For the August 2017 Market Update, we are turning to look at the role of rentals on the sales market, with the help of Tina at the Cromford Report.

For those of you who own rental property, or who are deciding what to do with your rental property, this month’s analysis is particularly relevant.

Here’s the Cromford take on the August 2017 Market Update.

For Buyers:
Good news for buyers, listings for sale between $150K and $300K stopped declining over the past 4 weeks.  This is good news because as the summer progresses, there are fewer buyers to compete with in the marketplace which offers a seasonal relief for those still willing to brave high temperatures and scalding door knobs to view homes.  Supply is still extremely low, but this slight improvement gives as much relief as a hot breeze on a July afternoon.  It’s not much, but it’s something.  Meanwhile, luxury buyers may notice fewer properties to look at this summer as demand was higher during the Spring season and overall inventory has been dropping due to a higher number of closings and seasonal cancellations/expirations.  Expect inventory in price ranges above $500K to continue declining seasonally until settling into a stagnant level in August and early-September.

For Sellers:
There has been a lot of talk about the increased production of luxury apartments and what impact they will have on the residential real estate market.  One segment that is starting to see their influence is apartment-style condominium rentals leased through the Arizona Regional MLS.  While rents on single family homes and townhouses continue to rise, successful leases of apartment-style condominiums have dropped 11% in average rates from a high of $1.26/sf in January 2017 to $1.12/sf by June. The drop is consistent across all lease price ranges for this type of rental and is not seasonal.  Areas that have been particularly affected are Tempe, Old Town Scottsdale and the Central Corridor including Downtown Phoenix.  Considering the lack of supply for sale in affordable price ranges and the added competition from brand new apartment complexes, this may be a good time for landlords of apartment-style rentals to consider selling if they’re unwilling or unable to reduce their rental rate.

Commentary written by Tina Tamboer, Senior Real Estate Analyst with The Cromford Report
©2017 Cromford Associates LLC and Tamboer Consulting LLC 

What we’ve seen for the August 2017 Market Update anecdotally may seem to contradict this analysis.

We had clients who purchased an affordable condo at about $90,000 in CenPho. We closed very quickly (three weeks) and, since the property was vacant, prepared them with resources to get ready to rent the property as soon as they closed. They advertised the condo for rent and had about 8 possible renters within days. They interviewed, chose and the new tenant moved in this week.

In other words, they were clamoring for an affordable rental.

The reason this does not contradict Tina’s analysis may have to do with price point. The new build apartment complexes that she is referring to are often renting much higher than a 40-year old condo. We have often felt that the new rentals are priced too high for the market, and I think that is why the rental rates for the new properties have dropped. As we’ve said before, the apartments are over-built.

That will probably continue to depress rental rates. If you own an older property, however, you are probably right where the rental rates need to be.

So, if you are thinking of purchasing a rental property, now may be the time. Give us a call at 602-456-9388 and we’ll help.

I saw this article in AZCentral which asked what renters need to earn in Phoenix in order to live here.

Y’all know that I’ve been critical of the number of apartment units that have been going up in Central Phoenix, as well as the fact that they are priced way above what is affordable here.

But, here’s the next question: What do these same renters need to earn in order to purchase?

Of course you would expect a realtor to ask that. We all just want to get everybody to buy a home, right?

Wrong.

I don’t actually believe that everybody need to purchase a home. However, the last I checked (about two years ago) there was a 6-to-1 ratio of apartments being planned downtown to owner occupied homes being considered. Those apartments have since been built.

While home ownership is not for everyone, I do think those numbers are way off.

But, I digress.

This article addressed what millennials need to save in order to purchase a home. The article is terribly misleading because it assumes that they need to save 20% of the median home price (about $27,000) to buy. So, it predicts that it will take them 13 years to save that.

Near the end of the article, they admitted that people can still get FHA and Conventional loans for 5% down, and under. But, very, very few people actually purchase with 20% down. So, why start the article on such a misleading point?

Oops. I digressed again.

