March 2016 Phoenix Real Estate Update

Phoenix Real Estate Update

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

Do you have a rental property and need a property manager?  Please call or email Karen Van Vugt at 602-316-7028 or


Pat Hune


1st Southwest Realty

Search the real MLS from my website!

Cell 480-703-1976

Fax 480-304-9099

Equal Housing Opportunity

Market Overview by Mike Orr, Founder and Owner of the Cromford Report

As 2016 starts, the market is in much better shape than it was at the start of 2015. Every measure is looking better for sellers than it was in January 2015, except for the appreciation rate. This has eased slightly but remains about ten times higher than the overall economy’s official rate of inflation, the Consumer Price Index.  The one serious problem that remains is that supply continues to be very poorly matched to demand.

In the ranges below $250,000 prices are still being driven higher by chronic weak supply and continuing demand from investors, boomerang buyers and millennials entering the market for the first time. Annual appreciation tends to be in the 6 percent to 12 percent range for this price segment. Lending standards remain stubbornly high, but if this were to change, as we keep being told it will, we could see increased demand in this price range. Unfortunately for buyers, this would further exacerbate the supply problems and lead to more price rises. A few builders, notably D R Horton & LGI Homes, have started to offer more homes in this price range but so far it has not made a big contribution to expanding the supply. To keep the price competitive many of these homes are a long way from the center of the valley. Not every buyer is willing to drive until they qualify.

From $250,000 to $500,000 we see much healthier levels of supply that are largely keeping up with robust, though not exceptional, demand. We have seen price increases for homes in the move-up price segments at the relatively modest level of 2 percent to 6 percent per year. The supply of new homes is increasing which helps to moderate upward pricing pressure, especially as overall demand remains constrained by financing issues. Buyers are increasingly being selective given their wider choice. Less attractive or competitively priced listings risk being left behind. This is generating more frequent price cuts.

Above $500,000 there is plentiful supply in most areas, with prices showing little upward movement except in the most fashionable locations. Those fashionable locations include Central Scottsdale (especially 85251 and 85250), Arcadia and a few of the newer communities in 85255. Jumbo financing to buyers with excellent credit is still very attractively priced and this helps to keep the market moving. However, we are just not seeing enough buyers to keep the supply from growing now that out-of-state demand is weakening. This is especially true of homes that are more than 20 years old and those in far flung areas of the valley.

New home closings were surprisingly strong in December and reinforce the theme that buyers are especially attracted to modern designs these days. The huge increase in permits that we saw in 2015 suggests that developers expect to grab market share away from re-sales.  Urban living is gaining popularity, but there are precious, few opportunities to buy new townhomes and condos in the most fashionable locations. New construction is still focused on providing apartments for rent. In time, we will see that wave receding and more construction of urban homes for purchase.  The West Valley had a stand-out year in 2015 but we anticipate that the Southeast Valley may be the area to watch in 2016. This especially applies to those areas close to the 101, 202 and 60 freeways and the major shopping areas like Tempe Marketplace and Mesa Riverview. South Scottsdale is also a promising spot, as is both Downtown and Uptown Phoenix.  We anticipate only small increases in pricing during the first quarter of 2016 with increases at the low end being offset by weakness at the high end. The mid-range is likely to see little movement unless there is a surge in demand.

Population and job growth are still moving in positive directions for Central Arizona, but there are ominous developments in the global economy that have the potential to disrupt the U.S. housing market to a limited extent. Luckily Arizona (unlike many of the central states) is no longer very dependent on energy products or commodities like cotton, citrus, copper and cattle. As long as the climate and economy continues to attract people from all over the country, the consequent increases in population are likely to keep the local housing market in a healthy state.


1)  STAT Newsletter 

2)  Rental Market  

3)  Multifamily and Commercial Real Estate Trends

4)  Seven Year New Home Building Slump in Metro Phoenix Appears to be Over 

5)  Property Taxes due May 1, 2016

6)  Real Estate Briefs

     a)  Foreign Investors See Tax Increase 

     b)  Bank of America Offers 3% Down and No FHA Home Loans 

     c)  Experts Say Zero Chance of Arizona Recession

     d)  Why Home Sellers Hate Roofs - Especially if the roof needs replaced

7)  Tales from the Real Estate Trenches 

      Why College Students Should Not Get Pets Without Permission From Their Parents & Landlord



1) STAT Newsletter Link (Note the numbers are reported a month behind.  The MLS has renamed to reflect the report is for January but published in February.)  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 2016

February STAT

STAT Newsletter and Real Estate Market Highlights

Commentary by Tom Ruff of The Information Market

Ask three different real estate agents what’s happening with home prices and you will get three different opinions. Oddly, they might all be correct. Prices have heavy upward pressure below $250,000, are moderate in the mid-ranges and are slow to negative in the luxury market. High demand and limited supply in the lower price ranges have pushed up the median sales price.

