As we wait for the worst of the summer to be over, periodically suffering those straggling 110˚ days that pop up later than it feels they should, here are some more indoor-centered activities and good reads for you.

Historic Orpheum Tour. September 12th at noon. The Orpheum Theatre is a fully-restored 1929 atmospheric theatre complete with a disappearing Mighty Wurlitzer Theatre Organ! Guided tours of the theatre include all public and many non-public areas and offer visitors a glimpse behind the scenes of a movie palace. I went to see All Puppet Players’ summer movie series there. I always love seeing this irreverent group of comedians playing to this most beautiful and historic house. All regular tours last approximately 60 minutes. Free. Ticket info.

Methane gas (marketed as “natural”) is 80x more potent as a greenhouse gas than CO2. Yet both Arizona utilities are talking about adding more gas power plants to our state. Many older ones are nestled in our neighborhoods. Join Poder Latinx, Vote Solar, Western Resource Advocates, and other organizations on September 8th. to learn about the connection between methane gas power plants and health. Plus, hear about clean energy alternatives and how you can get involved in energy policy decisions. Register at this link.

The Frog Prince. Sept 13th at 10am. A favorite fairy tale is back indoors on the big stage, performed with rod puppets and projected scenery! Come enjoy this classic story about a spoiled princess who learns important lessons about friendship and keeping her promises. Singing and dancing to original music make this a great show recommended for ages 5 and up. $10 – $12. Ticket info.

Interfaith 2023 on September 28, 2023 at the Sikh “Guru Nanak Dwara” Gurdwara. There will be a faith Fair in the downstairs Courtyard, Interfaith Discussion in small groups, followed by a “Langar” or community meal. Sikh-owned Indian Restaurants will donate the vegetarian dinner. This tradition involves sitting on the carpet in long rows, then being served by the Sikh Community. Initially, this was done to show value in all people, regardless of the caste system of the times. (There will be some tables / chairs for those unable to sit on the floor.) Register here. For more questions, email Albert@azifm.org.

Thousands of Bats at 44th and Camelback. Most of my readers know about this, but in case you do not, go see the thousands of bats that fly out of a culvert just west of 44th and Camelback at sunset. You can see a fuller report in this article in Atlas Obscura. They will all fly south to Mexico in October, so you will want to do this soon. It’s a treat to watch them duck and dive to eat the thousands of bugs that come out at sunset. Be sure to take somebody who is afraid of bats so that they can see just how amazing and harmless (and necessary) they are.

Why are we paying money so we can pay taxes? It has been documented for a long time that companies like TurboTax and others have spent million of dollars to convince the US government to require most Americans to continue to pay for their products, even though most people could prepare their taxes for free. Learn more in this video about that corruption that forces Americans to pay private companies to do something that they could do for free –and one ray of hope that has emerged. Check out this short video on just how we are getting fleeced.

Local First’s Member Appreciation Event. September 13th from 6-8pm. This September 13, we invite you to an evening of appreciation and celebration, hosted by Local First Arizona and Fuerza Local, at the prestigious Phoenix Art Museum. As the heartbeat of our state’s economy, local businesses deserve to be recognized and honored for their unwavering commitment to making Arizona thrive. Join fellow members and local businesses to access new and exciting materials to showcase your business as locally-owned in Arizona. Register here.

This is the motto that I’d love to see on a million cars around the United States.

I’ve opined in the past that I think the proliferation of investors (mostly institutional) have had a damaging impact on our neighborhoods, specifically, but have also increased homelessness. I think that trend continues and I think we need to begin to take action.

Here’s how the damage has been done.

Over 10 years ago, investors played an important role in making certain that foreclosed homes could be purchased and put to good use. But they learned from those days that they could treat neighborhoods like commodities, bundling them in to real estate investment trusts (REITs) and selling them to everyone.

So, what’s wrong with that?

First, when investors purchase homes, they have a different money calculus than does a home owner. They are willing to pay more because they will be able to pass that on to a future renter to pay their debt. Or, in some cases, they don’t have debt to pay off. But they do have shareholders that demand huge profits.

This goes for both investors in homes that they turn in to rentals and also short term rentals.

So, the increase of investors drives prices up because they are willing to pay more, and for cash. This drives mortgage-backed home owners out of the market.

And, yes, all of this trend started long before interest rates got as high as they are now.

This trend drives up homelessness.

“But what about the mom-and-pop investors?” After all, you might be one and you don’t want to think that you are part of the problem.

Don’t worry too much. Data indicates that it is the increasing amount of investors that are causing the problem, not mom-and-pop investors. This coverage indicates that an increasing amount of institutional investors (state retirement funds, union funds, etc) are investing in single family residences.

According to my friends at the Cromford Report, the total amount of rental properties remains at about 10% of the total inventory, but that the make-up of the ownership has changed, with an increasing amount of investors and a decreasing amount of mom-and-pop owners.

Note: Cromford analysts tell me that it is very difficult to track exactly how much of the total number of homes in the state are owned by investors. This is because some people don’t report honestly what they intend to do with the house. In some cases, the title company overseeing the transaction reports the affidavit of value to the county automatically as “owner occupied”, and nobody challenges it. Further, there is no comprehensive way (at least in AZ) to report a change in use if there is a change in ownership.

