Phoenix Real Estate Market Update (Mesa, Glendale: bank owned, sales, apartments)

[Captain Bill]

This update for the Phoenix Real Estate Market covers cities in Maricopa and Pinal Counties, and include major cities like Gilbert, Chandler, Mesa, Scottsdale, Fountain Hills, Surprise, Goodyear, Glendale, and others.

Recently I attended a Real Estate Summit with a panel of experts in various real estate fields discussing the current Phoenix market conditions. I’ll share some of the information and viewpoints of this panel, along with some current statistics and personal opinions.

The monthly average sales price per square foot increased in a number of cities, especially those where investors are buying rental properties.

• Tolleson average monthly sales price per sq. ft increased from $41.98 in April to $46.12.
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• El Mirage from $41.53 to $49.16
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• Maricopa city from $41 to $47 per sq. ft . 10% increase in just 2 months
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• The pending listings average price per sq. ft. (for all areas & types) is above
  $80 for the first time since June 15.
  

The earlier consensus was that we would see price declines during the slow season, but now we’re seeing increases.

Median Sale Prices Single Family Detached

Mesa
Aug 30…. $105,000….
Oct 27…..$112,900 (+)

Gilbert
Aug 26….$160,000
Oct 27,… $167,000 (+)

Chandler
Aug 23…$154,200
Oct 27….$168,000 (+)

Scottsdale
Aug 25….$375,000
Oct 27…..$337,000 (-)

Surprise
Aug 25….$118,000
Oct 27.….$119,400 (+)

Phoenix
Aug 15..…$83,000
Oct 27..….$92,000 (+)

(Sorry, but I can’t take the time to provide prices for every city in the valley, so in fairness to everyone else, please do not ask me to provide data for your particular city.)

Jobs Are an Important Factor in our Real Estate Recovery

Here is a list of the largest employers in the Phoenix area. They have entry-level positions plus admin and professional jobs, and it's said that they almost always have openings in some positions:.

• Wall Mart.....30,000+ employees
• Banner Health...20,000+
• Wells Fargo...13,000
• Honeywell...12,000+
• Bashas...12,000
• Apolla Group... 10,000 and increasing
• Intel...10,000 and increasing
• US Airways ...9,000+
• Target...9,000+
• Freeport McMoran Copper & Gold...7,000+
• JP Morgan Chase...7,000
• American Express...7,000+
• Catholic Healthcare...7,000+
• Scottsdale Healthcare...6,000+
• Pinnacle West Capital...6,000+
• We hear that Winn-Dixie is expanding in Phoenix

General Motors Proving Grounds Project:

This development consisting of one or two major resort hotels, a huge convention center with 365,000 square feet; a championship golf course; hi tech industry, light industrial, commercial, office and residential housing will create 100,000 jobs. Gaylord (who developed Opryland) is scheduled to begin hotel construction by the end of 2012.

Mormon Temple in Gilbert:

This project is underway and has created jobs. It will attract visitors from all over the country, benefiting local businesses and tax revenue, plus helping to increase property values.

The Construction Trend is up

Developers need to build. It's stated that it's cheaper for them to build and sell close to break-even than to hold vacant land now. This is creating construction jobs.

Foreclosures are Declining - Traditional Sales Increasing

September 2010 Single Family Resale Homes
Traditional Sales......... 4,895
Foreclosure Sales........4,110

September 2011
Traditional Sales.........4,110
Foreclosure Sales.......2,295

Foreclosure Filings (NOTS) are Down 39.47%

Sept 2010.... 7,500
Sept 2911.....4,540
Most of the ARMS have reset

Bank Owned Inventory Still Declining

May 2011..........19,000
Oct 31, 2011.....10,242 Interest Rates are at a 60-70 Year Low
This includes bank owned homes that are listed on the MLS, and those that have not been listed.

There are many factors that determine the home buying decision.

Inflation is One Factor:

Jan 2011 Inflation Rate......1.63%
Sep 2011 Inflation Rate.....3.87% and has been increasing steadily

It is thought that a little inflation rate may be good for real estate. People will use real estate as a vehicle to keep up with inflation.