Turning to sales volume we have a bit of a conundrum. At the beginning of the year we changed our statistics methodology. We no longer include sales with zero cumulative days on market in our reporting. Some Subscribers use the MLS to log their non-MLS sales by listing and immediately closing them. They report as having a DOM of 0. Since the sales didn’t occur on the MLS, we feel removing these sales from our reports gives a more accurate representative of the MLS sales market. Note: reports in Flexmls remain the same, this change only affects the reports we publish on our statistics section of

(Editor’s note:  I completely disagree with removing the 0 DOM sales entirely from the data.  A sale is still a sale.  Ignoring 0 days on market when calculating how long it takes a house to sell may make sense but completely ignoring the sale when determining price does not.  If it is going to be ignored then why allow subscribers to enter these sales at all?  It is far better to have ALL transactions in one data base.  There are transactions reflected in the tax records but never incorporated into the MLS statistics.  In order to get an accurate picture of the activity in an area appraisers have to look at the tax records.  Tax records do not include any pictures or description about upgrades or condition so it leaves the appraiser guessing.  The less information the appraisers have the more likely the appraisal will not meet contract.  Data is king.)  

The outcome of this change is seen when we compared sales numbers year-over-year in our charts. Around 200 faux MLS sales in the high season each month will not appear due to the new methodology, not because of the market. Compounding things is the fact that February 2016 also had an extra day this year.

Projected Pricing - Our last Pending Price Index projected a February median price of $209,900 with the actual median coming in at $214,000, off by 1.92%. Sales volume in February as reported by ARMLS was 5,718 with 482 fewer sales than our projected volume of 6,200. Looking ahead to March, the ARMLS Pending Price Index projects a median sales price of $215,000. We begin February with 7,222 pending and 4,169 UCB listings giving us a total of 11,391 residential listings practically under contract. This compares to 10,502 of the same type of listings at this time last year. We expect sales volume in March to be very similar to the numbers last year with a slight increase in the median sales price. February was not a great month for projections as I still remain single and unengaged.

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

February Rent Stats

3) Multifamily and Commercial  Real Estate Trends

Current Phoenix market trends data indicates an increase of 2.7% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of 16.2% compared to last year's prices. County-wide, asking prices for Multifamily properties are 2.6% higher at $62,870 per unit compared to the current median price of $61,700 per unit for Multifamily properties in Phoenix, AZ.  There has been an significant increase in the sales prices for duplexes, triplexes and fourplexes with very little available under $225,000.  

Loopnet Commercial Trends


4)  Seven Year New Home Building Slump in Metro Phoenix Appears to be Over 

Catherine Reagor, The Republic, February 2016

Strong January numbers, including a 57 percent increase in building permits, are a sign the new home building is increasing.  Homebuilder Lennar reopened a community in Surprise last month that it had stopped building in during the crash.  Fulton Homes reports its metro Phoenix home sales are almost 50 percent ahead of last year’s pace.  Eastmark in Mesa ranked No. 1 in the U.S. for the biggest increase in home sales — 181 percent — in 2015, according to national real estate firm RCLCO.

Metro Phoenix’s new-home market is definitely rebounding from its seven-year slump. And builders started 2016 strong.  New-home permits in January were up 57 percent from the same month in 2015, according to RL Brown Housing Reports.  Lower prices could be drawing more buyers. The median price of new home fell to about $294,800 in January from $298,100 in December.  Housing analysts RL Brown and Greg Burger say Valley builders are offering more lower-priced homes to better compete with the resale market.  The median price of an existing home is about $225,000 now.  In Pinal County, metro Phoenix’s farthest southeastern suburb, new-home prices start as low as $140,000. And that’s probably why new-home construction there shot up 114 percent last month.  Ironwood Crossing in Pinal’s San Tan Valley is currently one of Fulton’s top-selling communities. Prices for the builder’s homes there start at around $170,000.

