metro phoenix economic snapshot presented by john coats

WeallknowtheValley’srealestatemarkethasbeenvolatileoverthelast5+years.Thegoodnewsisthingsarechanging.Distressedhomesaredownapproximately75%fromlastyearandtheactualsupplyofhomesisbelowthatofa“normalmarket”.TheValleyispositionedforacomeback.Notacomebackof2005proportions,butastable,steadycomebackwhichwewillwelcome. Keepinmindrealestateislocal.Whatyouhearnationallymaynotreflectwhatisactuallyhappeninginyourneighborhood.RememberwhenArizonawasreaching47%appreciationinoneyear,mostofthecountrywasnowherenearthatlevel.Thesameconceptisvalidagain.Arizonawas#3lastyearforforeclosuresanddistressedpropertiesbehindFloridaandNevada.Wearenow#27!Wearemovingrapidlyintherightdirection.Pleasestudythisinformationandfeelfreetopassitontoanyoneyouknowwhomayneedhelpdecipheringourcurrentmarket.Weallneedtoknowwhatourpropertyvalueisandwhereitisgoing.Thisisvalidwhetheryouarebuyingorselling.Let’sdiscussyourpersonalsituationandgoalsandcomeupwithaplan. IamveryexcitedaboutthepositivemovementArizonahashadandlookforwardtohelpingyougetthemostvalueoutofyourhome.

Jeannine

JEANNINE BARTNICKICRS,GRI,ABR,SRS,e-PRO,RSPS,CDPE,CLHMS

Certified Luxury Home Property SpecialistCertified Residential Specialist

[email protected]

senior sales & marketing consultant

If your home is currently listed, this is not a solicitation for that listing. ProducedbyDesertLifestylePublishing•480.460.0996•www.DesertLifestyle.net

2011 Sales Statistics By CommunityCommunity Average DaysOn List/Sell # SalesPrice Market PriceRatio Closed

Ancala........................................$1,028,816................. 142..................93%..........................39

Bellasera........................................$441,157................. 139..................95%..........................19

DCRanch......................................$834,211................. 170..................95%.........................124

DesertHighlands.......................$1,283,186................. 277..................90%..........................18

DesertMountain........................$1,273,481................. 429..................88%.........................106

EagleMountain............................$515,914................. 193..................94%..........................27

Estancia......................................$1,973,181................. 294..................88%..........................11

FireRock......................................$1,151,845................. 271..................92%..........................24

GaineyRanch..............................$790,592................. 186..................93%..........................21

Grayhawk.....................................$526,555................. 122..................96%.........................142

HiddenHills....................................$664,171................. 133..................96%..........................32

IronwoodVillage..........................$337,443................. 105..................97%..........................44

LegendTrail...................................$507,262................. 150..................95%..........................51

McCormickRanch.......................$442,812................. 135..................96%..........................24

McDowellMountainRanch........$484,628................. 114..................95%.........................218

Mirabel..........................................$947,815................. 331..................89%..........................52

ScottsdaleMountain...................$639,893................. 157..................95%..........................40

ScottsdaleRanch.........................$431,296................. 112..................96%..........................77

Sincuidados..................................$771,923................. 184..................94%..........................13

Silverleaf.....................................$2,173,735................. 353..................86%..........................46

Stonegate.....................................$475,787................. 171..................94%..........................51

Terravita.........................................$425,710................. 142..................95%..........................76

WhisperRock.............................$1,866,900................. 667..................87%...........................5

Winfield..........................................$468,014................. 196..................96%..........................17

Statistics gathered from ARMLS. All information deemed reliable but not guaranteed.(Single-Family Residences)

2011 Average Sales Price By City

Statistics gathered from ARMLS. All information deemed reliable but not guaranteed. (Single-Family Residences)

