June 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.

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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 - A client sent me an article from CNN Money about the 5 worst state economies.  Arizona was in 4th place down 4% from 2007.  The article noted the drains were construction, real estate and wholesale trade while the gains were insurance and computer manufacturing.  It referred to North Dakota’s economy which has doubled since 2002.   I don’t think North Dakota is a fair comparison to almost any state as it is the second largest producer of oil (Texas is the largest).  The oil output from North Dakota is five times what it was in 2006. 

Turning the focus to Arizona let’s look at some statistics:

  1. Home sales are down 21% from a year ago.  Instead of 9,400 sales per month there were 7,400 sales per month.
  2. Home sales prices are up 46% from a year ago.  One would expect the sales volume to go down as prices increase.  
  3. Interest rates took a small jump up in the latter part of 2013 and are now down around the low to mid 4% range again. The increase would have made some buyers hesitate but the drop should get them going again.
  4. Arizona’s unemployment rate has been hanging around 7% since October 2013.  This is down from a high of 10.7% in January 2010.  Arizona fell twice as far than most other states so has twice as much ground to make up.  Arizona has landed some big employers like a supplier for Apple (700 employees), State Farm Headquarters (8,000 employees) and a Tesla factory (6,500 employees). 

My anecdotal observations from visits to shopping centers and restaurants show a significant increase in the number of customers.  Many restaurants stopped serving lunches because the business customers stopped coming.  These restaurants are serving lunch again and customers are coming in.  Retail space is filling up again after being vacant for years. 

Do I think Arizona’s economy has completely recovered?  No I don’t. But I think it is far better than it was three years ago and not as much doom and gloom as CNN Money would like one to think.


1)  STAT Newsletter, PPI and Rent Check Link 

2) Phoenix still sixth-largest city in US - Local Leaders say population undercounted

3)  Chandler Approves Demolition of Compadre Stadium

4)  Real Estate Briefs

a) Council to vote on Tempe Town Lake Apartment Development

b) HSL Properties Snatches Up Central Ave Apartments in $53M Deal

c) Phoenix’s Rental Demand on the Rise

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.


STAT Newsletter Highlights

Commentary by Tom Ruff, Information Market

I can’t imagine a better place in the country to be a housing analyst than the Phoenix metropolitan area. Why? Our market is constantly changing and constantly evolving. We’ve experienced exhilarating highs and staggering lows. When national housing reports are published it is not uncommon to see ourselves at either the top or bottom of the list as the best or the worst. Paraphrasing the words of Mark Twain describing New England weather — if you don’t like our present market, just wait a few minutes.

Our market can and does change quickly, however this month’s STAT report begins to feel like a broken record with the continued portrayal of a market with typical supply, low demand and stable prices. Supply and demand continue to be unbalanced leaving us an overall market slightly favoring the buyer. The sales volume in May from the MLS took a slight step back from April coming in 2.8% lower than the previous month. Year-over-year sales volume for May was down 21.1% reversing the improvement seen in April when sales were down only 12.5% over the previous year. There have been 32,087 total sales through the first five months of 2014 compared to 38,762 for the first five months of 2013, a decline of 17.2%. The 17.2% decline in sales activity is in line with what we saw for the first three months of 2014 with April and May numbers being the two anomalies. The reported sales volume for the first five months of this year has followed a remarkably similar pattern to the first five months of 2003, nearly a mirror image. Each month individually as well as the running year-to-date totals have never varied by more than a couple of percentage points.

In May of this year there were 7,445 closed listings compared to 7,468 in May of 2003. Sales for the first five months of 2003 totaled 31,730 compared to this year’s total of 32,087, a difference of 1%. In the last three months the Pending Price Index, also known as the PPI, projected the median sales price about 1% below the final reported number. For June, the ARMLS PPI predicts a median sales price of $192,000. We anticipate sales volume in June to be only slightly lower than May. We anticipate June sales volume to be 7,150.