Renters Will Become Buyers

In two years many people who are renting today will probably want to buy. (Part of the Pent-Up Demand)

25 Cities in the Metro area have an "Own or Rent" ratio from 5 at Florence to 15.8 at Fountain Hills.

• Ratio of 1-15: Owning less expensive than Renting
• Ration 16- 20: Renting makes more sense but buying may make sense depending on the circumstances
• Over 20: Renting less expensive than buying.

Retiring and Relocating

• Relocating for job transfer, new job, or to find the sun is a huge reason people move to Phoenix.
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• Retiring is another huge reason people relocate to Phoenix
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• The Baby Boomers are were born into the wealthiest generation history and the first one turned 65 on Jan 1, 2011. They will be turning 65 for another 18 years and should be a major factor in the Phoenix housing market.

Some Economic Factors

• Retail Sales Are Up
• Tax revenue is up
• The Euro problem is solved now, (but still remains volatile)
• The GDP is up 2.5%
• The stock market is up 5% for the year

Robo Signing is Not a Factor in Phoenix

Robo signing applies mostly to states with only Judicial Foreclosure. Most of AZ foreclosures are non-judicial.

Distressed Sales as Percentage of the Market

• 2010.....75% of market
• 2011.....64% of market
• The norm for distressed sales is around 10% of the market

Issues Preventing Many Buyers from Entering Market Now

• Financing is extremely tight and difficult
• Underwriters are overly cautious
• Appraisals are extremely conservative
• Negative news giving old and inaccurate information
• Unsure of world and national economy
• Waiting for the bottom (attempting to time the market)
• Waiting for credit to improve after a foreclosure
• Can't sell their house to relocate

Pent Up Demand

While the market is being fueled today by investors who understand the low prices, there is a huge market that is holding back. At some point these people will jump back in the market. It may be when the mortgage companies loosen up to a reasonable level; when people gain more confidence in the economy; or when they realize the bottom has passed.

When these people do come back in, there will probably be an increase in sales in the higher price ranges, stabilizing that market, and a further increase in sales and prices in the lower ranges that have been stable for 2 years and are now seeing some increases (in the slow season)

[Ponderosa]

September 2011
Traditional Sales.........4,110
Foreclosure Sales.......2,295

That is a stunning turn-around.

[MotleyCrew]

Thank you for taking the time to provide the statistics Capt. We own one home in Surprise so that is good to see that things bumped up a bit. I think Peoria is seeing some ticks up as well. Let us hope that things have finally started to move in a positive direction. After almost 2 years of job hunting, our daughter just got a very good job.

[VOC1]

Very interesting post, thank you for the information!


Any off-the-cuff predictions for the commercial sector? It seems like the square foot prices in east Phoenix continue to drop.

[Captain Bill]

Originally Posted by VOC1

Very interesting post, thank you for the information!
Any off-the-cuff predictions for the commercial sector? It seems like the square foot prices in east Phoenix continue to drop.

The commercial sector is still off, and tenants are able to drive some good deals.

Office vacancy is 27% currently, but the commercial guy on the panel said it's improving.

North Scottsdale and the Kierland area are prime growth areas.

New leases are mostly to:

• Health care
• Insurance
• Universities
• Large companies wanting 50k-100k sf of space
• Tenants looking to relocate their headquarters

Financial Services are dropping back

A lot of the land around Paradise Ridge, Grayhawk, Mayo Clinic, Scottsdale Rd and 101 is state owned land. They are both selling and leasing land.

For multi-family land around there, if I'm correct in my notes, one will pay $27/sf for the land.

Other Notes:

• Apartment Vacancy is around 12% and ideal is around 5%
• The Light Rail Corridor is very popular
• Apartments are offering fewer concessions to new tenants.

[whodiman]

Thanks for the update. Very informative. I like the fact that you listed the obstacles too.

[Skywayy2001]

Do you have the October '11 stats?

[Captain Bill]

Originally Posted by Skywayy2001

Do you have the October '11 stats?

Too early

[Ponderosa]

The Euro problem is solved now, (but still remains volatile)

LOL, so much for that one.

[MotleyCrew]

Originally Posted by Ponderosa

The Euro problem is solved now, (but still remains volatile)

LOL, so much for that one.

It is looking a little wobbly this morning for sure.