Glendale

Phoenix

Peoria

Gilbert

Litchfield Park

Chandler

Cave Creek

Fountain Hills

Scottsdale

Carefree

Paradise Valley

$117,597

$129,482

$139,952

$331,848

$405,408

$479,407

$682,714

$1,316,573

$190,588

$168,879

$194,236

$164,317

$199,320

TherecoveryintheMetroPhoenixhousingmarketstartedquitegentlyinSeptember2011butgraduallygrewinstrength,andbythespringof2012itwasrunningattopspeed.Theimmediatelyobviousimpactwasastrongriseinpricing,infactagreaterpercentagerisethananyothermetropolitanareaintheUSA.Alookbackat2012comparedwith2011showsusthat:•Theannualaveragepricepersq.ft.rosebyover20% from$81.59to$98.24•Theannualaveragesalespriceincreased23%from $156,774to$192,549•Theannualmediansalespricejumped27%from$110,000 to$140,000 Inventorywaslowthroughout2012,causingintensecompetitionamongbuyers.Thiswasparticularlytrueatthelowerendofthemarket.Buyerswithcashheldasubstantialadvantage,sincetheycouldimpresssellerswiththefactthattheirofferdidnotdependonobtainingapprovalforaloanorasatisfactoryappraisal.Forthehigherpriceranges,supplyanddemandweremorebalanced,butpricesincreasedinmostareasasconfidencereturnedtothemarket. Salesvolumeswerelowerin2012than2011,butthiswaslargelyduetoashortageofaffordablehomestobuy,notbecauseoflackofdemand.Atthestartof2011,nearlyhalfofhomespurchasedwerelender-ownedforeclosures,butbytheendof2012thesehaddroppedtolessthan13%ofsales.Meanwhilenormalsalesgrewfromjust29%ofsalesinJanuary2011to61%inDecember2012.Shortsalestookoverfromforeclosuresasthepreferredmeansofresolving

homeloandelinquency.Theyconstituted21%ofsalesatthebeginningof2011,and26%bytheendof2012. Delinquenthomeloanswererunningashighas16.3%inArizonaasrecentlyasFebruary2010.ByOctober2012thishaddroppedto7.7%,accordingtoreportsbyLenderProcessingServices.Thisimprovementisthelargestofanystateinthenation.Arizona’snon-judicialforeclosureprocesshasallowedittoeliminatedelinquentloansatamuchfasterpacethanstateswithajudicialprocess.Thisisbadnewsfortheborrowersinvolved,butgoodnewsforthemarketsincewenolongerhavetheimpendingthreatofsignificantdistressedinventorycomingontothemarket. Manyfamilieswholosttheirhomesthroughforeclosureandshortsalesin2008and2009arenowplanningtostoprentingandgetbackintohomeownership.Thiswilladdtothe2013demandforhomestoown,ratherthantorent. Investorshavebeenaverysignificantpartofthedemandsinceearly2009andthisdidnotchangein2012.Whatdidchangeisthatmorepropertieswerepurchasedbylargemulti-nationalinvestorsinsteadofsmallerlocalplayers.Nowthatpricinghasrespondedtotheexcessdemandoversupply,weexpectdemandfromthelargeinvestorstoslowlydissipatein2013. Thenewhomemarkethassprungbacktolifeafteraprolongedhibernationbetween2008and2011.In2012,demandfornewhomesoutpaceddevelopers’abilitytobuildthem.Ashortageofskilledconstructionworkersandlimitedfinishedlotsinbuilders’ownershipmeantthatthegrowthinnewsaleswassomewhatstifled.Neverthelesswesawnewhomesalesgrowby49%between2011and2012despitesignificant

