Arizona Home Group

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May 19, 2022

Largest vacant land parcel in Paradise Valley hits market at $55M

Source: Phoenix Business Journal | Angela Gonzales

The largest parcel of vacant land in Paradise Valley has been listed for sale at $55 million. The price has jumped more than 800% since it was last sold in 1997 for $6 million in cash.

The 27-acre parcel sits north of the Paradise Valley Country Club with views of the nearby Mummy Mountain.

Joan Levinson, Realtor with Realty One Group who listed the property, said developers have been eying that parcel over the past 50 years, but the owners had no intention of selling it for development.

The parcel is across the street from the home of John Teets, former CEO of Dial Corp. and Greyhound Corp., who died in August 2011 at the age of 77.

"He didn't want anybody to live across the street from him," said Levinson, who arranged the sale of the parcel to Teets in 1997. "He didn't want to block his view. He didn't have any intentions to build on it at that time, either. That's why it stayed undeveloped. The two owners of the property in the last 50 years did not want to develop it."

She remembers when that $6 million cash deal closed. The Teets were at the White House for an event when she called the family to notify them of the closing.

"They were very excited and they toasted with champagne glasses right after I told them," Levinson said. "Later, John invited the relatives of the woman who had owned the property out to lunch with me at the Dial Corp. when they came to town."

The 27-acre parcel is zoned R-43, which means it could have as many as 21 1-acre lots, or 13 2-acre lots or six 4-acre lots, she said.

"Or it could be a fabulous estate for somebody from out of state to keep the whole thing," Levinson said. "The Teets family still lives across the street."

Interest from developers, homebuilders, homeowners

The parcel is within walking distance of the Paradise Valley Country Club, nestled between Mummy Mountain and the Phoenix Mountain Preserve. It is north of Lincoln Drive, east of Tatum Boulevard, west of Scottsdale Road and south of Doubletree Ranch Road.

The land also is non-hillside, making it easier to develop, Levinson said.

Levinson said she listed the property a few weeks ago and is getting a variety of interest from developers, homebuilders and potential homeowners.

Rod Cullum, founder of Cullum Homes, a Scottsdale-based custom homebuilder, said he has watched that parcel for many years.

"It will make a great neighborhood of estate lots when developed," he said. "We have a different view on the current market value and cost to develop than the sellers. I do feel that this parcel is a wonderful opportunity."

The Teets family has been the caretaker of this property for a long time, Levinson said.

"We're trying to figure out who would be the best caretaker and do the best job on the property," she said.

Land is scarce in Paradise Valley, especially in the more expensive areas of the town, she said.

Known for its large lot sizes and as a place many celebrities and professional athletes call home, the Paradise Valley ZIP code 85253 is the wealthiest ZIP code in the Valley.

The exclusive area is desirable for one simple reason, said luxury real estate agent Scott Grigg: "Quality of life."

For a deeper dive into what's driving demand for luxury houses to new heights in Paradise Valley, click on this week's cover story. 

 

Posted in Lifestyle
May 18, 2022

Almost 45% of homeowners are now equity rich

Source: HousingWire | Connie Kim

Soaring home prices continue to serve existing homeowners, with nearly 45% of all property owners now considered equity rich, a year-over-year jump that boosted 13% more homeowners into the prime position.

A homeowner is considered equity rich when they have at least 50% equity in their home, a feat more easily accomplished when skyrocketing home price appreciation widens the gap between what someone owes on their mortgage and the value of their house.

About 44.9% of mortgaged residential properties in the first quarter of 2022 had at least 50% equity in their property, according to ATTOM. The portion of mortgaged homes that were equity rich rose from 41.9% in the fourth quarter of 2021 and from 31.9% during the same period in 2021. 

“Homeowners continue to benefit from rising home prices,” Rick Sharga, executive vice president of market intelligence for ATTOM, said in a statement. “Record levels of home equity provide financial security for millions of families, and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first time buyers to enter the market.”

