The Early September Market Update from the Cromford Report shows a continued shortage in the market, especially in homes under $250,000, as compared to last year.

Starting with the basic ARMLS numbers for September 1, 2018 and comparing them with September 1, 2017 for all areas & types:

• Active Listings (excluding UCB): 16,222 versus 17,486 last year – down 7.2% – but up 3.4% from 15,686 last month
• Active Listings (including UCB): 19,831 versus 21,355 last year – down 7.1% – but up 2.1% compared with 19,415 last month
• Under Contract Listings (including Pending, CCBS & UCB): 8,871 versus 9,871 last year – down 10.1% – and down 5.5% from 9,384 last month
• Monthly Sales: 8,230 versus 8,252 last year – down 0.3% – and down 3.7% from 8,548 last month
• Monthly Average Sales Price per Sq. Ft.: $161.10 versus $149.47 last year – up 7.8% – and up 0.2% from $160.76 last month
• Monthly Median Sales Price: $262,000 versus $245,000 last year – up 6.5% – but down 1.1% from $265,000 last month

The supply of active listings without a contract rose 3.4% during the month of August, while total active listings increased by 2.1%. These are bigger increases than we saw in August 2017 so there has been a slight improvement in supply even though it remains very low by normal standards.

The count of under contract listings continues to weaken relative to the last 3 years and indicates a gradual reduction in demand. Demand at the low-end of the market cannot be satisfied as the number of available homes below $250,000 is far too low. With supply moving up a little and demand down a little, it is not a surprise to see the Cromford® Market Index lower than last month. It still remains at a significantly elevated level relative to normal, however, and so we are in a strong seller’s market.

Pricing is behaving normally for a seller’s market with 3Q average and median prices lower than 2Q. We still expect 4Q to hit the high point for the year as any weakness in demand is compensated for by long-term shortages in supply.

If you are looking for more analysis of the market, please call us at 602-456-9388.

At Get Your PHX, we believe that all aspects of public policy can impact the real estate market. As such, we think it is worth some time to reflect on a couple little-known propositions on this November ballot, which could have an impact on Arizona’s future, and yours.

First, have a look at Proposition 126. This is an initiative that adds a clause to our state constitution to prohibit taxes on any kind of services. While collecting the 224,000 (minimum) signatures required to put this on the ballot, the backers of this measure told signers that this would prohibit sales taxes on things like haircuts. The backers, the Arizona Association of Realtors (AAR), really only told a small part the story.

The biggest beneficiaries of this initiative would be individuals who make most of their money on services, such as accountants, lawyers and, well, realtors like us. The pitch that this initiative was somehow built around the needs of the little guy was belied by the millions of dollars dedicated to this cause by the realtors.

Further, what they did not tell you was that it is already almost impossible for the legislature to raise taxes. Based on 1992’s Prop 108, the legislature must have a 3/4 vote of both chambers AND the governor’s signature to raise taxes. That has very seldom happened since 1992, and even then only on very marginal tax clarification issues. It certainly won’t happen as long at the AAR has as much control at the Legislature as it does now.

So, why the expense? Proponents claim that the proposition is in reaction to a bill in 2016 that would have instituted some services taxes. However, that bill –sponsored by a group of Republican who wanted to add a few service taxes so that they could lower over-all taxes on income– did not stand a chance of passage.

But, there’s a much bigger problem with this proposition. To illustrate, pick up your smart phone and look at the screen. See all of those apps that you use to make your life easier or fun?

Are those apps services or products? I don’t know, and neither does our current tax code.

It is estimated that, because Arizona has not clarified the difference between products and services in the on-line marketplace, we give up about $200 million per year in revenue to our state budget. To put that in perspective the Red for Ed movement was seeking about $680 million per year in new revenue.

So, what happens if we add this to our constitution? Simple. It would be nearly impossible to update and refine our tax code and we will miss out on even more funding for schools and infrastructure. This can have an impact on our local economy and economic growth and, therefore, the real estate market.

Our goal in presenting this information is to present information that most folks may not see in the press. Obviously we (mostly Ken, since he’s a policy nerd) have a bias. We all do. So, we encourage you to see both sides of the argument in the publicity pamphlet at this link.

Next month: Proposition 306, a Trojan Horse?

We had another active month last month. We had two great properties that just sold, and very quickly. In both cases, the owners planned well in advance to make a move. They upgraded the homes to meet the market and they priced the homes just right, with our help.

This town home on Medlock is in a popular mid-century modern community that has maintained its historic integrity over the decades. The owners purchased this property over a year ago and quickly set about improving on elements that had been neglected. The open floor plan was a challenge, as they were considering taking out more of the wall between the kitchen and the living room. In the end, they decided that the flow of the property made more sense, as is.

