Infill & Adaptive Reuse in Phoenix: what pencils?

Free to attend
May 8th 6-8 pm
Located in the Historic AE England Building
(between 1st Ave and Central Ave, just north of Van Buren/Central Station)

The post Infill & Adaptive Reuse in Phoenix seminar appeared first on Dwell Arizona - Urban, Historic, Mid-Century Modern, Contemporary Homes.

Bubble 2.0

It’s hard not to notice the plethora of silly articles suggesting the Greater Phoenix housing market is in another bubble, or that prices are soon going to fall. There are a variety of theories but they can all be seen as bogus when examined carefully.

Ten reasons why there is NOT a bubble in Phoenix housing right now:

1. The population of Maricopa and Pinal Counties is growing much faster than the housing stock – this is fundamental, yet is hardly ever mentioned.
2. Prices are being driven up by a chronic lack of supply, not by excess demand. Demand is close to normal. Bubbles always have excessive demand from foolish trend followers.
3. Prices are still at the same level as 9 years ago. They still have a lot of room to increase yet.
4. Most buyers are putting their own money in with cash or large deposits, not borrowing it all from foolish lenders as in 2004 and 2005.
5. Lenders are still being ultra cautious. Demand could increase if they ease up.
6. Investors are mostly buying to rent and filling their homes quickly with tenants – if and when these landlords sell it is a neutral event for the market – one extra home becomes available and one extra family needs a home to live in.
7. If investors started to sell off the small number of empty rentals it would slightly improve our market balance, not create a glut of supply.
8. There are several major long term obstacles for developers trying to increase the supply of new homes. Shortage of labor and affordable, accessible land are just the first two.
9. We have a low vacancy rate both in homes for rent and for sale. Multiple generations and even multiple families are sharing single homes.
10. No bubble has ever occurred in the same market twice in the same generation. However after a recent bubble everyone is hyper-sensitive to every price increase and numerous false cries of “bubble” are par for the course.

Given the unprecedented imbalance we now have between population growth and new home building, we have several years of rising prices in front of us. How fast and how high they rise I cannot tell, but the idea that prices could fall significantly in the near term because of excess supply is foolish. The only circumstance that could unravel things is a sudden collapse in demand caused by people leaving Central Arizona in droves. Far more likely is a surge in demand from both people and companies deciding to migrate from California. Compared to most of California, housing in Central Arizona is still ridiculously affordable even if interest rates were to double.

Nobody has a good track record of predicting mortgage interest rates, but in any case multiple studies have shown no significant statistical correlation between homes prices and interest rates. So when interest rates eventually rise, as they surely must one day, this is as likely to increase demand as it is to decrease it. This event would definitely decrease affordability, but we note that one of the times of highest demand (February 2005) was also a time of very low affordability. In fact large numbers of people signing up for mortgages they could not afford was the key characteristic of the February 2005 market.

Public Perception

A good example of how long it takes for the population at large to acknowledge a real change in the housing market is to be found in a survey recently reported by Hart Research Associates. During February and March 2013 the1,433 interviewees were asked the question:

Thinking now about the housing crisis that started in 2008 when many people and families defaulted on their mortgages and lost their homes, do you think the housing crisis is pretty much over, that we are still in the middle of it, or that the worst is yet to come in terms of the housing crisis?

• 58% think we are still in the middle of the housing crisis
• 20% think the housing crisis is pretty much over
• 19% think the worst is yet to come
• 3% were not sure

Of course the facts are very clear, but 80% of the public have not yet accepted those facts. The housing crisis actually started in 2006 but the public did not really notice until 2008. By April 2009 homes in the City of Phoenix had pretty much lost all the value they were going to lose. From reputable analysis sources we can see that most (but not all) parts of the country were well into recovery during 2012. The majority of the general public will probably not really acknowledge the recovery until 2014 or maybe even 2015.

The housing recovery is obvious to a large majority of the economists and analysts who look at the housing numbers and draw conclusions from them without filtering them through a political lens. You can still find plenty of doom-laden articles in publications like Forbes and Yahoo, presumably because forecasts of impending financial disaster attracts readers and editors seem to set a low standard for accuracy and logic when selecting opinion pieces to publish. These articles are almost without exception based on wild theories and/or extrapolations of incorrect or misinterpreted data. The most popular negative opinion pieces are currently based on the unsubstantiated claim that “the market is dominated by large investors”. They typically quote Phoenix as a prime example. This claim is not supported by examination of the sales volumes, especially if we use dollar values rather than unit volumes. When we examine the percentages of single family housing units sold in Greater Phoenix, the market continues to be dominated by owner-occupiers, followed by second-home buyers (including snowbirds), followed closely by small investors (who are very numerous in Phoenix) with institutional or large investors coming in a distant fourth. Large investors’ market share has grown fast in the last 2 years but they are still the least of the four groups of buyers.