In the first quarter of 2022, just 3.2% of mortgaged homes, or one in 31, were considered seriously underwater – meaning the owner owed at least 25% more than the property’s estimated market value. While that figure is largely unchanged from the 3.1% of seriously underwater homes in the prior quarter, it was a marked improvement from 2021’s 4.7%, or one in 21 properties. 

The decade-long housing marketing boom, which continued from late 2021 into early 2022, largely has been attributed to the rise in home equity. But across the country, the median home price rose 2% during that period – to another record of $320,500, according to ATTOM. Market analysts say a glut of home buyers chasing a historically tight supply of properties also brought up prices even higher.

ATTOM expects the latest home equity trend to slow in the remaining months of this year. 

“It’s likely that equity will continue to grow through the rest of 2022, although home price increases should moderate as the year goes on,” Sharga said. “Rising interest rates, the highest inflation in 40 years, and the ongoing supply chain disruptions due to the war in Ukraine are likely to weaken demand and slow down home price appreciation.”

Nationwide, 45 states saw equity rich levels rise from the fourth quarter of 2021. However, at the same time, the percentage of mortgaged homes that were seriously underwater increased in 28 states. 

Idaho had the highest level of equity-rich properties with 68.8%, while Vermont (68%), Utah (63.6%) and Washington (60.9%) followed. Meanwhile, Mississippi ranked first for having the country’s biggest portion of mortgages seriously underwater at 17%. It was trailed by Louisiana (11.3%) and Wyoming (10%).

Posted in Market Updates
May 17, 2022

Is the homebuyer market cooling in Phoenix? Experts chime in

Source: Phoenix Business Journal | Angela Gonzales

Homebuyers are seeing a dramatic drop in purchasing power as a result of rising mortgage interest rates surpassing 5% — but for now homebuilders still can't keep up with demand.

In his recent quarterly housing update for homebuilders and clients, Steven Hensley, senior manager of Zonda Advisory said homebuilders were still seeing so much demand between March and April that 90% of them surveyed said they were continuing to raise home prices.

Plus, the rising home prices have helped cover rising costs as supply chain issues and labor shortages continue.

 

Hensley warns that rising mortgage interest rates could create a growing risk for homebuyers who realize they no longer can afford a home they signed a contract on several months ago under lower mortgage interest rates, leading them to cancel their contracts.

 

Of the homebuilders surveyed by Zonda, 58% reported buyer hesitancy, and 41% reported qualification issues or cancellations, Hensley said.

 

One thing keeping the housing industry growing in metro Phoenix is that many people are moving here from California, where they sell their overpriced homes and are able to afford the home prices here, even though Phoenix continues to lead the nation in home price growth.

Phoenix has been in the top 10 of domestic net migration every year since 2015, Hensley said, and those coming from out of state aren't experiencing sticker shock.

 

While much has been said about potentially cooling housing prices as a result of interest rate increases, it does help to have some historical perspective, said Thomas Brophy, research director for Colliers International.

 

The largest interest rate increases occurred during the hyper-inflationary days of the late 1970s and early 1980s, Brophy said.

 

"While my crystal ball is as opaque as everyone else's, it would seem answering the value question in relation to rising rates is more complicated than it first appears," Brophy said. "It is certainly harder to say that home values will precipitously drop, even in the face of rising rates, against the backdrop of the demographic and by default economic, diaspora from the coasts to the interior/Sun Belt regions. How long will the diaspora last? No one truly knows other than it has, thus far, not mitigated."

 

Don Barrineau, Phoenix division president for Mattamy Homes, said he's been seeing a small cooling effect lately.

 

Plus, he's starting to see some homebuyers not able to qualify.

 

"At the same time, there's still an abundance of prospects who do qualify, and want to buy," he said. "That, combined with limited supply of lots and trades/suppliers, still leaves quite a strong demand side. Not manic like a year ago, but still strong."

 

Last month, the Canadian homebuilder closed on another parcel of vacant land in the southeast Valley as part of its long-range plan to build more than 1,000 homes in the area.