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 +4.4% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of +9.4% compared to last year's prices. County-wide, asking prices for Multifamily properties are 5.0% higher at $49,899 per unit compared to the current median price of $49,672 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 still sixth-largest city in US - Local Leaders say population undercounted 

Eugene Scott, The Republic, June 2014

The latest U.S. census numbers show Phoenix remains the country's sixth-largest city, despite speculation that it might overcome Philadelphia for that fifth-most populous spot.  Although numbers don't lie, some local leaders say the census figures don't provide the full picture, either. They believe Phoenix's population is undercounted, largely because of the city's vast Hispanic population.  There is far more at stake than bragging rights. They say an undercount would cause Phoenix to miss out on tens of millions of dollars.  "Even by a slight undercount by 1 or 2 percent of the minority population, we're talking $100 million over the course of a decade," said Seth Scott, policy director for Phoenix Mayor Greg Stanton. "That has enormous implications, and that's something we need to keep in mind as we move towards the 2020 census."  The most recent census numbers show Phoenix added nearly 25,000 residents last year, making the city's population an estimated 1,513,367.

Every 10 years, the U.S. Census Bureau does a major count of the population.The agency also conducts population estimates annually. Local, state and federal agencies use those numbers to draw congressional districts and determine funding for things like educational, health and social-service programs.  Censuses have been taken as early as the early 17th century for planning purposes and became more constant in 1790. The census was designed to provide an accurate count of the population to determine how best to serve residents, said Jen'nan G. Read, associate professor of sociology and global health at Duke University.  "If we aren't actually counting the population, then we are overserving the ones we do count and underserving the ones we don't," she said.  

Hispanic population - Even in the latest census count, Phoenix's Hispanic population is 41 percent, larger than most cities. Hispanics make up about 17 percent of the U.S. population.  But because Hispanics are more likely to be undercounted, policy makers and academics believe the city's population is much higher.  Experts say the leading reason some Hispanics refuse to participate in census counts is fear of deportation.  The Census Bureau estimates that the national Hispanic population was undercounted by about 1.5 percent in 2010.  If that same percentage were undercounted in Phoenix, Scott said that would translate to more than 6,000 people, according to recent numbers.  "If Phoenix's Hispanic population is undercounted at the same rate of the national average, the rough estimate of what that could mean is a loss of $16.2 million in federal and state funds annually," he said.

Lawrence Robinson, a governing-board member of Phoenix's Roosevelt Elementary School District, said he believes anxiety following the 2010 passage of Senate Bill 1070 — Arizona's immigration law that makes it a state crime to be in the country illegally — and the community's fear of enforcement could make Hispanics in his district less likely to participate in the census than Hispanics in other parts of the country.  Scott said an undercount prevents Phoenix from serving Hispanics, including those here illegally, adequately.

Economic downturn - Phoenix aggressively reached out to the Hispanic community before the 2000 census to encourage them to participate, Scott said. The goal: Let residents know the government could serve them only if it knew where the people were.  But the economic downturn made a comparable effort in 2010 impossible, he said.  "It was less aggressive in 2010 because of the budget scenarios. I think the city spent about $100,000 for census awareness in 2010," Scott said. "Of course, you could spend more and reach more people, but all governments have been strained since the economic downturn."  City officials had said Phoenix spent about twice that amount in 2000.  Robinson cites reports showing Hispanics and African-Americans, who make up the overwhelming majority of his south Phoenix district, were disproportionately affected by the Great Recession's housing and job crises. This made people more mobile as foreclosures and unemployment dictated where they could live, thus making them difficult to count, he said.

"After the downturn in 2008, you had a lot of folks who were not in the places they should have been to be counted," Robinson said. "They were in flux, and we are now beginning to see the outcome of that. There are more people living in the (school) district than we thought."  So many more people that the Roosevelt district board had to amend its budget twice this past school year to better accommodate the area's homeless and transient populations, he said.

Solutions - Scott said the city will need to prioritize funding a very significant campaign in the next few years to make sure every Phoenix resident is counted in the 2020 census.  "Phoenicians are paying their taxes, and that's why it's so important that everyone is counted so that we can get those resources back," he said. "It's a fair-share equity issue."  And Robinson said census workers need to revamp how they go about counting the city's Black population.  

