mac on July 3rd of this year was 4.12%.This is the first time this year where interest rates are lower than last year for the same period (on July 1, 2013 rates were 4.37%).


Supply: The imbalance between supply and demand is closing, not because demand is improving, but because supply is declining. In June of this year there were 8,677 new home listings.  This is the lowest number of new listings for the month of June in the 14 years ARMLS has compiled this data.  There were 6.2% fewer new listings this June as opposed to last year for the same period. It will be interesting to see how this metric progresses over the coming months. 


Foreclosures: There were 10,887 distressed homes in Maricopa County in June of  2013. The amount of “shadow inventory” over the past year has declined 40.5%. We currently have 3,995 residential properties in foreclosure and 2,481 residential properties that are bank owned. Simply stated, 6,476 residential properties in Maricopa County are currently defined as distressed. The total number of distressed properties in Maricopa County declined 4.7% month-over-month, indicative of the rate of decline each month this year. I see this trend continuing through the remainder of 2014. As your point of reference, the number of distressed properties in Maricopa County peaked in February of 2010 at 62,123

Market Composition: While demand has been lacking this year, the composition of the sales taking place paints a picture of marked improvement. We’re see.ing fewer distressed sales and fewer investor purchases translating into a higher percentage of homes being purchased by traditional buyers and a higher percent.age of the homes they are purchasing as normal/non distressed buys. This change in the composition of homes purchased is best exemplified in two metrics, year-over-year short sales and year-over-year investor activity. In June of 2013 there were 1,049 short sales, this year the number of short sales fell 73.9% to 274. As for investor activity, the table below details the consistent decline over the past year in the percentage of homes we define as investor purchases. As you can see, there were 1,033 fewer investor purchases this June. 

New Construction: Of all the facets of our real estate market in the first half of 2014, the number of new builds being sold without a doubt has been the most disappointing. In a year where most experts expected to see new home construction improve, the opposite has occurred. So far this year there have been 4,117 new builds sold com.pared to 4,712 same period last year (12.6% lower). What makes this number most disappointing is that 2013 was considered a very weak year for new construction. However, under the category of silver lining, the number of new homes sold in June 2014 (819) surpassed the total number of new homes sold in June 2013(754) at an 8.6% increase. This is the first .me we’ve seen a year-over-year improvement this year. Could this be an emerging trend? We’ll keep you posted. 

Looking Ahead: The last four months has seen the Pending Price Index (PPI) project the median sales price about 1% below the final reported number, this trend continued in June where we projected the median sales price to be $192,000 with the actual median price coming in at $195,000. Our sales volume projections came in as expected with the sales volume in June slightly lower than the sales volume in May. In July the Pending Price Index expects the median sales price to rise again projecting a median sales price of $197,000. We also expect sales volume to decline again in July with the expected volume to come in around 6,600. As a note of caution, when next month’s sales numbers are reported, expect a large decrease in year-over-year comparisons. This decrease is be.cause July of 2013 was a banner month where 8,216 sales took place. July 2013 sales exceeded our expectations as buyers rushed to close while interest rates were rapidly rising. 

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

Commercial Real Estate Trends

Current Phoenix market trends data indicates an increase of +6.9% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of +10.3% compared to last year's prices. County-wide, asking prices for Multifamily properties are 6.0% higher at $50,966 per unit compared to the current median price of $51,068 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.)


2) Phoenix improving on Forbes Best Places for Business list

Emily Overholt, Phoenix Business  Journal, July 2014

Phoenix is moving up in the world of Forbes rankings. The Phoenix metro area raked 56th on the magazine’s annual “Best Places for Business and Careers” list.  The list looks at the 200 largest metropolitan areas in the U.S. and factors in job growth, costs, income growth, educational attainment, projected economic growth, migration patters, and cultural and recreational opportunities. The most weight is placed on business costs and educational attainment.  Phoenix scored middle of the pack, ranking No. 116 in cost of business, 156 in job growth, and 99 in education.

In the overall rankings, Phoenix is improving. Phoenix placed 88th in 2011 and No. 117 in 2010.  Tucson also made the list this year at No. 101.  Arizona didn’t fare much better on the list of “the best small places for business and careers." Prescott topped Arizona cities at No. 68, followed by Flagstaff at No. 81, Yuma at No. 155, and Lake Havasu City at No. 156. Raleigh, North Carolina topped the list followed by Des Moines, Iowa, Provo, Utah, and Denver.