 

The weakening buyer demand will cause an increase in housing supply, predicts Greg Hague, founder of 72 Sold.

 

"Rapid rising interest rates have significantly curtailed buyer demand," Hague said. "But we must evaluate buyer demand in light of homes for sale inventory. We have been so out of balance in that regard that while diminishing demand and increasing supply will slow the rate of home appreciation, it will not result in homes actually declining in value. Therefore, nobody should sell out of fear, but only because they have a real reason."

 

Ashley Bowers, president of HomeSmart Holdings, said her team is still seeing a high demand for transaction real estate despite rising interest rates.

 

"Many potential homeowners are paying very high rents and therefore are still exploring the purchase of a home," Bowers said. "As a brokerage, we're attempting to provide any assistance we can with the process."

 

HomeSmart's mortgage company, Minute Mortgage, offers first-time homebuyers assistance as well as the ability to lock in an interest rate while still shopping for a home, she said.

In the last month, existing housing inventory increased over 25%, said Carson Eilers, designated broker for Original Realty Co. in Scottsdale.

"Our agents are helping buyers get under contract at near record rate," he said. "Buyers who thought it wasn't possible for them are jumping back in the market and finally getting into their new homes. This is a great opportunity for people that want to own a home." 

 

Posted in Market Updates
May 17, 2022

Developer looks to build huge mixed-use project in historic area of Phoenix

Source: Phoenix Business Journal | Audrey Jensen

A once-historic site in downtown Phoenix is set to become another massive mixed-use project with a towering residential and retail building totaling about 1 million square feet.

Documents submitted to the city of Phoenix show that Chicago-based developer LG Development Group has proposed building a 29-story multifamily building with 747 residential units comprised of studio and one-to-three-bedroom units and 29,000 square feet of ground level commercial space.

The 2-acre property covers an entire block at 601 N. Central Ave. and is bounded by Pierce Street, Fillmore Street, Central Avenue and First Street across from the historic Westward Ho building. Since the 2000s, the site has been used for surface parking after the previous structure was demolished.

LG Development Group purchased the property from Glasir Capital Partners for $22 million in March, according to real estate database Vizzda. LG Group, which owns LG Development and LG Construction, declined to comment on the project.

The facility could also feature amenities like a pool and spa, fitness center and clubhouse for the ground floor and levels 8 and 28, according to a preliminary application submitted in March by law firm Snell & Wilmer.

The development also proposes a public open space at the southwest corner of the site near the Central Avenue and Fillmore Street intersection. Chicago-based bKL Architecture is the architect.

Primary vehicle access is proposed for Fillmore Street to the south and Pierce Street to the north, documents said. The city said the project, which is in the preliminary process, has not been approved yet.

Site develops after longtime owners sell

In 2020, longtime Phoenix residents Honeylou and Morris Reznik sold the 1.83-acre property to an entity tracing to Glasir Capital Partners for $14 million.

The couple had owned the property, which was home to an underground bowling alley famously known as the Gold Spot on the parcel's corner, for nearly 50 years.

The bowling alley was operational from 1939 to 1950 and on the southeast corner of Central Avenue and Pierce Street. Glass blocks on the sidewalk were formerly used as subterranean skylights, according to Downtown Phoenix.

Honeylou Reznik previously told the Business Journal that she remembered using the bowling alley while attending Phoenix Union High School in the 1940s.

Just north of the property, Glasir Capital Partners also recently purchased about 3 acres that was home to the former site of the Downtown Phoenix Farmers Market and the Phoenix Public Market Cafe, which closed during the Covid-19 pandemic.

More residential projects have been proposed or planned for downtown Phoenix in recent years, especially with the growth of higher education and jobs in the area.

As of May 2021, Colliers International said the Phoenix core, which includes downtown and midtown Phoenix, had a total of 11,760 multifamily units with 5,306 units under construction and 2,046 units planned. 