The reason I asked what that same apartment renter needs to purchase a home is because I know that apartment companies are charging much more than what these folks would pay to own a home, if only they had good credit and down payment.

In other words, renters pay a premium for living space (more than owners) when they don’t have good credit and funds to purchase a home.

So, the question to be answered is what is the real minimum income that a person would need to make in order to purchase a home in Phoenix?

The answer, of course, depends on where in Phoenix they purchase and how much they have to put down.

Let’s assume they are making just enough to afford the county-wide median home, at $245,000. Let’s assume they bring the minimum down payment for FHA at 3.5% and that they have just enough to cover closing costs. Let’s also assume about $8,600 for down payment an another $4,500 for closing costs.

That $245,000 home (assuming no HOA fees) will cost you about $1,500 per month, depending on property taxes. I think that many, if not all of the apartments downtown cost more than per month that AND are probably smaller.

Just a disclaimer: I’m not a lender. So, this is just an illustration. If you are thinking of buying a home, I can share some leads for you of great lenders.

So, what is a minimum of that renter needs to earn in order to purchase? According to my calculations, about $40,000. Again, I could be off, so talk to a lender. But, my point is that home ownership is much more attainable than many think –and that’s where the apartment builders get you!

If you are thinking about purchasing a home, please call us first at 602-456-9388.

Usually, you see images of our listings in this section. However, we sold all of our listings!

Its a nice problem to have, but it sure does leave this section of the newsletter a little barren.

So, I would like to ask you to do one thing for us to bring back those nice photos.

Please support our Charity Referral Network.

You may have seen the following phrase on my email signature or in the Clark Report: “You refer, we donate. Call me today to find out how we can support your favorite charity. We appreciate your referrals!”

This is our attempt to focus positive attention on those charities that you care about, and which do so much good work here in Phoenix.

Here is how it works. If you send us a referral for a home sale or purchase, and that transaction closes, we will make a donation to the charity of your choice. We will post on our blog and on Facebook that your referral was instrumental in making that donation happen.

It is as simple as that. Thank you!

Please give us a call today at 602-456-9388 for more.

As we do each month, we check in with the Cromford Report for their monthly update. Here’s your July 2017 Market Update.

For the monthly period ending June 15, we are currently recording a sales $/SF of $151.10 averaged for all areas and types across the ARMLS database. This is up 0.4% from the $150.45 we now measure for May 15. Our forecast range midpoint was $151.94, with a 90% confidence range of $148.90 to $154.98. We were correct in forecasting a rise, but the actual rise was only about half as big as forecast.

On June 15 the pending listings for all areas & types shows an average list $/SF of $154.91, up 0.6% from the reading for May 15.

Supply has been falling quite sharply in the last few weeks while demand is little changed. However, we will shortly be entering the third quarter, a period famous for weaker pricing. This is because the luxury market loses a lot of sales volume during the hottest months, whereas the rest of the market slows to a lesser extent. This is a seasonal effect and does not indicate underlying weakness. We would expect the upward price trend to resume once we get to the end of September.

Now back to you, Ken.

Thanks, Tina.

So, here’s our more anecdotal view of the July 2017 Market Update for Central Phoenix and the historic neighborhoods. We are seeing property prices continue to move up in CenPho at a faster clip than the county-wide numbers. The chart here is for all prices. When I looked at different price brackets, the move remained.

In short, people want to live in CenPho. But you knew that, didn’t you?

We don’t believe that this means sellers can price absurdly high and expect to get what they want. Two of our recent listings downtown did have small price drops off of the original list price. That’s normal.

The Cromford Index continues to indicate a strong seller’s market, stronger than the last two years. This is, in large part, due to the shortage of available homes. You’ve heard me recently complain about the over-built rental market. Some of those projects could have been condos. This is the result.

As we often say, your decision to buy or sell should be about need rather than a desire to play the market. We can help you make the best decision with market-based data and experience.

Call me (Ken) at 602-456-9388 and let’s chat.