We helped our clients purchase this home on west Earll back in 2011. Since that time, they updated mostly decorative elements. The kitchen, while small, had the potential to be opened up significantly. So, there came a decision point: is it worth it to upgrade the kitchen and seek a higher price? Or, should we list the home at a price where somebody else could do that work? Given that our clients were looking for a new home, it made more sense to leave the demolition to somebody else. The price was just right, as we got offers quickly, but still did not leave money on the table.

Those clients are happily settling in to a new patio home in North Central.

The lesson in this market is that you really want to plan ahead. Set your renovation and upgrade goals and work toward them at a pace that does not make the process overly-frustrating.

If you work with us to watch the market on a regular basis, we can pick just the right time to list. Call us at 602-456-9388. 

The 2018 listing activity (aka supply) has been consistently lower than that of 2017.

Seems odd, doesn’t it? I mean, doesn’t it seem like you see another flipper home every time you look around a street corner?

Ask the folks in the greater Coronado neighborhood and they’ll tell you that, I think. Of course, they have other concerns, as older homes are being gutted and doubled in size so that they often look very little like their original historic predecessors –despite the hopes to protect historic homes.

But, I digress…

Back to the listings.  Have a look at the 2018 supply compared to the 2017 supply for Phoenix. Supply has lagged anywhere from 5% (now) to 12% (March).

Why? What’s up with that? What does that mean for you?

First, the “why.” When I’ve spoken to our friends at the Cromford Report, they’ve confirmed to me the same factors we’ve seen brewing for a while: there is an insufficient amount of new construction and labor is tight. So, if developers can’t build or flip quickly due to a labor shortage, we won’t see new listings coming on the market.

What I find particularly interesting is how this breaks down by area.

See this chart. This shows the difference in supply between 2017 and 2018 by major valley areas.

What accounts for this difference? According to Tina at the Cromford Report, South Phoenix has gone gangbusters since week 23 in the median sales price zone. She believes this is one of the only areas where they are building affordable housing in gated communities.

Second, the “what does that mean for you?” If you are selling, this is great for you. Of course, over-price your home in a fit of irrational exuberance, but don’t leave money on the table. We can help with pricing your listing right.

However, if you are buying, it means you are up against an excess of demand. Too many buyers for the supply. Be prepared to compete.

We need to analyze two things if you are thinking of getting in the market: location and availability. Are you looking in an area where a lot of building and flipping is going on? Are you looking in areas that are in need to new inventory?

Call us at 602-456-9388 and we can build a plan together.

Donna Reiner, a local historian and a good friend of Get Your PHX, has written many articles over the years for the Arizona Republic and others about what came before us. We use her services when we list properties of historic significance to help us tell the stories behind the homes.

We are happy that Donna is allowing us to re-publish some of her articles on a monthly basis. If you or your business ever needs a historian, let Donna know at laydeescholar@hotmail.com.

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Mention the name John F. Long to old timers, and the first thing they probably mention is Maryvale.  But it is known to only a few long-time residents of Coronado neighborhood that John F. Long designed homes exist there.  What?  Yes, one of the first, if not the first formally planned infill project in the city of Phoenix in the late 1970s consisted of 15 homes designed by John F. Long being placed on long-standing empty lots in what is now a designated historic residential district. ­

It began in the mid-1970s, when the need for neighborhood revitalization within a city’s inner core swept the nation. White flight or in Phoenix’s case, suburban flight, reduced concern and care for older homes. And those who remained in the inner city were part of an aging and poorer population.

Former Mayor John Driggs spearheaded a group which eventually led to the creation of a Neighborhood Housing Services site selection committee. The pilot site, selected in September 1975, encompassed McDowell Road to Virginia and 7^th to 16^th Streets. While most of the homes within these boundaries dated from the early 1920s and 1930s, it also included lots that had always been empty.

Fourteen financial institutions plus the City of Phoenix, along with a fledging non-profit, Neighborhood Housing Services (NHS), aimed to upgrade this central Phoenix neighborhood. NHS intended to provide a means of neighborhood preservation by offering home improvement loans to owners whose homes in the selected area were in “early stages of deterioration.”

But Mr. Driggs had another idea.  As an executive of Western Savings and Loan Association, he persuaded the institution to purchase often weedy 21 lots in the project site.  He then persuaded John F. Long to be the builder. Driggs’ argument was “new homes on vacant lots could ease central blight.”