 

Posted in Lifestyle
May 12, 2022

The Tide May Be Turning - 3 Big Takeaways for Agents From Zillow's Latest Market Report

Source: Zillow Premier Agent

On the heels of the latest Zillow market report, which showed rising inventory and cooling rents, we spoke with Senior Economist Jeff Tucker for three timely market insights agents need this spring.

1. Inventory rose substantially in March, a welcome return to seasonal norms as interest rates rise. 

Takeaway for fatigued buyers“The big one is that there’s a lot more fish in the sea. If the home this weekend gets bought up, or you get outbid on it, you’re going to see more homes on the market next weekend. Buyers should make sure they’re up to date on mortgage rates and double-check their budgets before the next round of open houses.

With rates rising, the other takeaway is that $2,000-a-month mortgage payment buys you less today than it did in November or December,” Tucker says. “It’s important to be really clear about what exactly their budget can get them, because it’ll save time that might otherwise be wasted on homes outside their budget.”

“It’s important to be really clear about what exactly their budget can get them, because it’ll save time that might otherwise be wasted on homes outside their budget.”

“The important questions remain: Can you afford this home? And will you be happy there for several yearsAt least three and probably five years in a home is a pretty standard horizon for buyers. If you answer yes, this 5% interest rate is maybe a bummer compared to a year ago, but that option isn’t really on the table anymore.”

2. Home values are still increasing quickly, but no longer accelerating on a monthly basis. The typical U.S. home is worth 20.6% more than it was a year ago.

Takeaway for uncertain sellers: “There’s not a lot of strategic reason to hold off from selling, Tucker says. “When we analyze the best time to list from a perspective of home sale-price behavior, late April is the best, and May is a very close second.”

“Our forecast shows that we are close to the peak pace of appreciation, but that’s very different from being at the peak price level. Prices are rising quickly, and expect them to be rising through this spring selling season. So this holds up as that time of year where inventory hasn’t risen that much yet, and a lot of buyers are coming into the market.” 

“Prices are rising quickly, and expect them to be rising through this spring selling season.”

3. Annual rent growth slowed for the first time in more than a year. Rents grew less than 1% from February, suggesting slower growth ahead.

Takeaway for renters thinking about buying: “The big questions here,” Tucker says, “are ‘How long do I want to stay here in this town or neighborhood, but also this particular home?’ and then, ‘Do I expect my family to grow, and will we fit in this home for several years?’ And finally, ‘Can I afford the payments and the maintenance?’ If you’re answering yes, and with interest rates where they are today, I think buying is a really reasonable choice.”

“It depends a lot on what you think the price of that home and the price of a comparable rental are going to do over the next several years. And frankly, both of those have become a lot harder to predict in this environment.”

“That’s why I think home ownership remains attractive. It’s one big part of your budget that you can nail down and say, ‘Okay, my principal and interest is going to be the same every month from now until 2052. That’s really attractive to people.’”

Posted in Market Updates
May 12, 2022

US housing market starts to shift from pandemic frenzy but not evenly across markets

Source: Phoenix Business Journal | Ashley Fahey

With mortgage rates rising and home-price appreciation continuing, there may finally be enough forces to slow the pandemic-fueled booming housing market.

One key metric suggests inventory shortages — the most commonly cited challenge in today's housing market — are starting to wane. For the first time since December 2019, active listings in April posted the smallest year-over-year decline of 12.2%, according to Santa Clara, California-based Realtor.com. To compare, March saw an 18.9% decrease in active listings compared to March 2021.

 

Some markets and housing types actually saw positive growth in listings annually in April, including Riverside, California, which saw 23.3% growth; Austin, Texas, with growth of 16.5%; and Sacramento, California, an uptick of 11.8%.

 

Moderately sized homes, or ones measuring 1,750 to 3,000 square feet, saw a 2.3% uptick in active listings from April 2021 to April 2022. That modest growth could compel some owners of prototypical starter homes to move up, then list their current homes that cater to first-time buyers.