3) Arizona Retail Spending Up Over 7 Percent in 2014

Howard Fischer, Capital Media Services, July 2014

The jobs may not be returning very fast, but a new report Monday shows the Arizonans who are employed are loosening up on their wallets.  New figures from the state Department of Revenue showed taxable retail sales in May hit nearly $4.58 billion. That's a 7.6-percent increase from the same time a year earlier.  That figure is still short of the $4.81 billion figure for the same time seven years ago, but it does come close to how much consumers were spending in May 2006.  “I'd give it a ‘B,’” is the way economist Dennis Hoffman of the W.P. Carey School of Business at Arizona State University rated the state's performance.  He said there are some particularly bright signs in the data.  Sales at motor vehicle dealers hit $645 million in May, a 5.8 percent year-over-year gain. But Hoffman also pointed out that these sales actually topped $700 million in April.  “That's something we haven't done since 2007,” he said.  “You've got folks with the wherewithal to buy consumer durables like cars, like furniture and fixtures,” Hoffman said, saying that category is up about 8 percent when averaging out the most recent three months this year compared with last year.

There was an apparent spike in purchase of building materials, with a 46 percent jump year over year. But Hoffman said that is likely an anomaly, with the averaged-out annual increase running about 11 percent, still a pretty healthy clip.  “It's overall continued signs that the Arizona consumer is doing their part — especially in light of the fact that employment growth has been so slow,” he said.  Arizona shed 800 private sector jobs between April and May, and it added just 42,700 private jobs from the same time a year earlier.  “Employment growth has just been so slow, surprisingly so,” Hoffman said.  He said Arizona used to be among the fastest-growing states in job growth among neighboring states. Now, he said, it is “among the laggards, which is a major concern.”  

Closely linked to job growth is home construction which Hoffman said will take years to recover at the current pace.  That still leave the question: If job growth is slow, why all the new spending?  Hoffman said those who are employed apparently find it worthwhile.  On one hand, he said, there are interest rates running at pretty much historically low rates. He said that may encourage those who can get loans to borrow the money to make investments in things that will pay off later.

He knows a bit about that: Hoffman said he just got a home equity line of credit at 3.25 percent to borrow money to install new energy-efficient windows, figuring he'll make up the cost in lower utility bills.  Hoffman said the same situation is likely driving new car sales, what with the newer models having much greater fuel efficiency than much of what Arizonans are now driving.  “You can pick up a new car and save quite a bit off the monthly bill in gas savings now,” he said. “It's really amazing how much that fuel efficiency has come up.”


4) Real Estate Briefs

a) Tempe Denies 358-Unit Southbank Town Lake Apartment Development Plan

Matthew Roy, Arizona Builder’s Exchange, July 2014

It’s a development application twist. The City of Tempe denied an application from Pier at Town Lake LLC because its uses and development density were too little and the design inadequate for lakefront property.  Normally, local governments require applicants to cut back on building density or height.  Owner Lincoln Property Company sought Council approval of an amendment to the previously-approved Planned Area Development (PAD) and appealed a Development Review Commission denial of the project design. Planning staff recommended approval of the PAD action and upholding the DRC rejection.

Tempe has tightly managed its lakefront asset. Properties fronting the shoreline have followed tight design guidelines, maximized allowable height and density and created a contemporary reflected skyline reflected in the normally mirror-like lake surface.

City Says Southbank Misses the Mark

Planning staff made an unenthusiastic recommendation for the city council to approve the PAD request for a smaller building and lighter density. Staff essentially took the position that the lakefront development regulations do not have a minimum building height or density, nor a firm requirement for mixed use.  The report suggests that denial can’t be recommended, so the project should be approved.  On the design side, in an unusually strongly worded staff report, Tempe planning staff firmly stated reasons the DRC action should be upheld.  Trudging through the two-year history of the project, staff does not mince words in setting out its reasons.  The recommendation led to the City Council denying both the PAD ordinance amendment and the design of the 358 units. Staff told the council it showed the owner appropriate designs to follow, but that revisions to the building design fell short of expectations.