Long began construction of the first six homes using two of his long standing designs: The Challenger and The Champion. The former was a two-bedroom model and the latter had three-bedrooms. Only one of these was constructed in the first phase.

Long managed to “fit” his prefabricated homes on odd-shaped lots that were often smaller than those found in Maryvale. However, he was definitely not happy when he had to reduce at least one house by four inches so it would fit the required setbacks. Perhaps that was the primary reason that Long did not continue this type of project beyond his original commitment to John Driggs and Western Savings.

From the 30 applicants, a drawing was conducted May 30, 1978. Six buyers were selected.  Seven more homes were then started for fall occupancy. All total, John F. Long and Western Savings and Loan completed the construction of fifteen homes in the Coronado neighborhood.

Photos by Donna Reiner.

Have you noticed how the Coronado Neighborhood has been really popping recently? Whether its the active neighborhood associations or the Front Porch Concerts, people are gravitating to this part of town.

This 3br/2ba, 1,544sf home is on the  market for $349,900 and we expect it to go quickly with such tight inventory.

Check out our listing page, here.

The Coronado Neighborhood is close enough to downtown and transportation that its convenient, but it is far enough away that its still quite. The restaurants that have popped up along 7th St from McDowell to Indian School include impressive vegetarian options and a whole array of different culinary traditions.

The park in the neighborhood has a pool and lots of space to play, and there are even hidden gems, like the art ally at 13th and about Palm. This is where people have lined the alley with fun and kitschy pieces of art in an alley between the homes. Its one of those things that you don’t know is there until you know its there!

You may feel the same way when you see this listing. It’s a 1925 Santa Fe-style home that is charming and unassuming from the front. But, inside, the owners have added some impressive features. The high-tech smart fan and smart lock technology are convenient and can even save money.

The home had updates in both 2014 and 2016, with new bathrooms, recessed LED lights and low-E windows. The master suite is large, with a walk-in closet and plenty of light.

The lot is large in back and ready for entertaining. You can easily imagine hosting a garden party under the long patio lights, which have been hung from properly-set, large posts. Maybe you’ll host the next Front Porch Concert, but in your perfect back yard.

Don’t miss this one on your tour this weekend.

As a team we are often thinking sustainably. As you know, we highlight Going Green House cleaners because of the work they do to clean homes responsibly. We are also big fans of Greg Peterson’s Urban Farm website. We know that we need to change our relationship to our urban environment, too.

By the way, check out Greg’s podcast featuring the famous Jason Mraz, who has his own urban farming adventures.

So, we thought we’d share these two bits of brain food with you.

First, have you ever thought about the environmental impact of cement? We knew that it uses a lot of energy to create, but this article will give you an idea of just how much carbon is emitted from the production of cement. Cement is the second largest industrial emitter of carbon after the production of steel.

So, here’s the interesting thing: cement lasts longer and is more energy efficient than wood construction homes. But its manufacture is so much more energy intensive up front. Or, to think another way, our water infrastructure leaks enough water every day to serve 15 million households. However, the cement needed to solve that problem with new pipes will increase carbon emissions even further.

This article really explores the few options we have if we are thinking sustainably about cement.

Here’s another great find about how much plastic is in the world’s oceans, land and our bodies and what our options are to reduce its use. Hint: there are no easy solutions, but the knowledge is incredibly important to share.

You might find yourself sucked in to this Youtube page. Kurtzgesagt is the German word for “in a nutshell” and these folks provide entertaining and thought-provoking short videos about all nature of science, history and humanity.

Don’t let that video discourage you, though. Here is a handy website for how to generate less waste at home. Don’t feel over-whelmed! Its all about baby steps and changing habits.

As realtors we believe that we have a responsibility to think sustainably, and share that knowledge with you. You may own your home for more than 30 years –longer than the life of your mortgage. What will our life be like in the desert if we don’t pay more attention to water, carbon and our waste stream?

If you have questions about thinking sustainably, please hit us up at 602-456-9388!

Donna Reiner, a local historian and a good friend of Get Your PHX, has written many articles over the years for the Arizona Republic and others about what came before us. We use her services when we list properties of historic significance to help us tell the stories behind the homes.

We are happy that Donna is allowing us to re-publish some of her articles on a monthly basis. If you or your business ever needs a historian, let Donna know at laydeescholar@hotmail.com.

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Central Avenue north of Osborn Road has two concrete representations of math. Some might even consider these buildings to be quirky rather than elegant. And one of these two edifices even has a popular name.