The idea that these institutions “buy in bulk” is also popular but simply wrong. They buy large numbers compared with small investors. After all, that is what makes them large investors. However they almost always buy homes one at at a time just like everyone else, at least in fast recovering markets like Greater Phoenix. The difference is that they have deeper pockets and are not afraid to bid high if it suits their business plan. This is what makes them scary to other competing buyers.

On several occasions we see bulk deals between one large investor and another, where a collection of say 50 rental homes is traded between landlords. However these transactions are not part of the open market and do not change the nature of the ownership. Almost always, the tenants stay in place with their leases and continue to occupy the homes paying their rent to a new landlord. Though it is interesting to see who is getting out and into the market, these purchases are of no great significance to the rest of the market.

Another fallacy is that all cash buyers are investors. Not true. There are a significant number of owner occupiers who pay cash, especially when they are buying expensive homes. This is also true of second home buyers. In particular Canadians are likely to be recorded as cash buyers, even if they borrowed money in Canada and moved that money into a US dollar bank account to buy a home here.

The post Bubble 2.0 and Public Perception appeared first on Dwell Arizona - Urban, Historic, Mid-Century Modern, Contemporary Homes.

March was a somewhat stronger month for sales volumes but most trends continued in the same direction as they have for many months.

Here are the basic ARMLS numbers for April 1, 2013 relative to April 1, 2012 for all areas & types:

• Active Listings (excluding UCB): 16,415 versus 14,175 last year – up 15.8% – but down 3.9% from 17,090 last month
• Active Listings (including UCB): 20,670 versus 21,841 last year – down 5.4% – and down 3.7% from 21,460 last month
• Pending Listings: 10,658 versus 11,964 last year – down 10.9% – but up 3.5% from 10,300 last month
• Monthly Sales: 8,162 versus 8,187 last year – down 7.4% – but up 24.5% from 6,555 last month
• Monthly Average Sales Price per Sq. Ft.: $113.10 versus $93.57 last year – up 21% – and up 1.3% from last month
• Monthly Median Sales Price: $167,000 versus $130,000 last year – up 28.5% – and up 4.4% from last month

As is common for the end of a quarter, we saw a large number of sales closed on ARMLS in the last 2 working days of the month. These late closings had a slight bias towards the lower and of the market so the final sales price numbers for March saw a relatively small advance over February. I say relatively because a 1.3% jump in average $/SF and a 4.4% jump in median sales price would normally be thought of as large. The closing of many cheaper homes has left the pending and UCB listings showing higher average $/SF, suggesting strongly that sales prices will continue to move higher in April.

Our pending listing counts are rising much more slowly than they have at similar points in recent years. This shows us that rising prices are having a dampening effect on demand. However, out there in the market it is hard to detect the weakening in demand because supply remains so far below normal that sellers remain severely outnumbered by buyers.

Sales volumes remain weaker than last year, down 7.4% from 12 months ago, but the deficit is less than in February. Bank-owned and short sale homes continue to get scarcer. Normal sales across Greater Phoenix were 29% higher than in March 2012. However lender owned sales in Greater Phoenix were down 51% and short sales and pre-foreclosures were down 43%.

Supply remains weak, but the situation is not deteriorating as fast as it did this time last year when active listing counts were dropping very quickly. The number of new listings being added is almost (but not quite) enough to make up for the listings going under contract or getting cancelled or expired.

Appreciation rates are dropping because prices were rising so fast this time last year. It is unlikely that they will be able to rise so fast this year, but price will still rise at a strong pace over the near term, at least until we hit the summer months.

Normal sales took a 73% market share in February (the highest since February 2008) with short sales at 16% and REOs at 11% (their lowest share since December 2007).

We have been expecting new home builders to increase production more than they have so far. The number of permits issued in the first two months of the year suggest they are being very cautious and this is likely to mean that prices will have to rise quite a bit further before a balance is found between supply and demand. So we repeat our expectation that prices will rise at least 10% between February and June this year. March only delivered 1.3% so we must expect more movement in the next few months.

The post April 2013 Phoenix Real Estate Market Update appeared first on Dwell Arizona - Urban, Historic, Mid-Century Modern, Contemporary Homes.

The School of Geographical Sciences & Urban Planning at ASU has organized the Second Annual Phoenix Urban Design Week.  On April 4-13, 2013 Phoenix Urban Design Week will engage the city with a series of partnered public events. Through lectures, symposiums, workshops, urban film screening and a gathering of community and food, this years Urban Design week will shine a spotlight on the importance of urban design and tactics as an essential ingredient of economic growth, sustainability, and community empowerment.

Here’s the event schedule:

April 4-5 – Urban Tactics Symposium
April 8 – Urban Film : Phoenix, City of the Future
April 9 – The Downtown We Want
April 10 – Downtown Devil Discussion
April 12-13 – PAVE Symposium on Entrepreneurship & the Arts
April 14 – Feast on the Street

Visit Phoenix Urban Design Week for more details and info.