 

Not only is record home-price appreciation a major factor but the cost of homeownership is quickly rising, thanks to rapidly rising mortgage rates. Homebuyers across the U.S. need 34% more income than they did a year ago to afford a house, Seattle-based Redfin Corp. (NASDAQ: RDFN) recently found.

What's next for inventory?

Observers and economists are cautiously optimistic that more inventory will hit the market in the coming months, which, combined with potentially fewer buyers because of rising mortgage rates and home prices, should help moderate the market.

"This is a step in the right direction but we’re still at a very low level of inventory," said Danielle Hale, chief economist at Realtor.com, adding the market has a long way to get back to what had been considered normal levels of inventory.

 

Take the Greater Boston market, for example. David Keiran, chief financial officer at Boston commercial and residential real estate firm Senné, said Boston and its suburbs, fueled by housing demand from area universities and a booming biotech scene, continue to have less than one month of inventory — a 0.8-month supply, by Keiran's estimates, in most areas. A balanced housing market is widely considered to have five or six months of inventory.

 

For the types of condo projects Senné builds — both urban infill projects in Boston and Cambridge, Massachusetts, as well as suburban communities outside the city center — there's seemingly elastic demand for that type of housing, Keiran said.

 

Even so, there's likely changes in the Boston housing market on the horizon, though not enough to meaningfully shift Senné's strategy.

 

"I think rising interest rates are going to change the homebuying landscape in ’22," he said. "Higher rates mean higher monthly mortgage payments, but they also usher in a more balanced supply dynamic and a slower pace of home-price appreciation."

 

Jeff Tucker, senior economist at Seattle-based Zillow Group Inc. (NASDAQ: ZG), wrote in an analysis this week the housing market is passing an inflection point, with the record-high annual home-price appreciation seen in each of the past 12 months likely to end soon.

 

Tucker in an interview said he is reasonably confident that a turning point is imminent in the U.S. housing market — moving from a rolling boil to a simmer.

 

"We’re seeing inventory really start to pick up this spring and actually close the gap on where inventory levels were at the same time a year ago," he said. "That growth in inventory is a pretty reliable leading indicator about the balance of supply and demand in the market."

 

In particular, inventory began to rise in March and will likely notch year-over-year growth later this year, which hasn’t occurred since September 2019, according to Tucker. He said it's not necessarily because more people are listing their homes but the rate of pending sales is slowing.

Market will likely shift subtly

The potential for a meaningful turning point in the housing market doesn't mean price appreciation considerably slows or stops anytime soon.

The Sun Belt markets that've seen the biggest spikes in demand and home prices since the Covid-19 pandemic may be among the last to see any slowdown in price appreciation, as they're still considered affordable compared to other markets.

 

Jesse McConnico, senior research analyst at Irvine, California-based John Burns Real Estate Consulting LLC, said the firm expects to downgrade specific markets in the Sun Belt from "very strong" to "strong."

"A lot of those were in Florida, some were in Texas — the markets where we’re seeing extreme price growth and demand," McConnico said. "That's not to say that they’re not still strong markets. They're outperforming norms by far."

Hale and others said a lot remains too early to tell. April reached another all-time high in U.S. median home prices, $425,000, a 14.2% year-over-year jump. Sun Belt cities like Miami, Las Vegas and Orlando, Florida, outpaced that, with annual growth of 20% of more.

Tucker said Zillow is still forecasting strong price growth for the next 12 months but seasonal patterns will likely influence that rate. By fall or winter, it's possible buyers will start to see some bargains, he added.

Pricey West Coast markets like Seattle, San Francisco and San Jose, California, as well as Mountain West markets like Boise and Coeur d'Alene in Idaho could be the first markets to see a slowdown, Tucker said, especially in markets where pricing was driven by extreme inventory shortages that are abating.

"Those pendulums got pushed way out of whack that they have some room to swing back in the other direction," Tucker said.

Hale said Realtor.com is working to revise its forecast for 2022 but she expects price growth will slow sooner than originally expected.