However, the increased proportion of investors to mom-and-pops represents the second way that investors drive up rents and contribute to homelessness. Investors, with automated systems and tens of thousands of properties create a less humane landscape driven by high expectations for profits over people. (This On the Media podcast covered the issue.)

The case is often made, quite accurately I think, that homes owned by companies both raise rents faster and are less tolerant of late payments, as detailed in this reporting. If a renter has a problem making rent, they are in a better situation if they know their landlord than if they are interfacing with a bureaucratic brick wall, which has the power to report them to other landlords as a bad renter (even if they are not).

This has created a situation where state governments are trying to solve a problem that they are helping to create. It is difficult to parse out causation and correlation, but I believe that it is possible that Arizona’s very own retirement system is investing in real estate in a way that helps drive up rents and increases homelessness, which taxpayers must pay for in many ways.

See page 11 of the Arizona State Retirement System’s Real Estate Investment Plan. While not all in Arizona, 35% of retiree money is invested in multi-family investments. Other state retirement systems invest in Arizona’s residential real estate. As the entities that run those apartments raise rates, the retirement fund makes more money, but at the cost of low and moderate-income people. It is unclear from this document whether some of this multi-family money is in REITs and/or single family residences.

Third, as we all probably know, the increased number of short and long-term rentals in neighborhoods are increasing turn-over in neighborhoods, decreasing our connection to our neighbors and undermining communities. We’ve seen people organizing around the damage done by short-term rentals. But I think it is a matter of time before we see people beginning to organize around investors treating our neighborhoods like commodity markets.

Fourth, like any investment trend, the trend ends. Investors who flock to an investment from anywhere else will eventually leave. It’s a fact of investing. Is it possible for investors to begin selling of tens of thousands of homes at once in a panic? What will that do to our home values? Or, could this go the other way so that fewer and fewer people can even own a home? In that case, will an investor class becomes the new landed gentry, with the rest of us renting with no intergenerational wealth?

Am I weaving unfairly scary scenarios here? Maybe. I hope I’m wrong. But we are not talking enough about it. All of this lands on top of an urban planning system in the US that favors sprawl and a current legal landscape that discourages dense condo development.

What can be done?

• I’m not sure we can outlaw institutional investors from buying in residential neighborhoods. But I think we should explore that.
• I am certain that we can at least ask state retirement systems to demonstrate that their investments are NOT contributing to increased rents. If they are, then our state retirement funds should not be contributing the problem. I think union retirement funds should do the same.
• States and counties should demand better tracking of whether properties are owner-occupied or used as rentals.
• If nothing else, we should be talking more about this.

From our friends at the Cromford Report. The take-aways:

• No, Karen, we are not in a bubble.
• We have a shortage, and we need more listings.
• Interest rates are very high, but that does not affect all parts of the market equally.

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

• Active Listings (excluding UCB & CCBS): 11,969 versus 18,694 last year – down 36% – but up 6.5% from 11,241 last month
• Active Listings (including UCB & CCBS): 14,476 versus 21,506 last year – down 33% – but up 3.8% compared with 13,945 last month
• Pending Listings: 4,604 versus 5,607 last year – down 18% – and down 4.9% from 4,842 last month
• Under Contract Listings (including Pending, CCBS & UCB): 7,111 versus 8,419 last year – down 16% – and down 5.8% from 7,546 last month
• Monthly Sales: 6,211 versus 5,916 last year – up 5.0% – but down 1.7% from 6,317 last month
• Monthly Average Sales Price per Sq. Ft.: $282.52 versus $286.71 last year – down 1.5% – but up a tiny 0.01% from $282.48 last month

Despite comparisons becoming easier with last year, the market still looks in poor shape. We can see that demand is very weak with listings under contract down 16% from this time last year. The August closing count offers some relief from the gloom, rising 5% from August 2022, but with the 30-year fixed mortgage rate still north of 7%, qualified buyers are thin on the ground.

Sellers are also scarce. Some simplistic commentators are obsessed with imaginary bubbles and assume that if demand is weaker then prices will fall. Not the case. The fact that so many people think we are in a bubble is conclusive evidence that we are not in a bubble. The important measure is the balance between supply and demand, not demand on its own. Supply has been low for several years apart from the brief surge in the summer of last year. This was caused by panic among iBuyers and speculators, both trying to exit the market in too much of a hurry. At the moment supply is down more than demand is down, so prices are firm.

Without a large and prolonged increase in sellers, we won’t have the lop-sided market that causes prices to fall. We do have a small increase in supply compared with last month, but we are still down 36% from this time last year. If supply continues to grow at 6% or more for six months or more, then we could get back close to a balanced market, but at the moment we are seeing just the usual seasonal pattern. Supply tends to expand from August until mid November and then contract again.

It might seem that prices are weakening given that the median sales price is $435,000, having been $443,000 two months ago. This is a drop of 1.8%. However, luxury home sales are relatively scare in July and August and we can see evidence of this from the fall in the average home size between June and August. This dropped almost 3% from 2,022 to 1,965 over the same two months, so median prices falling less than 2% tells us the underlying trend is still positive. The luxury home market share and average home size will no doubt bounce back in October and we should be able to see the upward trend reasserting itself more visibly.

One geographic segment of the market looks more favorable to buyers than the rest, that being Casa Grande. Here supply is relatively plentiful with 296 active listings without a contract. To compensate for this, sales have been much stronger than last year. If pricing were to weaken, this would likely be the first place to detect it.