Asante isn’t quite as affordable, with home prices starting at $217,000. But that’s still lower than what similar-sized existing homes are selling for in that part of the northwest Valley.  The increase in new-home building and sales is expected to continue for the new few years.  Brown and Burger are forecasting about 18,000 new homes will be built Valleywide this year. That will be about a 13 percent increase from 2015.  Many new-home buyers still want the most home for their buck in metro Phoenix.


5)  Property Taxes due May 1, 2016

The second half of the 2015 property tax is due March 1 of the following year and becomes delinquent after 5:00 p.m. on May 1. If May 1 falls on a Saturday, Sunday, or legal holiday, the time of the delinquency is 5:00 pm on the next business day. You may pay both halves together until December 31.   If you miss a deadline you may owe fees plus interest charges of 16% per year prorated monthly. To avoid paying on the wrong property, always check the property description and parcel number on the tax statement with your records.  If you do not have a mortgage or the mortgage company does not pay your property taxes for you then be sure to pay them prior to May 1 to avoid the penalty. 


6) Real Estate Briefs

a)  Foreign Investors See Tax Increase 

Nikki Salgat, Esq,  Associate Counsel to the Arizona Association of Realtors, February 2016

The Protecting Americans from Tax Hikes Act (the “PATH Act”) was signed into law on December 18, 2015. Included in the PATH Act is a provision modifying the Foreign Investment in Real Property Tax Act (“FIRPTA”). The modification increased the tax withholding from 10% to 15% in certain transactions. However, 10% rate of withholding still applies if: (1) the amount realized for the property is less than $1 million; and (2) the property is acquired by the transferee as a residence. The prior exception from FIRPTA (if the amount realized for the property is less than $300k and the property is purchased as a personal residence) is still effective.  The PATH Act is effective 60 days after the date of enactment, which is February 16, 2016.

What is FIRPTA? 

The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests. A disposition means “disposition” for any purpose of the Internal Revenue Code. This includes but is not limited to a sale or exchange, liquidation, redemption, gift, transfers, etc. Persons purchasing U.S. real property interests (transferees) from foreign persons, certain purchasers' agents, and settlement officers are required to withhold 10 percent of the amount realized on the disposition (special rules for foreign corporations). In most cases, the transferee/buyer is the withholding agent. If you are the transferee/buyer you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax. For cases in which a U.S. business entity such as a corporation or partnership disposes of a U.S. real property interest, the business entity itself is the withholding agent.


b)  Bank of America Offers 3% Down and No FHA Home Loans 

Joe Light, Wall Street Journal, February 2016

Move would skirt agency that has punished banks for errors on similar loans

Bank of America Corp. is rolling out a new-mortgage product that would allow borrowers to make down payments of as little as 3%, in a move that would represent an end run around a government agency that punished the bank for making errors on similar loans.  The new mortgage program, which the Charlotte, N.C.-based lender plans to unveil on Monday, will let borrowers avoid private mortgage  insurance, a product to protect mortgage lenders and investors that is usually required for low-down-payment loans.

That could make the new loans cheaper than those offered through the Federal Housing Administration, the government agency that has won big settlements from banks in recent years for what the lenders describe as minor errors.  The FHA doesn’t make loans but insures lenders against default on mortgages that can have down payments of as little as 3.5% and a credit score of as low as 580, on a scale of 300 to 850. When lenders make the loan, they have to certify that everything in a loan file is accurate.  Bank of America’s new mortgage cuts the FHA out of the process. Instead, the new loans are backed in a partnership with mortgage-finance giant Freddie Mac and the Self-Help Ventures Fund, a Durham, N.C.-based nonprofit.

Bank of America agreed to pay $800 million to settle claims of making errors on FHA-backed loans in 2014. This month, Wells Fargo & Co. said it would pay $1.2 billion to settle similar claims, joining J.P. Morgan Chase & Co., which settled in 2014, and other big lenders which have settled over the past few years. Nonbank lender Quicken Loans Inc. is currently fighting such claims.  Many big banks have pulled back sharply from FHA-insured lending in the past few years, citing the risk of being hit with penalties for minor errors. A raft of nonbank lenders have rushed in, but the banks’ retreat from the program has made it more difficult for low-income borrowers to get home loans.

“We need an alternative in the marketplace that helps creditworthy borrowers with a track record of paying debts on time,” said Bank of America managing director D. Steve Boland, who noted that “We think there are still a lot of uncertainties out there in working with FHA.”  After making a mortgage under the new program, Bank of America will sell it to Self-Help, which then sells it to Freddie Mac. If a mortgage defaults, and Self-Help isn’t able to recover the full amount owed, Self-Help takes a big chunk of the losses before Freddie Mac starts to take a loss, which lets borrowers avoid paying mortgage insurance.