The green cleaning tip for July 2017 from our friends at GoingGreenHouse Cleaning is all about air quality. After all, it’s summer time and with kids home from school we have a lot going on inside our homes.

Did you know that indoor air quality can be two to five times more polluted than the air outside? There are a wide variety of toxic chemicals lurking in your home and we often don’t think about all of the carcinogens that are swarming around in our air —from the cleaning products we use, candles, toiletries, clothing, and even the furniture inside our home, we are constantly polluting the air inside our home.

The Environmental Protection Agency estimates that we spend approximately 90% of our time indoors. Arizona summers are HOT and can be quite brutal. As summer creeps up on us we tend to spend more and more time indoors. Why not protect that air the best that we can?

Poor air quality can threaten your family’s health, so it’s important to keep things out of your home that cause pollution and ensure that your home is well-ventilated.  Here are a few ways that you can ensure you are being proactive this summer when it comes to the air inside your home:

1. Indoor plants

So, how do houseplants clean the air? Plants absorb some of the particulates from the air at the same time that they take in carbon dioxide, which is then processed into oxygen through photosynthesis. But that’s not all, microorganisms associated with the plants are present in the potting soil, and these microbes are also responsible for much of the cleaning effect . Here are a few examples of good air purifying plants:

Garden Mum: In NASA research, garden mums were found to be a air-purifying champion. They remove ammonia, benzene, formaldehyde, and xylene from your homes air. Plus they are cheap and readily available at any garden store.

Aloe Vera: Aloe Vera leaves are full of a jelly-like liquid that is chocked full of vitamins, enzymes, amino acids, and other compounds that have wound-healing, antibacterial, and anti-inflammatory properties. So as well as being a great resource for your medicine cabinet (think burns, scrapes, bites, etc) Aloe Vera also removes formaldehyde from the air.

Spider Plants: Shown to remove formaldehyde and xylene from air. They are super easy to grow indoors but need bright sunlight. 

2. Beeswaxcandles

Regular paraffin candles are petroleum derived and can release chemicals like benzene, toluene, soot and other chemicals into the air. These types of candles do more harm than good for indoor air quality and should be avoided. Pure Beeswax Candles, on the other hand, burn with almost no smoke or scent and clean the air by releasing negative ions into the air. These negative ions can bind with toxins and help remove them from the air.

3. Salt lamps

Salt lamps are another natural way to clean indoor air. Have you ever seen a salt rock lamp or do you own one without knowing exactly what it does? Salt crystal lamps, similar to beeswax candles, emit negative ions into the atmosphere which restore and neutralize air quality. Our homes and offices are filled with electrical appliances and electronics (televisions, computers, fluorescent lighting, microwaves, heaters, air-conditioners, etc.) all of which emit positive ions. Positive ions are known to reduce our energy levels. Balancing positive and negative ions also help reduce airborne infections.

4. Bamboocharcoal

Another natural air cleaning option for your cleaning tip for July 2017 is bamboo charcoal. Charcoal can have a toxin-removing effect on the air. Use bamboo charcoal in burlap bags in you house. They work wonders for odor removal and removing toxins from the air.

5. Essential oils

Multiple studies have shown that diffusing essential oils actually kills mold and mildew. Lavender, eucalyptus and tea tree oil all have powerful disinfecting properties that will combat air-borne bacteria and also dust mites, as well. Simply put a few drops into an essential oil diffuser and diffuse away.

Keep your air pure this summer and rest assured that your family is safe at home!

cleaning tip for July 2017

For your June 2017 Market Update, we check in again with the Cromford Report who tell us, in short, that the market is chugging along at about the same upward climb that we’ve been experiencing thus far this year.

“For the monthly period ending May 15, we are currently recording a sales $/SF of $150.42 averaged for all areas and types across the ARMLS database. This is up 0.1% from the $150.25 we now measure for April 15.  We were correct in forecasting last month that the average $/SF would rise less quickly, but after an extremely strong rise between March and April we saw a very small increase over the past month.

