October 2015 Phoenix Real Estate Update

Happy Halloween!  

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 www.greathouseaz.com.

Do you have a rental property and need a property manager?  Please call or email Karen Van Vugt at 602-316-7028 or ftr9558@cox.net


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  

The Phoenix  Real Estate Market has More Treats than Tricks: 

First the treats - 

1) Home values continue to increase and are expected to end the year about 5% higher than 2014.

2) New home builder confidence is the highest it has been since 2005.

3) Interest rates are low and are expected them to remain low for the next few months. 

4) Foreclosures and trustee sales (aka distressed sales) are only a tiny part of the market at 5.9%. 

5) Pending foreclosures are down 25.4% from a year ago.

6) The number of homeowners underwater on their mortgages is only about 18% and this number continues to decrease. 

7) Arizona is expected to be #1 in future job growth which will in turn create more demand for housing.

Then the tricks - 

1) There continues to be a severe inventory shortage especially in homes priced under $250,000.

2) New home builders are not building that many homes due to a shortage of land and labor. Most new homes are priced at $250,000 and up.


1)  STAT Newsletter 

2)  Rental Market  

3)  Multifamily and Commercial Real Estate Trends

4)  Why Mortgage Interest Rates Can Be Volatile  

5)  Real Estate Briefs

a)  Builder Confidence hits levels not seen since housing boom of 2005.

b)  Arizona Ranks #1 as Best State for Future Job Growth   

c)  Arizona and other Mountain States to lead economic growth in 2016 

d)  Taxes Due no later than November 1 

6)  Tales from the Real Estate Trenches 

 Why Bedbugs are a Landlords Worst Nightmare  



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 2015

October STAT

STAT Newsletter and Real Estate Market Highlights

Commentary by Tom Ruff of The Information Market

Fall has started and while the temperatures may not reflect the season, we are well into seasonal patterns for our market. September 2015 ended with 6,935 MLS sales, a -1.1% decline over August 2015 which was better than the expected -2% seasonal decline. Sales prices and new list prices increased 4.3% and 4.9% year-over-year respectively. Overall, September 2015 looked better than September 2014. 

Each month we look at successful sales but what should we make of the existing inventory – a.k.a the listings that didn’t sell? Today’s new listing contracts become tomorrow’s sales contracts. This month we are going to take a look at the listings that did and didn’t sell in September 2015. From this perspective, there were 6,935 sales and 18,356 unsold listings in September. 

For the purposes of this article, unsold listings are listings that were in active status during the month of September 2015 excluding UCB status. 

Our unsold listings have 130 days on market on average whereas the average closed listing in September had 71 days on market. Even when we exclude the 65 listings that have more than 1,000 days on market, our average for unsold listings only falls to 125 days. We expect a higher DOM for unsold listings, but it is surprising that we have so many long-haul listings in such a DOM sensitive market. In fact, there are a few listings that have been on the market for more than eight years. Some properties need that special unique snowflake of a buyer and this isn’t a knock against those properties, but more so a statement concerning how older listings are not moving off the market. 

Looking at price changes, MLS listings that sold nearer to their original list price sold faster on average. Of the 6,935 residential MLS sales in September 2015, 65% sold within 5% (+/-) of their original list price with an average DOM of 50 days, 21 days faster than the average sale. 32% of closed listings went for greater than 5% of their original list price but ended up with a DOM of 111 days on average. Only 2% of listings in September sold below 94% of their original list price, they landed at 67 days. This highlights the importance of correct pricing. 22% of unsold listings are al- ready listed 5% above or below their original list prices. 

For example, listings which sold between 11-15 days went for 99.9% of their original price. Conversely, listings in the 101- 105 day range went for 95.8% of their original list price. We need further study to draw additional conclusions on this relationship, but the conventional wisdom is to price it right to sell it faster. 