"I think the African-American community falls between the cracks as a smaller minority than others, so we don't do the same type of targeting," he said. "The messaging needs to be updated. We only target in traditional manners.”  Robinson said he believes Phoenix's Black population is larger than the census reports because of how counters target the community. In response to reports of undercounting communities of color, the 2010 census targeted churches, charities and businesses frequented by people of color to communicate the importance of participating. Robinson believes that approach is problematic.  

"To a large extent, that's a stereotypical reflection of our community folks," he said. "But there's a little bit of comfort for the census in using models that have been around since the 1960s."  Read also believes Phoenix's Hispanic community could be larger and more socioeconomically diverse than previously reported.

The number of Mexican-Americans in the U.S. legally could increase by nearly 10 percent if the census broadened its standard definition in the "Mexican" Hispanic origin question to include people who don't identify themselves as Hispanic or Latino, yet who were still born in Mexico or report Mexican ancestry, she said.  Because some people associate being "Mexican" with being an illegal immigrant who is a financial drain on the government, Read's report said that many affluent and well-educated people who were born in Mexico or who have Mexican ancestry prefer to identify as White. Broadening the definition of Mexican Hispanic would expose policy makers to a much more diverse Hispanic population, she said.

Republic reporter Ronald J. Hansen contributed to this article.

10 largest cities in the U.S. based on population

1. New York City - Population: 8.40 million.

2. Los Angeles - Population: 3.88 million.

3. Chicago - Population: 2.71 million.

4. Houston - Population: 2.19 million.

5. Philadelphia - Population: 1.55 million.

6. Phoenix - Population: 1.51 million.

7. San Antonio - Population: 1.40 million.

8. San Diego - Population: 1.35 million.

9. Dallas - Population: 1.25 million.

10. San Jose - Population: 998,537.

Source: U.S. census 2013 estimate


3) Chandler Approves Demolition of Compadre Stadium

Mike Sunnucks, Phoenix Business  Journal, June 2014

The Chandler City Council voted Thursday night in favor of a housing development that will result in the demolition and demise of the Compadre Stadium ballpark.  The abandoned stadium was home to the Milwaukee Brewers from 1986 to 1997. The council vote moves forward a plan with 318 homes and townhomes in a gated community near near Alma School and Ocotillo roads.  Demolition on the remaining bleachers, dugouts and other remaining parts of the ballpark could begin as early as next week.

Standard Pacific Homes — which has a dozen housing developments in the Phoeix market — is the builder for the Compadre site. “We’re excited to move forward with creating the move-up community of Echelon at Ocotillo,” said Pat Moroney, Phoenix president for Standard Pacific Homes. “This is an important piece of land in the City of Chandler and we’re incorporating thoughtful details into the all-new home designs that cater specifically to the tastes and preferences of Chandler area home shoppers.”  Chandler Economic Development Director Christine Mackay said her city is not interested in getting another spring training team but is instead focused on high-wage and technology jobs. “Compadre Stadium will be going away,” Mackey told a Valley Partnership breakfast this morning.


4) Real Estate Briefs

a) Council to vote on Tempe Town Lake Apartment Development

Mike Sunnucks, Phoenix Busines Journal, June 2014

The Tempe City Council will vote tonight on a proposed apartment development on a long vacant parcel at Tempe Town Lake. Lincoln Property Co. wants to a build a 350-unit luxury apartment complex called Southbank via two four-story buildings on the site, said Nick Wood, the Snell & Wilmer LLP attorney representing the developer.  The parcel sits near the northeast corner of Rural Road and Rio Salado Parkway on Tempe Town Lake just north of Arizona State University’s Karsten Golf Course.  The parcel and surrounding land have been vacant since 1998 with proposals for a hotel and then a $1 billion large mixed-use development called Pier 202 never coming to fruition.  The never built 27-acre Pier 202 development would have included nine commercial buildings, a 285-room hotel and more than 1,480 residential units, according to Tempe city documents.