Self-Help also gives counseling to borrowers who struggle to pay, which it believes will help more people avoid foreclosure.

“We believe the mortgage-lending sector is underserving families of modest means,” said Self-Help CEO Martin Eakes. Mr. Eakes said that his fund also is in talks with other large and small lenders to roll out similar programs.  Mr. Eakes said Self-Help didn’t need new funding for the Bank of America program, but in the past the organization has received funding for other loan programs from foundations, the government and companies.

Mr. Eakes is also CEO of the Center for Responsible Lending, a nonprofit advocacy group for borrowers that in the past has also asked the FHA to limit lenders’ damages for some errors.

To get the loans under Bank of America’s new program, borrowers must have a credit score of at least 660, which is higher than FHA’s requirement, and an income that is less than the area’s median.  Bank of America said that for now it is capping loan production at $500 million annually under the program and that it expects that three out of four mortgages in the new program would have otherwise been backed by the FHA.  Last year, Bank of America made $1.36 billion in FHA-backed loans, according to trade publication Inside Mortgage Finance, making it the 22nd biggest FHA lender. The bank used to be in the top 10.

Freddie and competitor Fannie Mae in 2014 said they would roll out mortgages with down payments of as low as 3% to improve mortgage availability for low-income borrowers. But because the mortgages often cost more than FHA-backed loans, the programs had little volume last year.  As lenders become more wary of the FHA program, lenders and Fannie and Freddie executives said that their programs’ volume could rise.  

In October, Quicken Loans, which is in the midst of FHA-related litigation, announced a partnership with Freddie to originate more Freddie-backed low-down-payment loans.  “Many lenders, including us, are looking at the Fannie and Freddie programs as an alternative to the FHA,” said Quicken CEO Bill Emerson.  Bank of America says that for a borrower with a $150,000 mortgage, a credit score of 680 to 719 and a 3% down payment, the monthly cost of the new mortgage would be about $782. A comparable FHA borrower with Bank of America would pay $887 a month, the bank said.  The FHA has been working for months to attempt to clarify the liabilities lenders could face when making an FHA-backed mortgage, including changing the certification that lenders must make in order to limit major penalties. An FHA spokesman said that the agency plans to unveil the final version of the certification by the spring.


c)  Experts Say Zero Chance of Arizona Recession

Ronald J Hansen, The Republic, March  2016

The Valley and Arizona continue to shine in a pair of new economic analyses that suggest solid near-term growth here amid broader tumult.

In one report, BBVA Compass economists estimated Arizona has a zero percent chance of falling into recession in the near term and is expected to post 2.5 percent growth in economic output. By contrast, the continued struggles in the oil industry mean Texas has an 87 percent recession risk and will see its gross domestic product shrink 0.3 percent, BBVA reported.

Separately, the JPMorgan Chase Institute found that consumer spending in metro Phoenix grew slightly faster in December than the average of the 15 major markets the organization has begun tracking regularly. The 3.1 percent spending growth over the past year was largely due to increases in restaurants and sales of non-durable goods, even as sales of durable goods such as appliances fell slightly, JPMorgan reported.

The reports are consistent with the state's improved labor market and suggest that after years of relatively sluggish growth, Arizona is belatedly returning to better performance.  New data on wages from the U.S. Bureau of Labor Statistics showed that while the Phoenix area has made job gains in the past year, wages didn't grow much.  The median annual wage in metro Phoenix as of May was $35,660, up 1.5 percent over 2014. The national annual median was about $36,200.

Compared to the 21 metro areas closest in population to Phoenix, other markets usually paid more and saw bigger annual gains. Phoenix ranked 17th in median wages and 18th for wage gains in 2015.

Still, Arizona was the only state that had no near-term chance of a recession in the BBVA report. Florida had a 0.1 percent chance and it was 0.7 percent for Georgia. Energy-dependent states like Texas, Louisiana and North Dakota are near-certainties for recessions these days, but most other states are seeing reasonable growth, BBVA found.  BBVA defined a recession as two consecutive quarters of declining employment.