ARMLS Pending Price Index 

Our last Pending Price Index projected a September median price of $210,000 with the actual median reporting at $211,000. Our sales volume projection was 6,850 with actual sales of 6,935. Looking ahead to October, the ARMLS Pending Price Index projects a median sales price of $212,500. In the last 14 years the median sales price has risen five times, fallen eight times and had no change once between October and November. We begin October with 5,801 pending listings and 3,219 UCB listings giving us a total of 9,020 residential listings under contract. This compares to 9,595 listings under contract at the beginning of September. The October 2015 sales volume should exceed October 2014 (6,154), but should be lower than the total of 7,010 in August 2015. STAT is projecting 6,650 home sales in October. This forecast is not without a little TRIDidation as there were 23 business days last year and only 22 business days this year. Based on the historical average sales volume in past Octobers we predict October 2015 will be 2.98% lower than September 2015. 

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

October Rent Stats

3) Multifamily and Commercial  Real Estate Trends

Current Phoenix market trends data indicates a decrease of +0.1% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of +9.1% compared to last year's prices. County-wide, asking prices for Multifamily properties are 0.7% higher at $59,275 per unit compared to the current median price of $58,581 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 $200,000.  

Loopnet Commercial Trends


4)  Why Mortgage Interest Rates Can Be Volatile 

John Cabello, Guild Mortgage Company, October 2015

Mortgage rates are dependent on many economic factors.  When there is strong economic growth mortgage rates tend to stay low.  When this is weak economic growth mortgage rates tend to go up.  So where are we today?

Second quarter 2015 Gross Domestic Product (GDP) data was  a reason to celebrate. Economic growth far outpaced growth in the first quarter, led by consumer and business spending. The final GDP reading rose 3.9 percent, above expectations and well above the anemic 0.6 percent registered in the first quarter. GDP measures the total output of goods and services produced in the U.S., and is the broadest measure of economic activity.

The Fed will continue to monitor all economic factors over the next month as it prepares for another discussion on whether or not to raise its benchmark Fed Funds Rate at the end of October 2015. The Fed Funds Rate is the rate at which banks lend money to each other overnight. While an increase in the Fed Funds Rate does not directly impact home loan rates, home loan rates may increase once the Fed takes action, depending on the market and overall economy.

For now, home loan rates remain near historic lows. 

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result.  Mortgage Backed Securities (MBS), are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving—and when they are moving lower, home loan rates are getting worse. 

To go one step further—the MBS can worsen or improve during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets lenders start with each morning.  Mortgage Bond prices have remained higher in recent weeks, keeping home loan rates near historic lows.


5) Real Estate Briefs

a) Builder Confidence hits levels not seen since housing boom of 2005.  

Now if there were only lots to build on and laborers to build them. 

Dallas Turley, Realtor Report, October 2015

Gremlyn Waddell, The Republic, October 2015

National Builder Confidence Up - Builder confidence in the market for newly constructed single-family homes rose three points in October to a level of 64 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This month’s reading is a return to HMI levels seen at the end of the housing boom in late 2005.  “The fact that builder confidence has held in the 60s since June is proof that the single-family housing market is making lasting gains as more serious buyers come forward,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “However, our members continue to tell us there are still pockets of softness in some markets across the nation, and that they face challenges regarding the availability of lots and labor.”

“With October’s three-point uptick, builder confidence has been holding steady or increasing for five straight months. This upward momentum shows that our industry is strengthening at a gradual but consistent pace,” said NAHB Chief Economist David Crowe. “With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015.”

Two of the three HMI components posted gains in October. The index measuring sales expectations in the next six months rose seven points to 75, and the component gauging current sales conditions increased three points to 70. Meanwhile, the index charting buyer traffic held steady at 47.  Looking at the three-month moving averages for regional HMI scores, all four regions posted gains. The West registered a five-point uptick to 69 while the Northeast, Midwest and South each rose one point to 47, 60 and 65, respectively.

