Why does Phoenix still have such a shortage of properties?

As we learned from my previous posts on this series (part 1 and part 2) this inward migration from the east coast and midwest into Phoenix is one of the key reasons home prices will continue to rise for the foreseeable future. There’s a logical explanation for the shortage of properties.

Look first at the motivation for out-of-state companies to come here in the first place:

It started when California changed their tax code and started to tax the Internet retailers. So when those Internet retailers started coming into Phoenix, they began by taking up our warehouse spaces. At the same time the Arizona legislature restructured our tax codes so that we were more competitive with states like California, Texas, and New Mexico. ~ Tina Timboer, Cromford Report

Notice our standard of living here compared to other major cities. Those companies coming here don’t have to pay their employees as much money. Why pay them a six figure salary, when they can get the same middle class life out here, but for much less? You can get a 2,400 sq ft, four-bedroom, two bath home out here for very affordable prices. Compare us against New York, San Francisco, even Texas. Plus, GPEC (Greater Phoenix Economic Council) has just done a great job to attract those out of state businesses, too.

We’ve noticed a serious slow-down in buying and selling in the last three weeks.  The exuberance of the first and second quarter has given way to tightened inventory in the third quarter, while interest rates climb.

The problem is that the rise in interest rates has scared a lot of people, even though rates are still really low.

I want to share these three graphs with you. The first is the movement in the 30-yr fixed interest rate. See that shift upward over this year? Its really only one percentage point.
 You can see more here:

http://www.freddiemac.com/pmms/pmms30.htm
http://research.stlouisfed.org/fred2/graph/?g=lHz

So, why the shock? Its like the effect that a dollar increase in gas has on driving: it makes people pause and think about their future plans.

Check out the other two graphs from the Cromford Report, below. They are of the 3-month and 12-month moving averages for homes in the CenPho area, which make up the majority of the sales ($100k to $600k). See how the price per square foot continues to rise in CenPho?

By the way, the higher interest rates I believe mean less chance of a bubble, which was slim anyway.

So, here’s the challenge and the opportunity:

1) If you want to be located in the central valley, you are in competition with people for a small supply of homes. The interest rates will cause a pause, but people will realize that 5% is still really low and they will continue to buy.

2) The opportunity comes in those homes where the sellers listed too high thinking they could make take advantage of that exuberance (which they don’t realize is gone). 

3) If you are thinking to sell, keep an eye on interest rates, but don’t get wedded to them. The tight inventory will have more of an affect on sales success, but if they continue to rise, it could dampen the market.

Please let me know if you have other questions.  I can help you buy or sell your home. Please give me a call at 602-456-9388.

Jump back to late 2010. At an urban infill site on the south end of downtown Phoenix, designer and visionary Vincenz Saccento has just installed three multi-units of his shiny, silver, boxes:  called V100 Modboxes. Watch this 3-min video produced at the time. Be awed. Be inspired. Be proud of these inventive Phoenicians. Then keep reading.

Did you watch the video?

Now hear this: From Get Your PHX, I bring August 2013 news of what has not been publically known until this very moment…

In the video you saw, you learned that the V100 Modbox can be constructed in just few days by people with no technical training. Well, get this. In my conversation with designer Vincenz Saccento last week, he told me something not previously announced to the public:

A full modbox can now be constructed in just 7 hours, by a single person, with no tools, and zero prior building experience!

That’s right. Seven hours. Still with no nails, screwdrivers, or hammers required. No screws, nails, or wood.  This baby is high-tech structural, aviation and aerospace materials that a school teacher or college student could build. But wait, there’s more!

That’s right, folks. When the last article about V100 Modbox was published in 2010 by Blue Vertical Media, the 2010 material for the walls was 4″ thick.

That’s the thickness of the walls in which Vincenz lives, today. They exceed the standards for LEED Platinum certification (meaning that out of 100 possible points in categories of the sustainability of the site, water efficiency, energy & atmosphere, materials & resources, indoor environmental quality, and innovation in operations, the V100 Modbox far surpasses this rating).

So those 4″ walls are maybe an R35 insulation rating. He then showed me a piece of the wall for the next incarnation they’re building with today:

It’s 5/8 of one inch thick! Much less expensive. AND…

It’s like an R-zero rating. It could be 3000 degrees outside and that heat’s not getting through,” said Saccento.