She pointed to days on the market as another indication the market is potentially changing. In April, homes sat on the market a median 34 days, or six days faster than a year ago. In March, time on the market was 11 days faster than it was a year ago. While still fewer days than a year prior, which suggests homes are selling faster than they did in 2021, the rate is slowing.

But, Hale said, the housing markets remains very competitive. Metrics like days on the market and active listings will be watched closely in the coming months, she added.

Rental market ripple effects

If more buyers exit the housing market, as is predicted with surging mortgage rates, that'll likely put additional pressure on what's already a hot rental market.

Lease renewal rates are also rising rapidly, Tucker said. Zillow's national rental-rate index found rents are up 17% annually.

McConnico said it's likely rental rates will continue rising this year, especially since the spring and summer months are peak leasing season. Plus, she said, a lot of renters are on discounted leases, and landlords will look to push rates to market levels at renewal time.

Still, she continued, it's unlike that rents will rise as much as they did in 2021.

"We have seen, in our commentary from real estate agents, some comments about more people moving into the rental market due to those rate hikes, low inventory — not able to find anything, basically," McConnico said. "A lot of buyers have been fatigued by multiple offers and offers well over asking price. They're sitting on the sidelines … and moving into the rental market." 

 

Posted in Market Updates
May 12, 2022

As metro Phoenix home prices rise, so does the number of people forced to rent

Source: Phoenix Business Journal | Sara Edwards

Rents in Maricopa County had been steadily climbing even before the start of the pandemic in March 2020. With home prices now soaring to record levels, more people are being forced to rent houses, condos and apartments, which adds more upward pressure on rents.

“There’s a certain segment of the population that’s getting priced out of homeownership, so renting is their only option,” said Scott Wilken, senior planning project manager at the Maricopa Association of Governments, or MAG. “There aren’t many apartments that (families) can fit in, so naturally they’re going to look to rent houses.”

Housing experts say the problem is there are too few homes to buy or rent and too many people moving into – or within – the Valley. A building boom is underway, but they say it will take years to put enough homes and apartments on the market to satisfy the demand in one of the fastest-growing metros in the country.

MAG, which is the regional planning council for metropolitan Phoenix, created the interactive Housing Data Explorer to show the changes in housing affordability and rental prices over the past 10 years. It shows that the median sales price for homes, including single family, condos and townhomes, was $427,500 in December 2021 – a 25% increase over the previous year.

The dashboard also shows that more than 50% of apartments in the fourth quarter of 2021 had a rent of at least $1,500 a month, compared to the fourth quarter of 2020, when that segment only made up 20%.

Lexi King, a full-time student majoring in social work at Arizona State University, is looking for a place to live for the next school year. It has been nearly impossible to find a place that she feels safe and that she can afford as a student who also works about 30 hours a week, she said.

King is looking for a place where she can have her own bedroom and bathroom, and she doesn’t mind if that means living with roommates. She hopes to stay within her budget of $700 to $900 a month.

“It’s so hard to find anywhere that’s in budget or where I’d feel safe or comfortable living,” she said. “I’m a part of Facebook renting and sublease groups, and even then it’s still hard to find somewhere that fits all of my needs.”

King lived in on-campus housing her freshman year and doesn’t want to add to her already rising student debt.

“I know so many people that are doing the exact same thing like me, and it’s ridiculous because clearly this isn’t an uncommon need,” King said. “The fact that so many people aren’t able to find housing is ridiculous.”

Land availability is key factor

Doug Ressler, manager of business intelligence for the real estate data company Yardi Matrix, said Phoenix is a hot market for buyers and renters because of the amount and cost of available land.

“In the Northeast and gateway cities, you have a lot more restrictive zoning ordinances and the cost of land and availability of the land is limited versus what you see in the Southeast and Southwest,” he said. “The demand is chasing the supply, and the supplies are inadequate right now.”

