Those of you who read this newsletter know I don’t shy away from certain public policy issues. For instance, our water security and planning. There is a direct connection between making the right choices today and what your house may be worth 15 years from now.

So, it’s relevant.

You may recall this article and this article, in which I talk about the future of water in AZ and who bears responsibility for it.

Our most recent governor, despite dire warning from the US government, never really took water conservation seriously. He put forward an incredibly wasteful, pie in the sky plan to build desalination plants in the desert.

He could have considered incentives to change what we farm in the desert from high water use alfalfa and cotton to lower water use plants. He could have spent much less money bolstering infrastructure that will recycle water from our cities and towns to refill our aquifers and reservoirs.

But this is conservation and he seems averse to that. It’s hard politically.

That’s why I’m hopeful that our new governor, Katie Hobbs, will take a new direction.

Full disclosure. I helped edit her “Resilient Arizona” plan, which speaks to the importance of working on land, energy and water policy comprehensively.

It’s a great start.

So, please watch this space and watch what our new governor does. She has a lot of opposition from the same forces (realtors, home builders, developers, farmers and ideologically-driven legislators) who have created this mess.

She will need our help, as home owner or prospective home owners, to say that we need policies that will protect our investments for our future generations.

Coming in to the new year, our motivated clients are dropping prices. In one case, the buyer exited the sale and lost their earnest money. It was a huge lesson for our client. See below for more.

See our listings page directly for more information.

Price Drop! 10018 E Indigo St., Mesa. 4br/3ba, 3,000sf. NOW $899,000

If you want space for all your toys, your garden and all your things, this roomy home and huge lot will be great for you.

The owners updated the flooring, the kitchen, the back yard and added a huge, four-bay garage. This is perfect for the auto enthusiast, or for all the toys.

That’s in addition to the three-car garage that is attached to the home! The additional garage bays are 30 feet deep and the entire garage is 50 feet wide with 8 foot tall doors.

You will be able to sit out on the back patio with amazing views of the mountains, with Usery Mountain Regional park almost out your back door. Whether you are all about indoor or outdoors, you will love this one!

Back on the Market. 1107 W. Osborn Rd., #101. 1br/1ba, 849sf. $195,000.

This is a rare condo in Central Phoenix for under $200,000 from a motivated seller who just did another price drop.

Since it was last purchased, the owner has completely remodeled the bathroom and has updated the kitchen to complement the historic features.

Walk around the grounds and you will see why people love living here. The trees are big and offer plenty of shade.

This particular condo is in the center of a beautiful breezeway, which feels like a green jungle, even in summer.

This listing is a lesson in how buyers can sometimes be, well, less than up front. We presented an offer from a buyer (and agent), who swore up and down that they had great credit and were eager to buy quickly. But as we got in to the process, we started to see what they were really all about. You can often tell when there begin to be excuses and delays that something may be going wrong. It turns out that the buyer did not disclose all of their financial obligations to their lender.

Crazily enough, they wanted us to just delay close until they worked it out. Naturally, we called their bluff and asked them to perform. Even crazier, once they pulled out of the contract, they still thought they could keep their earnest money. For those of you who know the AAR contract, this buyer definitely could not. We fought to get our client that earnest money payment and we won. It did not cover the cost of the delays and having to go back on the market.

But it demonstrates the value of having a team, like us, that knows that contract well.

Donna Reiner has written many articles over the years for the Arizona Republic and others about Phoenix history and memorials.  She is a regular contributor to our newsletter. This month, Donna tells us about the history of droughts and floods before we began moderating water flow with dams and canals.

“Unless we have early summer rains and plenty we will experience the most drouth ever known here…. May the Lord have mercy on us.”

-J.A.R. Irvine, 1904

Irvine’s words were no exaggeration. At the time, the Salt River Valley was firmly in the grip of a nearly seven-year drought that had dried up the Salt River, severely crippled farming, and forced other residents to leave the area. The passing of the Newlands Reclamation Act of 1902 followed by the formation of the Salt River Valley Water Users Association in 1903 set the stage for the construction of Roosevelt Dam. While this would eventually provide a steady source of water for the valley, it was not completely filled until 1915. In the meantime, everyone prayed for rain. And eventually it did come.  But Phoenicians needed to be careful of what they wished for. Too much rain was also a hazard.