Looking for More

The council agreed with staff and its analysis of lakefront development. The zoning permits heights of 292 feet and 252 feet on the two parcels LPC proposes to develop. Staff criticized the uniformity of building height, the lack of retail use on lower floors and the amount of development potential being left on the table.  The 6.2 acres allows approximately 600 units, plus commercial and office development.  The city says it’s looking for higher densities and “building design that better align(s) the project with the vision for the South Bank area.”  The city council was unanimous in its denial, but conciliatory to LPC’s representative, Nick Woods, attorney with Snell & Wilmer, telling him effectively, it’s a quality project, just not for the lakefront.

b) Huge Phoenix Multifamily Acquisition One day after $165M Portfolio Sale 

Paul Dionne, Vizzda, July 2014

Before the ink was dry on PB Bell’s acquisition of seven multifamily assets from the Bethany Kingdom I portfolio, an additional 775 units in two assets were sold for a combined $75.5m and a third, 856-unit asset was noticed for trustee sale on a $59.4m outstanding debt. The assets in question are the 360-unit Verrano Townhomes which sold for $49m, the 415-unit Colonnade Apartments which sold for $25.5m and the Saratoga Ridge Apartments, which were noticed for trustee sale by an affiliate of AIG Life Insurance Company. The three deals today bring the total amount of economic activity in the 100+ unit multifamily space to $464.8m since the beginning of last week. Verano Townhomes is located north of the northeast corner of 44th Street and Ray Road in Phoenix. Its 360 units comprise thirty residential buildings totaling 435,840 ft2 on a 22.23 acre site. It was built in 1996 and substantially renovated in 2006. It was previously acquired by Cornerstone Real Estate Advisors in July of 2011 for $44.55m or $123,750 per unit with $25m in new debt with People’s United Bank, maturing September 1st, 2016. Yesterday, ColRich Multifamily acquired Verrano Townhomes from Cornerstone for $49m or $136,111 per unit with $10.19m down and $39.2m in new agency debt underwritten by CBRE Multifamily Capital and assigned to Fannie Mae at origination.

The Colonnade Leasing Office - The Colonnade is located east of the northeast corner of State Route 51 and Camelback Road in Phoenix. As mentioned above, it has 415 units in twenty four 3-story buildings built in 1970 and 1974 on a 9.57 acre site. There are 196 studios, 236 one-bedroom units and fifty two-bedroom units, all of which are master metered. Steve Wasserman of Gelt, Inc. previously acquired the property in two sales in 2011: the 219-unit Fern Tree Apartments for $9.3m and the 197-unit Colonnade Gardens for $6.95m. Gelt sold its interest in the property yesterday to a tenant-in-common group comprised of affiliates of Mica Creek-Sagamore Capital Partners who paid $3.1m in cash and financed the remainder of the purchase price with $22.4m new agency debt originated by Greystar and assigned to Fannie Mae at origination.

Saratoga Ridge Apartments is located west of the northwest corner of 16th Street and Bell Road in Phoenix. It is one of the largest apartment complexes in the valley, with 856 units in seventy four two-and-three story buildings totaling 732,406 ft2. The complex was built in 1984 on a 38.37 acre site and features four pools. Pacific Coast Capital Partners previously acquired this complex in September of 2004 for $42.65m or $49,825 per unit. After investing another $9.35m in rehabilitating the property, PCCP sold to Greystar in June of 2007 for $70.4m or $82,243 per unit, $14.214m of which was tendered as cash and $59.4m of which was secured under a deed of trust with Variable Annuity Life Insurance Company, an affiliate of AIG. Variable Annuity served notice to Greystar that it was in default of the $59.4m loan—stipulated to have an unpaid balance of $58,320,577—yesterday.

c) Isagenix Coming to Rivulon Development 

Kristian Seemeyer, Globe Street,  July 2014

PHOENIXColumbus-based Nationwide Realty Investors has signed a lease with Arizona based health and wellness leader Isagenix International, LLC to occupy a 150,000-square-foot, single-tenant building at its master-planned Rivulon development in Gilbert.  The Isagenix lease agreement launches the first phase in the 250-acre Rivulon development located at the corner of Gilbert Road and the AZ Loop 202. The Isagenix building is scheduled to be completed in late 2015 as part of the approximately three million-square-feet of class A office, 500,000-square-feet of retail and hospitality uses planned for the project.