Phoenix New Home Building Permits Increase - In the Phoenix area there is mostly good news, according to Larry Kush, a life director with the Home Builders Association of Central Arizona. Over the past two years, approximately 11,000 building permits for single-family, new homes have been issued annually, and he said the expectation is that the number will reach 16,000 by year’s end. “The market certainly has turned the corner as far as new homes are concerned,” Kush said. Granted, it’s a far cry from 2005, when 50,000 housing permits were issued, but that was also when “things just got crazy” and unmanageable, he said.  “No one wants to see that again, because you can’t sustain that kind of market,” he said.  In fact, he added, most economists and analysts who study this kind of thing say Phoenix housing permits should register somewhere “in the low 20,000’s” every year. So we’re on the right track.  “If Phoenix’s growth curve stays the same, it’s very possible we can do 20,000 permits a year,” Kush said.

Construction Labor Shortage - And, finally, there’s the bad news. Many builders, particularly smaller ones, are having a tough time keeping up with production due to labor shortages, Kush said.  It’s not uncommon for smaller outfits right now to be two months’ behind on their schedules, especially when it comes to the skilled trades such as plumbing, electrical work and air conditioning.  He said the problem stems from the exodus of skilled laborers who left Arizona due in part to both immigration policies and the economic downtown. Many of the workers fled to Texas, where the market didn’t get hit as hard, thanks to the oil industry.  “We kicked them out, they relocated and why would they want to come back?” Kush said, who noted that the best solution to get the local industry back on track is to start training people in the skilled trades.

New Homes Are Not Cheap - Now, for some tougher news: finding a new, affordable single-family home is becoming more of a challenge. Kush said homebuilders right now are trying to accommodate the Millennials, who prefer a more urban setting close to work, shopping and recreational opportunities.  But more urban settings tend to cost more, and if there’s one thing in housing that you really can’t change, “it’s what you pay for the land,” he said.  Small, finished lots in Chandler and Gilbert, for example, run approximately $80,000 to $90,000 and the rule of thumb is that a house should sell for four times the cost of a finished lot, he said.  Unfortunately, a $320,000 home isn’t exactly affordable for everyone, so builders are turning to attached homes and condominiums as well as infill projects to satisfy those seeking in-town convenience. The only other option for those wanting a new home is to consider locating more on the fringes of the metro area.

New Home Prices Expected to Increase - As for those in the market for a new home, he highly recommends finding a spec home to purchase. It’s a finished home, it’s probably heavily upgraded and you might be able to score a sweet deal on it.  And if you’re just cooling your heels, thinking maybe the labor shortage will bring prices down, don’t.  “Whatever happens, the price of new homes is going to go up,” Kush said. “When supply does not meet demand, the price goes up. That’s Economics 101.”


b)  Arizona Ranks #1 as Best State for Future Job Growth  

Kurt Badenhausen, Forbes, October 2015

Arizona was absolutely hammered during the financial crisis of the late 2000s. Median home prices in the state plummeted 53% over five years from $250,000 in 2006 to $117,000. The foreclosure rate was the second highest in the U.S. for three straight years as construction ground to a halt. Unemployment peaked at 11.2% at the end of 2009 and net migration into the state fell sharply.  But Arizona has emerged from the wreckage to be one of the brighter spots in a slumbering U.S. economy thanks in part to renewed migration. Arizona’s projected job growth is 3.1% annually though 2019, best in the U.S., according to forecasts from Moody’s Analytics.

“Baby boomers retiring to Arizona is the main driver for Arizona’s employment growth,” says Kyle Hillman, an economist at Moody’s focused on Arizona. This migration fuels jobs in healthcare and consumer services. Net migration into the state is projected to total 679,000 over the next five years. Only Nevada is expected to enjoy a faster migration rate.

Companies and workers are also finding their way to Arizona as a more affordable option to West Coast locales like the Bay Area and Seattle. The state offers a diversified economy with a skilled workforce.