Now, Lincoln wants to buy a 3.6 acre parcel from the Pier 202 developer Wolff Co. The deal is under contract but is contingent on city approval.  Tempe’s Development Review Commission denied the Southbank apartment plan. The Tempe council will consider an appeal of that decision tonight as well as approving the development’s plans.  The Development Review Commission argued the apartment development did not mesh with the city’s plans for more high-density development along Tempe Town Lake. Wood said economics and market dynamics are not there for the previously proposed density and hopes the full council will come to a different conclusion. “We’re hopeful the council will approve it,” Wood said.  A 17-story senior housing development also is planned for another Pier 202 parcel.  Tempe now controls most of the remaining parcels and has a development RFP out for bid, according to city staff.

b) HSL Properties Snatches Up Central Ave Apartments in $53M Deal

The Brew, Rose Law Group. June 2014

HSL Properties Inc. in Tucson (Humberto Lopez, principal) has added to its vast multi-family holdings in Arizona with the $53 million ($128,019 per unit) purchase of The Station on Central, a 414-unit apartment complex at 4140 N. Central Avenue in Phoenix. The seller was North Central Avenue Apartments LLC, formed by Baron Properties in Greenwood Village, Colo. (J. Jeffrey Riggs, Scott Fisher, T.J. Tarbell, principals). Maricopa County records show HSL Station on Central LLC (HSL entity) acquired the project with a $39.24 million loan from Compass Bank. After buying the Central Avenue apartments just over three years ago, the seller made a tidy $16.5 million profit from the sale. In May 2011, the Baron Properties company paid $36.5 million ($88,164 per unit) to buy The Station on Central (then called Empirian on Central apartments). The complex was developed by JPI Properties in 1999 and was originally named Jefferson on Central. Four years ago, a company that acquired the project from JPI Properties lost the apartments to foreclosure after defaulting on a $39.5 million loan that was secured by the multi-family community. The Class A property is just north of Indian School Road and is adjacent to a METRO light rail station. The luxury one-, two- and three-bedroom units fit in well with HSL Properties 10,000 + unit multi-family portfolio. With the acquisition of The Station on Central, HSL Properties owns 42 apartment projects in Arizona. Of those, 8 are located in the Phoenix market, 32 are in the Tucson area and the privately-held HSL has 1 multi-family community in Casa Grande and 1 in Yuma. HSL Properties is looking to buy additional apartment projects in Arizona. 

c) Phoenix’s Rental Demand on the Rise

Liviu Oltean, MHN Online, June 2014

With an employment growth rate that will outpace the national one, Phoenix is on the path of having its fifth consecutive year of real estate growth and economic improvement, according to research data from Marcus & Millichap. The recovering economy will bring about an influx of new residents to the metro area that will undoubtedly lead to higher rent demands and to lower vacancy rates.

In 2014, employment in the metropolitan area is projected to increase by 54,700 jobs, quite a significant improvement over 2013, when only 41,400 jobs were added. In response to this, the real estate market will have to accommodate new household formations. The new formations are expected to be absorbed mainly by multifamily properties, due to the single-family lending standards remaining high. In addition to  the strict lending standards, when it comes to the sale of single-family homes, Phoenix has been seeing a consistent decline for the past two years. Taking into account these difficulties, the focus will remain on the multifamily sector, not only for developers, but also for potential buyers.  In spite of areas where vacancies rates remain relatively high, developers are expected to increase production in Phoenix for the second consecutive year. One such example is Scottsdale, where the completion of several luxury rentals ramped up vacancy rates to roughly 6.5 percent. This year, approximately 4,500 new residential units will be added to the market. It’s the largest volume since 2009, contrasting with last year’s 3,900 units that had been completed.  The research data points to a significant increase in demand in 2014. Therefore, vacancy is expected to fall 30 basis points to 6.9 percent. Regionally, real estate operations in the north Tempe/Arizona State University will be the lowest due to vacancy rates barely passing 4 percent. Consequently, a significant amount of renovation projects is expected to surge in these areas.  As far as institutional investors and REITs go, the focus will remain on the newer Class A properties, with investors bidding aggressively on these assets in locations that feature a steady rental demand. Class B and C assets with value-add components will also be desirable assets to investors.


5)  Tales from the Real Estate Trenches

Pat Hune, Broker at 1st Southwest Realty

This month I used two real estate terms in one conversation I had not thought about since I studied for my broker’s license - Adverse Possession and Lis Pendens.  Adverse Possession is a method of gaining title to real property by actual, open, hostile and continuous possession to the exclusion of its true owner.  Time periods vary from state to state. In Arizona the statutory time period for adverse possession is 10 years. 