The neighborhood in this hugely rundown area of town has been changing for the better since the V100 Modbox came here. Attitudes are changing. Neighbors are cleaning up outside their homes. Surprisingly, nobody has graffitied the Modboxes.

More of the same?

The “shimmery 10’x10‘x10’ boxes” are ready to go. Vincenz Saccento could have 100 of them ready in a month, if an order asked for them. But that’s not what he’s preparing to do next. He’s got his sites on a pop-up mall.

You go to an empty piece of land for 3-5 years and put in coffee, breakfast, lunch, bar, working/co-working space. Maybe it’s 40ft x 40ft x 20 ft.” ~ Vincenz

I heard last year that 2011 was the first year since the 1940s that more people moved in to urban cores than moved out. Well, I was wrong. It was the 1880s!

Check out this article from the Daily Mail about the book called The End of the Suburbs: Where the American Dream is Moving, which maintains this point.

I’ve seen this anecdotally for a while now, as I help people who want to live more centrally. They are tired of the commute, the empty neighborhoods and “lack of cultural amenities.”

It is difficult to prove that this is represented in the housing market in Phoenix, but we agents see it. Below is a little bit of information that sheds some light on what it means to live in an urban core now. Notice that two major central Phoenix zip codes lost less of their value than most other zip codes in the study.

I stand by my position that density equals security and prosperity –at least for a couple generations, I hope!

To learn more about specific neighborhoods, please give me a call at 602-456-9388.

The summer is turning out to be a good time to buy. Unlike the late spring, sellers are a little more realistic about prices. However, we expect activity to pick up in September, as people come back from vacation and begin listing their homes in larger numbers.

I’m going to shamelessly lift some comments now from Mike Orr of the Cromford Report about Listing Success Rates, because its a good way to think about what is selling out there right now:

“One of the statistics listing agents like use to set seller expectations is the Days on Market for sold listings.  They use it as a guide to show a homeowner how long they should expect to wait for their property to sell.  The downfall of this measurement is that a property could come on the market at the beginning of a seasonal slowdown (like July or August) and all of the sold DOMs would be recorded during the busy Spring and early Summer months.  Obviously during those months the DOM may be shorter due to the heightened buyer activity that occurs every year at that time, so DOM is not necessarily a good indicator for future marketing times in this instance.  Conversely, if a property is being listed in January, all of the DOM measurements would be for the slow Fall and Winter.  So therefore, not a good indicator for future marketing times during the busy Spring season. 

An alternative measurement to consider is the Listing Success Rate.    This measures the number of properties that sell during the month vs. cancel or expire.  It can be measured by city, price range, dwelling type and transaction type.  The chart below tells us that in the month of July, of all the properties that came off of Active status 79% closed escrow while 21% cancelled or expired.  This is a high success rate, in a normal market it falls between 60%-70%.  It is also a significant improvement from May of 2011 where 36% of all properties that came off the market cancelled or expired vs. selling.”

In short, if you are listing over the summer, expect to be on the market longer, but know that your success rate is still, in historic terms, probably going to be relatively high. See below

If you are starting to look or list, call me at 602-456-9388 if you want more insight and information.

In order to gauge a correct ‘supply and demand’ temperature for today’s Phoenix, it’s important to understand how far we’ve come.  (If you missed last week’s post, be sure to read part 1 of this series to catch up on the new definition of ‘supply and demand’).

Our market is a lot more complicated that it was in 2004/2005. Today, you do need a job to get a loan. It’s far more important than it was in 2005 when loans were as easy to get as raising your hand in class.

The nation’s unemployment rate had soared to over 10%. Maricopa County’s employment rate this past January? 7.1%. It then went down to 6.5%, then 6.6% and now we’re at 6.5%. Tucson is just a touch behind us at 6.7% unemployment.

Our biggest areas of growth are leisure and hospitality.

Because most of our losses were in leisure and hospitality, this is a good thing. A lot of the losses were in the construction and tourism industry when we went through our unemployment. Those industries are now in the top three and haven’t been since 2011.  ~ Tina Timboer, The Cromford Report.

Education and health services were one of our top growths in 2011 and 2012. So now construction is starting to pick up, as is professional business services.