increasesinprices.Developersarenowbuyingupnewlandandfinishedlotstosetthemselvesuptosupplymorehomesin2013.Withtheexpectedincreaseinpopulationthough,thisisnotexpectedtobeenoughtomeetthecomingdemand. OveralltheMetroPhoenixhousingmarketisinastrongerpositionnowthanithasbeensincelate2005.Manythemesfrom2012willprobablycontinueinto2013asthemarketheadsbacktonormal.Foreclosuresandshortsalesareexpectedtodecline.Newhomeandnormalre-salesarelikelytoincrease,whilelowinventorywillcontinuetobeakeyfactorincausingpricestomovehigher.Withnosignificantsourceofnewsupply,wedon’tseeinventoryrisingbacktonormallevelsforaverylongtime. Inthecurrentmarket,homesareeasytosellbutsometimesbuyingcanbeachallengeduetocompetitionfromotherbuyers.Evenso,owningahomeisfinanciallymuchmoreattractivethanrentingbecauseinterestratesonhomeloansareunusuallylowandhomepricesarestillcheapbyhistoricalstandards,especiallywhencomparedwithrentalrates.Withtheinventoryofhomesforsaleexpectedtostaylowforsomeconsiderabletime,buyersarelikelytohavetheirpatiencerewardedwithcontinuedstrongappreciation.Mostofthosewhoboughthomesin2011havealreadyseenverystronggrowthinthevalueoftheirhome,andbythetimewereach2015wearelikelytobesayingthesameaboutthosewhopurchasedhomesbetween2009and2013.

AuthorandstatisticianMichaelOrristheDirectorofRealEstateStudiesatASU’sW.P.CareySchoolofBusiness,andPrincipalofTheCromfordReport.

IN THE NATIONAL SPOTLIGHT Aswe’veturnedthepageonanotheryear,thenationaleconomycontinuesitsmodestrecovery.Optimismtingedwithuncertaintyseemtobetheprevailingsentiments.Althoughtheworsteffectsofthe“fiscalcliff”havebeenaverted,thereisstillawait-and-seeattitudeamongconsumersandemployersregardingtaxationandfederalspendingpolicies. Corporationsareflushwithcash,butarewarytospendonhiringorotherbusinessexpendituresuntilfurtherclarityontheeconomy’spathisavailable.However,onceCorporateAmericagainsconfidence,thetrillionsofdollarsandrecordprofitsthey’resittingoncanbeinjectedintothemarketplacethroughemployment,manufacturing,andotherbusinessinvestment. ThereisadirectcorrelationbetweenanincreaseinconsumerconfidenceandanincreaseintheGDP.Whenconsumersarecomfortableandconfident,theyspendmoney,pavingthewayforbusinessexpansion.Forconsumerstofeelconfidentin2013,thereneedstobeacontinuedimprovementinthefinancialmarketsandhomevalues,alongwithaprogressiveloweringoftheunemploymentratecoupledwithaveragewageincreases.TheGDPisexpectedtogrowatapproximately2%in2013,aboutthesameaslastyear. Ourfinancialmarketsenjoyedarobust2012withtheS&P500finishingwithjustundera12%growth.Whiletherecentlyenactedtaxlawchangesmaydampensomeoftheenthusiasmininvestingforsome,manymarketforecastersareprojectinga6%-12%growthfortheS&P500thisyear. Thebrightspotintheeconomyin2012wasthehousingmarket,aslowmortgageratesandaffordablehomepricesnationwidekepthomessellingatabriskpace.Fortunatelythattrendisexpectedtocontinuein2013.Infact,someareasareexperiencingsuchahousingshortagethattheconstructionindustryisstrugglingtomeetdemand.ThatisespeciallytrueinourArizonamarket(seetheResidentialRealEstatearticle.) Kiplinger.comforecastsamoderate,butsteadyjobgrowththrough2013withaprojectedannualtotalofanaddedtwomillionjobsbyyearend.Similarly,theunemploymentrateisprojectedtodriftdowntoabout7.5%vs.7.8%attheendof2012. Mosteconomistsareexpectinganoverallimprovementinournation’seconomic

healthin2013.WayneStutzer,SeniorVicePresidentandFinancialConsultantforRBCWealthManagement,explainsthecyclicalnatureoftheeconomy.“Thetopofthemarketwasin2006.Today,2013istheseventhyearofthetypicalseven-yeareconomiccycle.We’realmostoutofthewoods.”Thewildcardmaybehowthenewtaxlawsimpacttheeconomyasthehigh-incomeearnerstargetedwithtaxincreasesalsoaccountforhalfofournation’sconsumerspending.Weareexpectingslowbutencouragingprogressinalloftheseareasin2013.Stutzercontinues,“Ifthingsgowell,then2013willberememberedastheeconomicyearthatsetthestageformuchbetteryearstocome.”