On May 15 the pending listings for all areas & types shows an average list $/SF of $153.97, up 1.3% from the reading for April 15. So although last month’s rise was pretty small, we are still expecting a respectable increase in prices over the next 31 days.

Beyond those 31 days we would expect to see 3 months of price weakness as the third quarter sales mix tends to include fewer high end homes than the rest of the year. However there is no sign of supply and demand converging and the overall long term trend is still upwards.”

Price per square foot for Cenpho, 12-month moving average

I was on the phone with Tina Tamboer at the Cromford Report this week, speaking about our predictions for 2018 for the June 2017 Market Update. As you recall, I was concerned earlier this year that emigration patterns could have a impact on the market. But, as Tina points out, if people begin to leave Arizona, they won’t do it overnight. It is still too early to tell whether there could be some affect on the market.

We continue to hear rumblings of a market correction in 2018. But, most of what I hear is a “flattening” of about 3%. Well, we’ve seen that growth in the last year, so we are not talking about the type of correction that is likely to result in major losses for home owners who purchased some years ago.

It might mean, however, that if you are waiting for home prices to reach 2007 peak levels in 2018, you might have to wait a few more years.

CenPho Price Per Square Foot, 3-month moving average

In the Central Phoenix and historic districts, both the 3-month and 12-month moving averages for price per square foot are strong. People want to live downtown. So, if you are looking to purchase, it is still a good time to do it. If there is a 3% correction in 2018, that won’t even account for the price difference between December of 2016 and today. But, if there is no price correction, then you are looking at even more expensive homes in this land-locked area with no new construction for owner-occupiers. (Thanks, over-built apartment market.)

If you need to put together a strategy to purchase, give us a call at 602-456-9388.

Our friends at the Cromford Report give us the county-wide scoop for this May 2017 Market Update, as they do every month.

Supply is even further below last year than it was last month, both in total active listings and in active listings with no contract.

The monthly sales rate is down over 6% from last month, but this is a very unfair comparison. March had 23 working days and April, because it had a weekend at both ends, only had 20. With 13% fewer working days we could easily have seen sales drop a lot more than 6%, so demand remained in strong shape throughout April. Sales were up 3% from April 2016, but in 2016 April had 1 extra working day, so that again is a pretty strong result.

Sellers remain in charge of the market in most sectors and price is responding accordingly. The average sales price per sq. ft. is our preferred method of measuring prices and it is up over 7% from last year at this time.

Sales are extremely hampered by lack of supply below $200,000, but above $200,000 supply is more free flowing and sales are up by very large percentages from 2016.

So in summary almost the whole market is humming along with all cylinders firing. However there is little sign that it is going to move up a gear from here.

The Cromford® Market Index appears to be making little effort to surpass its recent peak of 147.5 thanks to a very slight weakening in some demand indicators (including listings under contract). We are at a point where the seller remains in firm control but the seller’s advantage is no longer growing stronger.

Anecdotally for this May 2017 Market Update, we’ve seen a slight slowing in the number of showings in all listings, as the year progresses. I would hate to speculate as to why that could be –anything from national political uncertainty to local unhappiness with the available supply.

But in the end, when we see slight shifts like this, we suggest you watch the market for other indicators of changes. There could be a shift brewing.

We have already opined that, if you are thinking of selling, then 2017 is probably the best time to do it. We are over-due for a market correction in Arizona, and that may put downward pressure on house prices by early 2018.

So, the take-away? If you are thinking of selling, let’s get a strategy together. If you are thinking of buying, you might consider taking a little more time building up cash reserves so you can bring more to bear to your next purchase.

If you need to do both, well, we’d better get a cup of coffee and talk. Please call at 602-456-9388.

Our friends at the Cromford Report paint a picture for this April Market Update of a stable, but upward-trending price line, probably fueled by a reduction in supply.

This may be why we all keep getting those annoying form letters in the mail offering to purchase our homes. (But we all know that those buyers are just fishing for people willing to sell their homes at a discount, don’t we?)