Financial service firms have a heavy presence in Arizona with Wells Fargo WFC -1.85%, JPMorgan Chase JPM -1.56% and Bank of America BAC -6.25% among the 10 largest private employers in the state. In February, Northern Trust NTRS -1.43% announced plans to expand in Arizona by opening a new operating center in Tempe that will house 1,000 employees by 2018. “This step will provide us with access to significant talent pools and a strategic location that will help us efficiently serve our clients,” said CEO Frederick Waddell in a statement announcing the news.


c)  Arizona and other Mountain States to lead economic growth in 2016

Russ Wiles, The Republic, October 2015

Arizona and other Mountain states could have the nation's top economic growth next year, according to a report, partly by sidestepping the negative fallout from lower oil prices and a trade slowdown.  Arizona and other Rocky Mountain states could see the nation's strongest economic growth next year, supplanting Texas and other south-central states hurt by falling oil prices.

That's the prediction from Standard & Poor's Rating Services, which expects Arizona and seven other Mountain states to grow 3.13 percent next year, virtually unchanged from an expected 3.15 percent this year and up from 2.66 percent in 2014. Gains in the construction, high-tech and service sectors will help the region, including a projected 23 percent rise in housing starts in 2016.  "The Mountain states have been humming along nicely through the third-quarter 2015, with the construction, high-tech, and service sectors having above-average employment growth," according to the report. Arizona is the most populous state in the region.

Arizona could benefit by sidestepping economic weakness from lower oil prices and from a possible slowdown in trade with China and Canada, which could hit more trade-dependent states harder, especially those in the upper Midwest and Northwest, according to Standard & Poor’s.  While some neighboring states, including Colorado, will be hurt by a decline in the natural resources/mining sector, the region will see gains from hospitality, tourism, housing and other sectors.

The report also cited the region's healthy population growth, although that could prove a mixed blessing for some local governments, Standard & Poor's said. Population growth would help to boost sales and property tax revenue for governments but also lead to increased demand for municipal services and capital improvements. Credit conditions for most states are favorable, said Standard & Poor's, which evaluates state and local government finances.  Standard & Poor's expects the national economy to strengthen from 2.4 percent growth in 2014 to 2.5 percent this year and 2.8 percent in 2016.


d)  Taxes Due no later than November 1

Pat Hune, 1st Southwest Realty

Taxes Due no later than November 1 -  The due date for the first half tax is October 1. The first half installment becomes delinquent after 5:00 p.m. on November 1. If Nov 1 falls on a Saturday, Sunday, or legal holiday, the time of the delinquency is 5:00 pm on the next business day.   The second half 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 have a mortgage on the property the taxes are typically paid by the mortgage holder.  However this is not always the case so be sure to look at your mortgage statement or call your mortgage company to confirm.  


6)  Tales from the Real Estate Trenches 

Pat Hune, Broker at 1st Southwest Realty

Why Bed Bugs are a Landlords Worst Nightmare

Recently I took over property management of two fourplexes.  There were four separate buildings each with two apartments connected.  When I notified the tenants of the change in management one of them, Mary*, told me the entire property was infested with bed bugs.  Mary stated the apartment directly across from her (though not physically connected) had a terrible infestation of bed bugs.  The bed bugs moved to her apartment when they were treated.  I notified the owner and received authorization to have Mary's unit treated as well as the vacant unit connected to Mary’s unit.  Mary, who was not paying rent, always seemed to be too busy to let the exterminator in.  I finally served a 48 hour notice and had Truly Nolan inspect Mary’s and the 7 other  apartments and learned more than I wanted to know about bed bugs.  

1)  Bed bugs do not move from one building to another by running across the ground.  They are transported in items like furniture, mattresses and clothing.  This is why it is advised when staying in a hotel to keep your suitcase closed and your clothing sealed in plastic bags.  Wash all clothing immediately upon returning from your vacation.

2)  If a tenant has recently moved in and starts complaining about bed bugs it is probably because they brought them with them.

3)  Bed bugs can live for up to 8 months without food. 

4)  Bed bugs can be easily treated but in order to be effective the tenant has to cooperate by preparing their home and personal items.  (See Preparing for Bed Bug Treatment below.)

5)  Baby bed bugs are called nymphs.

6)  Bed bugs do not like heat.

7) Treating bed bugs is expensive - ranging from $800 to $1500 or more depending on the property and cooperation from the tenant.