"While the likelihood of a U.S. recession is the highest it has been since the 2009 downturn, based on a state-by-state assessment, the overall probability remains low," BBVA economists wrote. "A majority of states stand to benefit from strengthening domestic conditions in certain sectors, such as real estate, and solid consumption of durable goods, particularly autos. In addition, non-energy transportation sectors, along with state and local governments, will benefit from substantial reductions in energy expenditures." 


d)  Why Home Sellers Hate Roofs - Especially if the roof needs replaced

Mark Nothaft, The Republic, January  2016

A home's roof requires inspection more than nearly any other part of a house and remains something of a wild card during any real estate transaction, professionals say.  “You can have a roof that looks perfect, but will leak during the first big storm,” says a historic home specialist. “On the other hand, you can have one that shows poorly but is water-tight.”  “It's one of the most difficult determinations to make since we don't get a lot of consistency (in the desert),” she says.  An inspection from a licensed home inspector is the first place to start, and if a detailed assessment cannot be determined, then a licensed roofer should be called in.

Patrick McNamara of Gryphon Roofing of Tempe agrees.  “I've seen deals fall apart because of roofing,” McNamara says. “A seller will wait until roofing comes up during the inspection” rather than be proactive, “and run the risk of buyers getting jumpy and canceling the contract,” he says.

Adjusting the asking price may be a solution to a roof in poor condition.  If sellers don't make known roof repairs ahead of time, then it may become a negotiated item during the sale and the asking price will need to be adjusted to allow for repairs.  “It's the inspector's job to find all the things wrong with a home, including the roof, and sellers need to reduce those items,” McNamara says.

A roof service call before subjecting a home to inspection is recommended, and includes replacement of cracked or missing tiles or shingles, and “resealing any roof penetration,” McNamara says. Prices for the service range from $300-$900, depending on the size of the home.  

But what if the home needs a completely new roof? It can be a good selling point and offers peace of mind to buyers, McNamara says.  “Expense is a big thing, but the outlay can be recovered in the purchase price,” he says, noting that the typical new roof ranges from $5,000 to $10,000 for asphalt shingles, but prices vary based on the size of the home, time involved, and if upgraded materials are substituted such as Spanish-style tile.  “It's more difficult to recover the costs at a lower price-point,” says McNamara. “An appraiser cannot get the value out of it. But at $400,000-plus, you usually can get the value out.”

“There are a lot of good roofing companies and contractors out there, but there is some variation in pricing,” he says. “Get a referral or recommendation from a neighbor who has had work done on their roof and always use the Registrar of Contractors to verify licenses.”

(Editor’s note - Real estate agents are required by law to disclose any material facts they know about the house.  If the realtor observed water staining on the ceiling before the house was painted then this should be disclosed.  If the seller has received an opinion from a  licensed roofing contractor that says the roof needs replaced then it needs to be disclosed.  There is no more "let the buyer beware" in our litigious society.  It is now disclose, disclose, disclose and disclose in several ways.)


6)  Tales from the Real Estate Trenches 

Pat Hune, Broker at 1st Southwest Realty

Why College Students Should Not Get Pets Without Permission From Their Parents and Landlord

Last year some college students rented one of our Tempe rentals. A few months later the tenants called saying there were problems with the lights.  I figured it was just light bulbs so armed with a ladder and replacement bulbs I visited the property.  There were several burnt out light bulbs.  But to give the students credit there were electrical issues with the lights and an electrician had to be called.  

While visiting the property I observed a four legged tenant who was not on the lease as a very friendly puppy came running to greet me.  I asked about the puppy to confirm it belonged to one of the tenants, which it did.  Then I explained they needed to get permission BEFORE they got the dog.  They begged me to let them keep the dog because they had just spent $3,000 on emergency surgery because the dog had chewed and swallowed an old cable line.  The owner agreed to let the dog stay with an additional non-refundable pet deposit provided the tenant purchased insurance in case the dog bit someone or caused other property damage.  In addition the tenants had to make sure the dog was properly trained so it did not destroy property, bite someone, bite another dog or bark.  

A secondary issue is many HOA’s and apartment complexes do not allow dogs over 40 pounds or do not allow pets at all.  Eventually this dog will weigh more than 40 pounds so finding a future rental may prove difficult unless it is a single family home with no HOA or an HOA that does not have a dog weight limit restriction. Children also need to understand having a pet can be an expensive proposition. If the dog damages the property then the tenants will not get their security deposit back.  I doubt the parents of this college student were happy with the unexpected $3,000 vet bill.  The bottomline is parents need to make sure their college students do not get any pets without getting permission from both the landlord.