Anecdotally, for this April Market Update, we see lots of buyers coming to us. We’ve also had a fair number of sellers talking to us about selling. Not all are pulling the trigger, so there might be some hesitancy on the selling side of the equation.

There could be many reason for that. Despite record stock market highs, folks might be a little uncertain about what is coming next, and whether they should sell now or wait.

Anyway, so sayeth Cromford:

“Supply is significantly down from last year, especially in terms of active listings that are not in UCB or CCBS status. A drop of 12% is not to be sneezed at and makes life hard for most buyers.

The monthly sales rate is very strong, up almost 11% from last year, though this year over year growth is a little less than we saw last month. Surprisingly, we are not seeing the same growth in pending listings or in listings under contract. These are running close to last year’s numbers.

Pricing continues to advance, though not at any alarming rate. In fact the median sales price is unchanged from last month. This just shows one of the disadvantages of medians – they tend to cluster at round numbers, like $230,000, and resist moving by small amounts. Our more reliable indicator, average $/SF indicates an appreciation rate of 6.1%, better than last month’s 4.8%.”

Interest rates are on the way up!

We’ve been hearing talk of it for a while, but now its probably going to be a reality — not once, but maybe three times in the next 18 months.

So, what does this do to the price of a home? As you can guess, a lot!

For instance, if you buy a $200,000 house at 4.5% interest with a 5% down payment, your monthly payment (before taxes and insurance) would be $962. The same house at 5% interest would cost $1,019 per month.

That extra $57 per month difference may not seem like much. However, that is $684 per year or $20,520 over the life of the loan!

I don’t know about you, but I can think of a few things that I could do with that money. There are a few countries on my bucket list that I’d like to visit and I don’t want interest rates to keep me from going.

Another way to look at it is that in order to have the same payment every month that you had at 4.5% interest, you could only afford a house that costs $189,000 at 5% interest.

So, what does this mean? It means that you want to consider getting in to the market before interest rates go up.

It also means that you probably want to act before both prices and interest rates go up, which they are doing now. That is to be avoided!

Further, we’ve been hearing news stories that the Federal Reserve bank may be thinking of raising interest rates multiple times in the next 18 months or so. If prices in Phoenix continue to go up at the same time these interest rates are going, that could be a problem for you.

What’s the take-away? If you can buy now, you might want to make it happen.

Give me a call. I’m more than happy to help you navigate the market: 602-456-9388.

Spring is almost upon us and for a lot of folks that means time to organize and freshen up their home after a long winter. Now, before you start breaking out all your cleaning supplies, let me give you several reasons why switching to green cleaning products is the way to go this spring!

1. Healthy Home – Chemicals will no longer absorb into the skin or be breathed in. No longer breathing in harsh chemical cocktails from your typical household cleaners can reduce the risk of asthma, which is one of the most common chronic illnesses.
2. Pure Environment – Using greener methods to clean, reduces the pollutants released into the environment. This means less contaminated water and air. Most green cleaning solutions are made from recyclable packaging which also reduces waste.
3. Safe Products – Typical household cleaners pose the risk of chemical burns to skin and eyes. Green cleaning products are non corrosive and have stricter standards regarding toxicity, combustibility, and skin absorption.
4. Better Air Quality – Strong chemical cocktails come with a strong chemical odors. Green products usually include soft, pleasant smells, often from natural essential oils.
5. Less Expensive – Most green cleaning methods can be made right at home from ingredients you already have in your pantry. Why go out and buy expensive products when you have what you need at home?
6. Knowledge of Ingredients – Government regulations do not require ingredients be listed on cleaning products. When you’re making your own green cleaners at home, you know exactly what you’re using.

These are just a few of the many reasons people are switching to green cleaners. Not only is it better for the environment, but for your and your family’s health! So, before you start checking things off your spring cleaning checklist this season, consider cleaning GREEN!

I should also ad that it’s kinda fun to make your own products to clean around the house. I never even thought about it, but it kinda is!

We love and use our friends at Going Green House for their good work and their tips. We use them for our clients, too!