“We are excited to kick off the first phase of development at Rivulon with the construction of the Isagenix headquarters and significant infrastructure improvements,” says Nationwide Realty Investors president and COO Brian J. Ellis. “The commitment by Isagenix to locate its worldwide headquarters at Rivulon allows us get construction underway and will begin to establish Rivulon as a best of class business district.”

The recently announced four-story, 125,000-square-foot speculative office building originally planned for the Isagenix site will shift slightly east, and be located adjacent to the new headquarters. Construction on the speculative office building will begin in the second half of 2014 with anticipated completion in fall 2015. NRI also recently announced a 45,000-square-feet LA Fitness for the project. Construction of the LA Fitness building will begin this month, with anticipated opening in March 2015.        


5)  Tales from the Real Estate Trenches

Pat Hune, Broker at 1st Southwest Realty

Over the last few months I was reminded how important it is to hire a competent home inspector.  All home inspectors in Arizona are required to be licensed.  As with all professions just because someone has a medical, law, contractors or real estate license does not mean they are competent in their field.  Typically the buyer (or more likely the buyer’s realtor) selects the home inspector.  The inspector should prepare a detailed report of any issues found and provide detailed pictures of areas of concern.  The report should be written so all parties understand exactly what the issues are and where the issue is located.  A copy of all inspection reports are required to be delivered to the seller regardless of whether or not the buyer asks for repairs.  It is important to have a well written inspection report with plenty of pictures so the seller can obtain an estimate. If the report is not well written it will be difficult for all parties to understand the issue, how critical the issue is and determine how much it will be to repair.

The first report I had an issue with was one with NO pictures.  The buyer was asking for ceiling drywall repair in the master bedroom.  The master bedroom was quite large and there was no directions to or pictures of the damaged area.  I had to go the house with my camera, flashlight and a tape measure to figure out where the damage was located and how big the area was to get an estimate.  It turned out to be some very light staining from a roof leak and was less than $200 to repair. 

The next home inspection report said “Repair Loose Trim”.  There was a close up picture but no indication of the location of this loose trim or how much of the trim was loose.  This was a 2400SF house and the trim could have been anywhere. When I called for the location the inspector said if he put everything in the report it would be too long.  Really.  All he needed to do was say southeast and southwest corner or whatever.  But a few more words were too much for him.

This same inspector decided to turn on the heat when it was 110 degrees outside. He left it on for about 20 minutes. When he tried to cool the house back down it took too long so he wrote up the HVAC as not functioning correctly. The buyers asked for this to be repaired and the sellers agreed.  The HVAC company could find no issues with the air conditioning. So this inspector wasted the seller’s money. And the buyers asked for a repair that was not needed.   Typically if it is a heat pump the inspectors do not turn them on if the outside temperature is higher than 85 degrees.  If it is a gas heater they turn them on for a few minutes to make sure the blower works and take a picture of the flame. The whole process typically takes less than 5 minutes.

The lesson learned here is for buyers to ask questions BEFORE the inspector goes to the house.  Find out how many pictures they are going to take. Make sure they have a back up camera just in case the one they typically use has issues. When the inspector is reviewing the report ask for a better explanation if there is something you do not understand.  Ask for them to send a sample of a report so you can see how they document the issues.  If you can’t understand it then look for a different inspector.  If a buyer wants a seller to make repairs then it is imperative the repair is documented so everyone can easily understand the repair.

My last comment on home inspections is regarding new homes.  I always recommend a home inspection whether the house is 20 years old or 20 days old.  Most of my buyers don’t want to spend the money because the house has a warranty.  I have two examples of where it ended up costing the buyers a lot more money than having the inspection.  The first example was a house were the builder did no install any insulation in the attic. When the buyer went to sell she realized why her electric bills were so much higher than her neighbors.  She had lived there for eight years and probably spent an extra $500 a year on utilities.  The $400-$500 inspection fee looked pretty cheap by comparison.   The second house was one with a ceramic tile roof. This buyer actually listened and hired a home inspection.  There were over 27 cracked roof tiles.  Without a home inspection this issue would not have been discovered until the house was sold and the builder warranty would have expired.