ARIZONA HEATS UP AlongwithNevada,Arizonawasgroundzeroforthehousingmeltdown,plaguedbyhighforeclosuresandhighunemploymentduring2006-2010.However,Arizonastagedastrongeconomiccomebackin2012,boastingthebesthousingmarketinthenation. “AsofSeptember2012,Arizonarankedfifthamongstatesforjobgrowth,andtheMetroPhoenixareawasfourthamonglargemetropolitanareas,”saysLeeMcPheters,ResearchProfessorandDirectoroftheJPMorganChaseEconomicOutlookCenterattheW.P.CareySchoolofBusiness.ThisisanextraordinaryimprovementfromArizona’slowpointin2009whenArizonafellfromanenviablejobgrowthrankingofsecondin2006,toadismal49thofthe50statesin2009.“Arizonaisexpectedtoadd60,000jobsin2013.Weshouldfinallydipbelow8%unemploymentin2013–downto7.6%.” Arizona’seconomicgrowthhashistoricallybeenstokedbyencouragingbusinessesandpeopletomovehere.Arizonaoffersadesirableclimate,affordablehousing,andagrowingbusinessenvironmentwithreasonablestatetaxrates.ArizonastandstobenefitfromCalifornia’srecentlyenactedProposition30whichraisesanalreadyhighstatesalestaxevenhigher,whilesignificantlyraisingincometaxesonindividualsmaking$250,000ormore.TheGreaterPhoenixEconomicCouncilhasdoubledtheireffortstoattractCaliforniabusinessesandtheiremployeestoArizona.ThesenewCaliforniataxlawchangesareexpectedtosignificantlyincreasepopulationflowstoArizona’sadvantage. ElliottD.Pollack,CEOoflocaleconomicconsultingfirmElliottD.PollackandCompany,notestheimportanceofmigration

toourstate.“Intheabsenceofthefiscalcliff,thingsshouldcontinuetoimproveoverthenextseveralyears.By2015,thingsshouldbenormalized.AsIliketosay,we’reonlyonedecentpopulation-flowyearawayfromtheissuebeingresolved.” MetroPhoenixhasrisenfromitshousingmeltdownwithencouragingjobgrowthledbyahousingboomthathasnowcausedaresidentialhousingshortage.Homebuildersaresteadilydustingofftheirequipmentandbuildinghomestomeetdemand.NewhomesalesinjectfreshlifeintotheArizonaeconomyandtaxbase.ThejourneytowardcontinuedeconomicgrowthandprosperityforArizonaseemstoonceagainbeheadingdownthefamiliarpathofbuildingandsellinghomestomeetincreasingdemand.

G E N E R A L E C O N O M I C S NA P S H OT

R E S I D E N T I A L R E A L E S TAT E

2013 ECONOMIC FORECASTS

GDPGROWTH2% growth in ’13,

about the same as last year. . .

INTERESTRATESLittleornoincrease

inshort-termratesin‘13. . .

BUSINESSSPENDINGAbouta4%gainin’13,

halfof‘12’space. . .

HOUSINGSALESUp8%,helpingGDPin’13

. . .TRADEDEFICIT

Wideningby2%in’13,afteraslightdipin’12

. . .UNEMPLOYMENT

Headingtoabout7.5%bytheendof‘13

. . .INFLATION

Slightlyhigherthisyear,2.3%. . .

ENERGYOiltradingat$90-$95/barrel

throughearlyspring. . .

RETAILSALES5%growthin’13

afterstrongholidaysales

Source:TheKiplingerLetter

ByMichaelOrr

ACTIVE LISTING COUNTSGreaterPhoenix-ARMLSResidential

SALES PER MONTHGreaterPhoenix-ARMLSResidential-MeasuredMonthly

MONTHLY AVERAGE SALES PRICE PER SQUARE FOOTGreaterPhoenix-ARMLSResidential