As anyone who has experienced the valley monsoon knows, sudden and torrential downpours can create “rivers” as the rushing water fails to soak into our caliche soil.  Presumably, today such water is either diverted into catch and flood basins, or spills into underpasses and streets. During a heavy storm, many of us still watch from our windows to see how quickly the streets back up “just in case” because too often the water goes where it wants and not necessarily where the experts expect. This might be Mother Nature’s gentle reminder to many Phoenicians of why they still have flood hazard insurance.

However, in 1891, without the protection of dams on the Salt River, the flooding was so extensive near the Salt River bed that the residents of the southern part of Phoenix (the Irvine, Montgomery, Collins, Murphy and Linville additions just south of Washington) were forced out. Many of their adobe structures “melted” as the water lapped at their walls.

Floodwaters even invaded the Territorial Capitol building on 17^th Avenue and Washington several times after its construction in 1901. During 1905, the “rain gods” were overly generous: 19.73 inches of rain fell from the sky (over 2 ½ times our normal rainfall). Yikes!!

Fierce forest fires throughout the state this year could again impact the valley’s watershed increasing the chances of flooding and mudslides IF and when it rains. Climatologists know how much rain it will take to officially declare the end to this prolonged drought and this means here and in the mountains.

The official start of the monsoon season is June 15^th. Are we prepared for the amount of rain which would spell the end of our drought?

Believe it or not, the market is balancing again. Well, it’s moving in that direction. It seems crazy to say since active listings are up 182% since this time last year, according to the Cromford Report.

If you are a buyer, this is good news. But see the note in bold below. The market is creeping back to seller advantage. Buy now if you are in need of a home. I think that as soon as the FED announces that they will not raise interest rates again, buyers will flood back in to the market.

“Here are the basics – the ARMLS numbers for January 1, 2023 compared with January 1, 2022 for all areas & types:

• Active Listings (excluding UCB & CCBS): 16,298 versus 5,776 last year – up 182% – but down 14.9% from 19,155 last month
• Active Listings (including UCB & CCBS): 18,097 versus 8,630 last year – up 110% – but down 14.7% compared with 21,206 last month
• Pending Listings: 3,657 versus 6,539 last year – down 44.1% – and down 15.0% from 4,301 last month
• Monthly Sales: 5,132 versus 9,265 last year – down 44.6% – but up 4.1% from 4,931 last month
• Monthly Average Sales Price per Sq. Ft.: $265.58 versus $267.92 last year – down 0.9% – and down 2.5% from $272.30 last month

There are lots of small numbers in December’s totals. We have very low volumes of closings because both buyers and sellers are discouraged. Monthly sales are down almost 45% from this time last year, and listings under contract are down nearly 42%. The numbers confirm that demand is very weak compared to normal for the time of year, and even weaker compared to the strong demand 12 months ago. However weak demand does not necessarily make a market crash. Excess supply is what really drives prices down hard. This is what we saw in 2006 through 2008. But in 2023 supply is low and getting lower. It is much higher than this time last year, when it was abnormally low, but it is still a long way below normal.

Activity is very low across the board, but the market balance is normal. By that we mean we have equal balance between buyers and sellers. The trend is now moving in favor of sellers, having been favorable to buyers a month ago. So although there is gloom and despondency almost everywhere, amid the murk there are clear signs of improvement. Because sentiment is so poor, there is psychological pressure to lower prices. However there is no such downward pressure coming from the market. If all trading was done by unemotional computers, prices should be stabilizing right now.

In the real world, strongly influenced by human emotions, prices fell sharply last month, losing 3.5% in the monthly median and 2.5% based on the average price per square foot. However sales prices are a trailing indicator and these moves reflect the balance in the market in November, when we experienced a clear advantage for buyers. Leading indicators are looking more positive. This probably stems from interest rates being less horrible than they were six weeks ago. Demand is starting to stabilize and even showing a few signs of a slow recovery. With new supply very weak, we are not witnessing a market crash. This is merely a correction, with prices now just a tad lower than a year ago – the monthly average $/SF is down 0.9%.

We are still dependent on the whims of the Federal Reserve. If they continue to push the Federal Funds Rate higher in an attempt to curb inflation, then mortgage rates could move higher too, putting a quick damper on any recovery in demand. However if the 30 year fixed mortgage rate stays between 6% and 6.75%, then we should have confidence that the housing market can operate normally at this level. Prior to 2009, anything under 7% was considered a low interest rate and rates under 5% were unheard of.

To achieve confidence we need several months of interest rate stability. This is by no means certain to happen, but it is possible. Once the fear is removed, we should see more signs of a recovery in demand and volumes will rise back towards a more normal level.”