Truly Nolan inspected all the apartments and the only one with bed bugs was Mary’s.  In his opinion she brought them with her when she moved in.  (What a surprise.)  He said it would do no good to treat her apartment unless she cooperated.  I explained this to Mary, who was still not paying rent and was in the process of being evicted, but she still did not cooperate.  Mary’s lack of cooperation was costing the owner money because the unit next to Mary’s could not be rented until the bed bug issue was resolved as they could potentially move next door. Mary also ran off a tenant by telling her the unit she was moving into was infected with bed bugs even though I had proof it was not.  I blame the media for this as they have reported a good way to get back at your landlord was to say the property had bed bugs.  This is not the first time I have had a current tenant tell new or potential tenants the apartment had bed bugs to discourage the tenant from moving in.

Eventually Mary was evicted but she did not remove some of her personal items including the infected mattresses and furniture.   So lucky me I had to store them for 21 days.  This delayed the bed bug treatment another 3 weeks costing the owner more money.  

Unfortunately bed bugs are here to stay, are expensive to treat and even if tenants do not have bed bugs they can use the threat to discourage new tenants.  I feel sorry for Mary’s new landlord as I know she took the bed bugs with her.  Maybe someone should invent a bed bug detector kit that every tenant has to take to their current apartment to prove they are not bring these pests with then.

Preparing for Bed Bug Treatment

Reduce clutter to make bed bug inspection easier. Be careful when removing items from the infested area to other areas because you may transfer the bed bugs.

Personal items (stuffed animals, soft toys, blankets) should be removed, cleaned with a vacuum cleaner, and bagged in plastic for a couple of days with an insecticide like Nuvan Strips. You can also bag laptops, phones and radios as well. The insecticide in Nuvan strips will not harm these items, and is non-residual, so you don't have to launder them after using the Nuvan strips

Dismantling bed frames in infested areas may expose additional bedbug hiding sites.

Remove drawers from desks and dressers, and turn furniture over to inspect and clean all hiding spots. All furniture should be pulled away from the walls.

Stand up the box spring and shine a flashlight through the gauze fabric to expose bed bugs. If the fabric is torn (possible hiding place), remove fabric to prepare for spraying. If the mattress and or box springs are infested, you may want to consider Encasements by Mattress Safe. Once covered with these encasements, bed bugs can not enter or exit. There is no need to treat the mattress or box spring when using these encasements. Keep them on for a year.

Active Guard Mattress Liners may be used on the mattress or box springs, killing bed bugs and dust mites for two years. Not only will it kill active bedbugs, but helps prevent bed bugs from infesting beds.

Caulk and seal all holes where pipes and wires penetrate walls and floor, and fill cracks around baseboards and molding to further reduce harboring areas.

Since infested garments and bed linen can't be treated with insecticide they will need to be laundered in hot water (120 degrees fahrenheit minimum). If washing is not available, sometimes heating the garments or bed linens for several minutes in a clothes dryer may work.

Thoroughly clean the infested rooms. Scrub infested surfaces with a stiff brush to dislodge eggs.

Vacuum areas of bed bug infestation with a vacuum attachment. Vacuum along baseboards, furniture, bed stands, rails, headboards, foot boards, bed seams, tufts, buttons, edges of the bedding, as well as the edges of the carpets (particularly along the tack strips). A good vacuum cleaning job may remove particles from cracks and crevices to encourage greater insecticide penetration. Bed bugs cling tightly to surfaces, so it is best to repeat vacuuming by scraping the end of the vacuum attachment over the infested areas to pull out the bed bugs. It is not good to use a bristle attachment, because you may transfer bed bugs to other areas since they cling to the brush. Dispose of vacuum cleaner bags after you are finished.

Caulk cracks and crevices in the infested building exterior, and also repair openings to exclude birds, bats, and rodents that can serve as alternate hosts for bed bugs.

Monitoring devices such as the Bed Bug Monitor Traps should be placed around the infested area to help determine where the bed buge population resides. It is important to know that these devices are for monitoring only. Lack of trapped bed bugs does not necessarily mean that you are bed bug free.

*not her real name