We’re one of the fastest-growing cities in the nation for bioscience (“Arizona bioscience sector adding jobs at four times the national rate“) and high technology. The average income in these sectors is $85,000 a year, an increase of 15% since 2011. As you see we have a lot of good things happening here.

We’ve had 30 companies either relocate or significantly expand their business out here – and 10 within just the last year; big ones like State Farm, Union Bank. ~ Tina Timboer, The Cromford Report.

These things we’re talking about are a big part of the macro view on the issue of supply and demand here in Maricopa County. It’s the why we know that home prices will continue to go up in the foreseeable future. How is this happening? What winds shifted (or are shifting) that is drawing businesses to expand or migrate here? How do we account for those 30 companies migrating here in the first place? And because they are coming here, why do we still have such a shortage of properties?

That’s right. Next week!

To buy or sell with the our city’s macro view in mind, please call or email me at 602-456-9388 or ken@getyourphx.com

[‘now and then’ photo by Melody Ayres-Griffiths]

The average website visitor reads from a screen at 180 words/minute. I’ve already used 15, so I better get to the point of the matter. Which is this:

The only thing that really affects our supply and demand of homes in Maricopa County is people going out of, and people coming in to, our County. ~ Tina Timboer, The Cromford Report

That’s right, folks. Migration.

There used to be other things that affected supply and demand (and we’ll get to those in part 2 of this market analysis) but not any more. Some of you are looking to buy. Some are looking to sell. After you hear what I have to share with you, you may want to rethink your plans. Or, you may find your plans are confirmed by what you learn.

Some of you may want evidence that what I’m about to tell you is certifiable and trustworthy. I’ll tell you. It’s because it comes from The Cromford Report. For those who’ve not been following my blog posts for long, you don’t know how much I admire this report. If The Cromford Report were touring like The Grateful Dead or Phish, I’d follow them around. If Ben & Jerry’s were looking for a new flavor, I’d suggest they call it ‘Cromford’. Don’t just take my word for it. Listen to what Tina Timboer, the absolute Guru of all things Cromford, has to say:

Prices will continue to go up in Maricopa County for the foreseeable future.

How do we know this? Because Michael Orr, the founder of The Cromford Report is an Oxford educated mathematician. Because he is the Director for the Real Estate Theory and Practice of ASU. Because he personally cleans up all the public record data for ASU’s Real Estate department. Because The Cromford Report does not buy/sell property, but is solely an analytical firm. Michael Orr puts together all the data at The Cromford Report. Nobody knows the real estate market better than Orr.

Let’s get back to supply and demand. You’ve been hearing a lot about interest rates and you want to know what the long-term trend will be? How will interest rates affect buying/selling homes? Next week, I’ll share what Tina had to say about the macro view on the issue of supply and demand here in Maricopa County and how we know that prices will continue to go up in the foreseeable future. Yes, because Michael Orr said so, but more importantly, it’s why he says so.

Trust me, you’ll nod your head and think, “That makes perfect sense. I should look at the macro view more frequently before I hear the news tell me the Case–Shiller Home Price Index says homes are selling for X amount nationwide. Which is just like saying the average temperature in the country is 76 degrees, but golly it’s 110 degrees in Phoenix!”

Exactly. Come back next week to hear what the supply and demand “temperature” really is in Phoenix and why.

To buy or sell, informed and with confidence, give me a call or email me at 602-456-9388 or email me at ken@getyourphx.com

  [migration photo:  Billtacular]  

This time last year the summer sky was overcast and the rain was on it’s way. This last week, we got over 117 degrees and there’s a 10% chance of rain, but I don’t know that I believe it will actually happen. A year ago this week, short sales were all the rage and the Mortgage Forgiveness Debt Relief Act allowed you to avoid paying taxes on mortgage debt forgiven–but that ran out at the end of 2012.

Speaking about the end of the year, we’re in the second quarter now and that Q4 time from October through December will be here before you can say “Jimmy Crack Corn”. As the old-time realtors say, “Them be the slow months. Might as well kick up your heels and sit for a bit”.

But as I find myself thinking about the end of the year, I can tell you in my experience that last Halloween through New Year’s was all work for me in the real estate business. People were buying and selling through me last Q4 like there was no change of the season.

What “they” say is supposed to happen is that people stop buying or selling houses because the holidays just creep up on them and they get distracted. They say the market slows down after the summer and maybe you can negotiate a better deal during the holidays or Christmas. That has definitely not been the case for me in the last three years.