The lesser known building is The Pyramid on Central located at 3507 N. Central Avenue. How many of you have ever paid attention to that building? Wow, an upside down pyramid. How is it supported and what does it look like inside? The pyramid and its more prominent neighbor to the south, The Financial Center, symbolize the changing landscape of that section of Central Avenue. From desert to farmland, then homes and a school. Eventually over time the commercial structures in this localized area grew from one to two stories to the Financial Center’s 18 stories.

Little was known about the Pyramid’s history for some time. The low square building previously on the property was occupied by the Great Southwest Land & Cattle Company which, along with its president, Ned Warren Sr., was involved in several major land frauds. With that much negative history, no wonder the developers of the property wanted to start with something new and different plus super modern.

Tempe City Hall, the first inverted pyramid design in the state, was nearly ten years old when our inverted pyramid was constructed in 1979. But the Phoenix structure has far less glass than the Tempe City Hall and that lessens its visibility to the casual driver. During the day we merely see a wide band of concrete and only a narrow band of glass. Illumination of the windows certainly would make it strikingly noticeable at night.

The identity of the architect was finally discovered last year in an old lease agreement. Thomas Hite, from Colorado, also designed the futuristic looking McDonald’s in Woody Allen’s movie “Sleeper.” Watch the movie again, just to see that building. By the way, it’s actually a church.

We suggest that you stop and really look at this beautiful geometric shape the next time you are in the area.

This month’s Market Update is about the larger direction in the Phoenix real estate market.

Before I get in to that, let’s look at what the staff at the Cromford Report has to say about the market:

“For the monthly period ending June 15, we are currently recording a sales $/SF of $164.10 averaged for all areas and types across the ARMLS database. This is up 1.0% or $1.64 cents from the $162.44 we now measure for May 15.

Our mid-point forecast for the average monthly sales $/SF on July 15 is $163.80, which is 0.2% below the June 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $160.52 to $167.08.

We are now faced with the third quarter which is almost always a weak period for average price per sq. ft. A forecast decline of 0.2% between now and July 15 would be less than average and has no real significance over the longer term.”

From Cromford Report presentations and our experience in the field, Michelle and I are seeing that we are still dealing with a shortage of supply and an increased demand –despite the fact that permits for multi-family and detached residential have been up since last year.

The new construction of multi-family has been small in CenPho and downtown by comparison to the rest of the valley. Indeed, those condo projects that have happened in CenPho and downtown are largely completed now and sold off. So, what is coming next amid this sea of apartments?

To put this another way, the increasing prices have more to do with supply and demand than they do with loose financing, as we saw prior to the “recession who’s name shall not be spoken.” See below. Yet, the increased number of permits is not keeping up.

At the same time, the number of flipped houses it an all-time high, despite the fact that profits on flips don’t seem to be as high as you might think they would be. Conversations with Cromford indicate that flipped homes will continue to be a dominant force in the market. We want to make certain that the work has been done properly on any flip that our clients consider, and that the flippers complete a full disclosure.

Here are some projections from Cromford:

•Despite reports of Phoenix being overvalued, prices are projected to continue to rise over the next 3-6 months. (We are still in a reasonable range of affordability, but lesser so downtown).

•Luxury homes are expected to continue to be positive due to tax reform changes, exchange rates and stock performance. (Tariffs?)

•Tariffs on lumber and other building materials will have an affect on new home prices, flip costs and remodeling.

•If prices surpass where the Valley should be historically along the 3% annual growth line, then appreciation will probably slow down. This could NOT FEASIBLY happen until early 2019.

So, what does this mean for you if you are buying a home?

It means that you need an experience set of eyes on any home that you purchase, especially a flipper.

Sellers need to still price aggressively, especially going in to the summer. We continue to run in to sellers who (despite our warnings pay too much attention to Zillow, Realtor.com and Trulia), want to list too high. In 90% of the cases, they will learn where the market actually is only after a few months of dropping their prices.

You want to remember that you are up against fully-remodeled homes that feel completely new to buyers.

You can feel free to use the data that we provide. Ask us questions and we will confer with the experts at the Cromford Index, if we don’t know the answer.

We have access to the best data in the state and we are ready to share that knowledge with you.

Contact us at 602-456-9388 if you are thinking of buying or selling.

We are realtors. And, in the space of this newsletter, we do our best to drive just in that lane. We try not to get too political.

We leave other times for that. We are citizens of our country, after all.

However, we would be remiss if we did not encourage you to sign the Outlaw Dirty Money petition. This ballot initiative would require basic disclosure of what we commonly know of as “dark money.”

No level of government can work properly — from the legislature to the Department of Real Estate, unless we have basic disclosure of the money –often laundered– that is being spent to influence our government.

Please take a moment to learn more at this website and find a location to sign the petition in person.