The post Phoenix Urban Design Week 2013 appeared first on Dwell Arizona - Urban, Historic, Mid-Century Modern, Contemporary Homes.

Here are the basic ARMLS numbers for March 1, 2013 relative to March 1, 2012 for all areas & types:

• Active Listings (excluding UCB): 17,090 versus 16,026 last year – up 6.6% – but down 2.7% from 17,573 last month
• Active Listings (including UCB): 21,599 versus 23,511 last year – down 8.7% – and down 1.4% from 21,757 last month
• Pending Listings: 10,300 versus 11,693 last year – down 11.9% – but up 8.2% from 9,523 last month
• Monthly Sales: 6,521 versus 7,296 last year – down 10.6% – but up 7.9% from 6,041 last month
• Monthly Average Sales Price per Sq. Ft.: $111.33 versus $87.32 last year – up 28% – and up 3.0% from last month
• Monthly Median Sales Price: $160,000 versus $122,000 last year – up 31% – and up 3.3% from last month

Just like February 2012, prices shot up at the end of the month. This should not have been a surprise given the remarkable increase in the average $/SF for pending listings. A lot of high priced homes closed escrow on February 28th. This caused the pending $/SF to drop and the sales $/SF to jump. However the pending $/SF has swiftly recovered suggesting more price rises are on the way. NAR recently reported that pending listings were strong for the nation as a whole. Not so here. The pending volume of 10,300 is the weakest number for the beginning of March since 2009. But then Phoenix has not been following the national trends for many months.

Sales remain weaker, down 10.6% from last year. This is a result of the low number of bank-owned and short sale homes available. Normal sales across Greater Phoenix were 34% higher than in February 2012. However lender owned sales in Greater Phoenix were down 47% and short sales and pre-foreclosures were also down 47%. Though down from 2012 and 2011, February 2013′s sales exceeded all earlier years except for 2005. Demand is well off its highs but remains above normal.

Supply remains very weak, but not as tight as this time last year when active listing counts were dropping fast. The mix of active listing (excluding UCB) has changed a lot compared with March 2012. Within Greater Phoenix:

• Normal listings – up 19.1%
• Lender owned listings – down 15.3%
• Short sale listings – down 46.4%

Prices have been climbing extremely fast over the last year, with distinct pauses during the third quarter and holiday season. However the change in the mix of both supply and sales has exaggerated and amplified the underlying change in home values.

Normal sales took a 71% market share in February (the highest since February 2008) with short sales at 16% and REOs at 14%. This represents a decrease in the REO market share from 16% in January, as we predicted last month. Short sales are also dropping, down from 18% in January and now at the lowest percentage since August 2009.

The shortage in supply remains concentrated in price ranges below $225,000, where things are getting worse for buyers. Between $225,000 and $500,000 supply is low but stable. Above $500,000, supply is recovering and at the top ranges over $2,000,000 supply is plentiful and now increasing.

New home builders have increased production but not to anything approaching a level that can make much difference to the overall tight supply situation. They are not even at one third of the production levels they were at 15 years ago. Having been burned badly by overbuilding in 2004 through 2006 they are not about to risk over-building again in a hurry.

The only remaining solution is for prices to rise – this encourages more sellers to list their homes and discourages buyers, especially investors, who are gently slowing down their activity. New homes prices are going to rise anyway. Labor costs are rising due to the shortage of construction workers. Materials costs have been rising at an unusual rate and land costs have been rising even faster. The increase in new home prices will create a vacuum for resale homes to move into. Buyers hoping and waiting for prices to drop back from 2012 levels are likely to be very disappointed. Their disappointment may turn to extreme frustration as price rises of at least 10% seem likely between February and June this year. No relief for buyers is yet in sight.

The post March 2013 Phoenix Real Estate Market Report appeared first on Dwell Arizona - Urban, Historic, Mid-Century Modern, Contemporary Homes.

During this event, Coronado residents open their historic homes and gardens to visitors. Please join in celebrating this vibrant community during the 2013 Home Tour and festival, which will feature live music, local vendors, and free demonstrations.

When? March 3, 2013 from 10am to 4pm

This year we are focusing on houses built in the 1920′s, a time in construction when brick and plaster were used instead of siding and drywall. A time when it was a craft or an art to construct a true home. A time when built-in elements were a part of the plans and not an afterthought. We believe when combined with the inspiring and creative artists in our neighborhood we start to see what we mean by handcrafted.The theme of the home tour this year is handcrafted. What does handcrafted mean? We hear it all the time with the popularity of such things as handcrafted beers. A handicraft is defined as any kind of craft that can be made using one’s hands or simple tools. At a time when the economy might not be doing well, you will find resurgence in things that are homemade; people want to get back to simpler things, while remembering what is important to us. But what does it mean to us here in a historical neighborhood?

Visit the official page for  more info and to purchase tickets in advance.

The post Coronado Historic Home Tour 2013 appeared first on Dwell Arizona - Urban, Historic, Mid-Century Modern, Contemporary Homes.