A Notice of Lis Pendens is a document recorded with the county recorder notifying the public a specific piece of property is subject to litigation that may affect ownership of the property.  When a Lis Pendens has been recorded against a property, the buyer takes title subject to the rights of the person who recorded the document.  In other words, if the person wins the litigation, they can get title to property, even if the buyer paid for the property and was unaware of the Lis Pendens.  It is because of this title companies will generally not provide title insurance on properties with Lis Pendens recorded against them.

A.R.S. § 12-1191 states when a party files an action regarding title to a property and records a notice of Lis Pendens, “thereafter a purchaser or encumbrancer of the property affected shall be held to have constructive notice of the pendency of the action and the claims therein.”  Even if the buyer was unaware of the Lis Pendens, the buyer is deemed to have notice of the litigation and takes title subject to the rights of the person who records the notice.  This is an important reason to get title insurance and have a title company complete a title report before you buy a property.

Because anyone can record a Lis Pendens by paying the recorder the filing fee, statutes have been created penalizing a person for recording a frivolous Lis Pendens.  A.R.S. § 33-420 says person who wrongfully records a Lis Pendens can be liable for statutory damages, attorneys’ fees and costs to the property owner.  However it is necessary for the owner to intervene in the lawsuit and move to quash the Lis Pendens.  Alternatively, the owner could file a separate lawsuit (special action) for the sole purpose of determining whether the Lis Pendens is valid.

So why were these two terms now in my life?  I was representing the buyer, Sara. The sellers were having a dispute over settling the estate of a family member.  Joan* had a son named Fred.  Fred had a son named Bob.  Joan put all her assets into a trust including her personal residence.  Joan named Bob as the Trustee. This meant Bob was in charge of handling the disposition of Joan’s assets.   Several years later Joan died and Fred was unhappy with the terms of the trust.  He moved into Joan’s house claiming he had a life estate.  There were liens against the property which Fred refused to pay so the house was scheduled for foreclosure.  Bob brought the loans current using funds from the trust.  Bob tried to get Fred to move so the house could be sold as there were not enough assets in the trust to continue to make the payments. Plus Fred was not maintaining the house, i.e. not treating the termites, not fixing the leaking roof and not watering the landscape.  Fred refused to move so Bob had no choice but to get an attorney to force Fred out.  Once Fred moved the house was put up for sale.  

The seller accepted an offer from my buyer, Sara.  Sara did her inspections, reviewed the preliminary title report which seemed to be in order and was ready to close.  The title company tried to record the deed but could not.  Fred had filed a Lis Pendens six days before stating he had a life estate in the property.  Because recording the Lis Pendens is considered notice Fred had no obligation to tell Bob he was doing this.  Bob had no idea the lis pendens had been field.  If Fred had said he had a financial interest, i.e. wanted some of the proceeds, the title company would have recorded the deed and held the proceeds until Bob reached a resolution with Fred.  Because it was a life estate claim everything stopped. 

My buyer was understandably upset.  Sara thought Fred had a claim because he lived in the house for six years before Bob kicked him out, i.e. Adverse Possession. Because Fred had been in the house for less than 10 years Adverse Possession did not apply.  Based on the actions taken to get Fred out of the house we all knew this was a frivolous Lis Pendens. But Bob still had to get an attorney, file a motion and appear before a judge to quash the Lis Pendens.  Though everyone was confident it would be quashed no one knew how long it would take.  So everyone was in limbo, the termites were munching away, the trees and plants continued to die and the monsoons were quickly approaching.  Luckily Bob’s attorney was able to expedite the hearing and the Lis Pendens was quashed.  The total delay was only eight business days.

I don’t have much of a moral to this story.  Because recording a Lis Pendens is considered notice the property owner will never know it is there until the property is transferred, sold or refinanced.  I think the laws should be changed to require the filer of the Lis Pendens to give notice.  At least the property owner would have an opportunity to resolve without scrambling at the last minute.  Maybe the filer would have to give the property owner notice prior to filing so the issue could be resolved without a court action. This would reduce the burden on our already overtaxed court system.

*Names have been changed.