Look at previous years in the chart below. You’ll see this is generally true; especially around Thanksgiving. In the first chart, you’ll see the last nine years. Some of them drop off drastically, but come back around February.

In the second chart you will see 2004 and 2005 compared to 2010 and 2011. In ’10 and ’11 there was a little drop around November, but then we just picked right up again.

In other words:

ONE: Don’t assume the end of the year is going to be slow. Selling or buying? Take advantage of the active market during the summer months.

TWO: It’s been hectic the last two years. We have every reason to believe it’s going to be hectic this year, too.

THREE: If you want to buy or sell, Summer, Q3 or Q4 or beyond, give me a call at 602-456-9388 or email me at ken@getyourphx.com.

I’ve been seeing properties dropping in price because sellers listed too high recently, watching an upward-trending market. But, watch for prices to level in CenPho over the summer, followed by a push upward again in September. To be clear: this is not a price drop, it is a plateau. So, you won’t be able to offer 20% less to a seller and be taken seriously.

The graph, below shows how those prices have started to plateau a little, going in to the summer.

In the next four months, watch for fewer properties to come on the market and for it to take longer to find the right house. But don’t give up!

If you are starting to look, call me at 602-456-9388 if you want more insight and information.

 You have to give it to them. Despite upcoming triple digit temperatures, the Phoenix Bike Community never stops peddling.” ~ Me, in 2012.

I wrote that in a post just over a year ago (“Can we measure distance in miles per doughnut?“) and the (then) upcoming Celebration of the city’s growing bike scene, as an event we know as Pedal Craft was just kicking into its second volume.

Here we are: June 2013. My, how quickly things pick up when people get excited about the possibilities of something… This past April, just five months after Phoenix Spokes People (PSP) formed–a group of urban cyclists dedicated to making Phoenix a friendlier, more welcoming place to ride a bike–they were represented at nearly all of the 19 community budget hearings for the City of Phoenix.

It’s not sexy, standing up and asking politicians for a much-needed increase in funding for bicycle infrastructure, but it gets the job done. Prior to PSP’s activation in the budget hearings, the city of Phoenix was spending a paltry $50,000 per year on bike safety and improved infrastructure.

Word spread quickly and we are fast becoming a popular group to join in the Phoenix bicycling community. We believe that bicycling should be an easily accessible form of transportation for people of all ages, incomes and abilities. We imagine a Phoenix with people dressed up or down – going to work or heading out for a night on the town – and getting there safely by riding their bike in a proper bike lane.” ~ Lisa Parks, PSP advocate

To put that $50,000 city of Phoenix bicycle budget in context: The country average for a bike infrastructure spending is $1 per person. In Atlanta, it’s $6 per person. Phoenix is a mere 3 cents per person!

 April 2013 Bike to Work Day (photo by Jonce Walker)

Or rather, that WAS our bike budget… That was before the Phoenix Spokes People took to our Phoenix streets and raised their voices with facts, figures, encouragement, and accountability on how the money should be spent. The result is that PSP made a difference!  The approved budget for the City of Phoenix now includes $1,500,000 to make our city more bike-friendly!

We’re sending the message that biking and walking and all multimodal transportation is as important as vehicular traffic in the city of Phoenix,” Mayor Greg Stanton.

Phoenix Spokes People has monthly meetings and monthly rides. If you bike Phoenix, they’d love for you to join them!

PSP members (Lisa Parks, John Romero, Mayor Stanton, Sean Sweat, and Joey Robert Parks) with Mayor Stanton at the first budget hearing of 2013 (photo by John Romero)

Providing neighborhood choices and transportation choices, and neighborhood choices that allow you to reduce transportation costs — are really essential for the success of Phoenix,” says Curt Upton from the city’s planning department, who’s part of the Reinvent PHX management team. “From an economic development perspective, the stakes are pretty high for us to make sure that we’re a livable city and we’re an attractive city going forward.” ~ The Atlantic, ‘Phoenix’s Walkability Gamble Might Actually Pay Off‘

(And what about Pedal Craft volume three? Sign up for details at the link.)

If you want to buy or sell, please give me a call at 602-456-9388 or email me at ken@getyourphx.com.