Ressler said Arizona had a housing affordability and availability problem before Covid-19 struck, and the pandemic condensed the timeframe for rental developments to be completed with the rise of the work-from-home lifestyle and people wanting more living space to spread out.

Wilken said MAG data indicates many houses are being built to rent rather than buy. Ressler said people who had intended to purchase a home no longer can because sale prices for homes have increased more than salaries and wages. So people are turning to renting homes instead.

“People would like to buy a house, but they’re inhibited because the housing availability just isn’t there, so they rent longer,” Ressler said, noting that purchasing a home is a years-long commitment that many people can’t make.

Hyalyn Schwichtenberg has been living out of her car for the past year. After her mother died, she couldn’t afford to continue paying for the place they shared, so she had to downsize her belongings, put bigger furniture in a storage unit and live as lightly as she could in her car while working in child care.

“I’ve lived in the Valley for over 30 years, and I remember when I could get a one-bedroom apartment for $700 a month,” she said. “I’m more about renting than buying because for me, at this point, it’s not advantageous for me to buy a house.”

Schwichtenberg said even with her job and her income, she can’t afford the upfront costs that come with renting an apartment, such as security deposits and application fees.

Some forced to wait or rethink

Sindy Ready, the treasurer for the Arizona Association of Realtors, said the cost to buy has increased so much that people must choose between waiting to buy a house or rethinking the move to Phoenix altogether.

“It’s really a concern that we all have to be aware of because there’s not enough houses for the number of people that are wanting to live here,” Ready said. “For the first time in the history of our market, we’re seeing very low inventory on rental listings, just like we’re seeing low inventory on purchasing.”

Because people are able to work from home more often, she said, they’re starting to move to the edges of metro Phoenix.

According to MAG Housing Explorer Data, Cave Creek, Carefree and El Mirage saw the largest percentage changes in housing sales prices, while Avondale, Glendale and Scottsdale saw the highest percent increase in apartment rents.

“It’s just crazy, the building that’s going on right now,” Ready said. “It brings in a lot of wealth to our industry in the Valley and the opportunities for jobs, but it also puts that pressure on the housing market.”

Ready said there’s also a push for more luxury housing and apartment developments, which she says also comes from market demand.

 

“If somebody can’t find a house to rent, they’re going to want something that has a little bit more amenities like the luxury swimming pool and workout facilities, so I think it’s just the demands of what renters are wanting,” she said. “There’s also just the difficulty of finding homes. If someone’s looking to rent a home, there’s just not enough rental houses out there for the number of people that want them, so that pushes them into an apartment or townhouse setting.”

 

 

Posted in Market Updates
May 12, 2022

The 'wow' factor: Realtors say buyers are still lining up in droves to buy a piece of the Valley's wealthiest ZIP codes

Source: Phoenix Business Journal | Angela Gonzales

Demand for luxury homes skyrocketed during the Covid-19 pandemic, leaving few empty lots for homebuilders who want to capitalize on the hot market in the Valley’s wealthiest ZIP code. 

That ZIP code — 85253 — primarily makes up the enclave of Paradise Valley in the northeast Valley known for its large lot sizes and where many celebrities and 

The exclusive area is desirable for one simple reason, said luxury real estate agent Scott Grigg: "Quality of life."

High demand

What's driving demand for luxury (even ultra-luxury) houses to new heights? Home equity and stock equities, said Steven Hensley, advisory manager for Zonda housing market research firm.

"People in higher priced markets are able to put their home equity to work in areas such as Phoenix," he said. "We are seeing this across all pricing tiers, but it is very prominent in the luxury market today."

Some people are using their money from the stock market to purchase real estate, Hensley added.

In some of the wealthiest ZIP codes in the Valley, mansions are constructed along golf courses.

"In some cases, this is to hedge against inflation and cash out of the stock market while values are high," he said. "You have these factors creating demand for luxury homes, but these shoppers are generally looking in a narrow location band. So ultimately location still matters, and the limited amount of luxury options is driving up prices in areas already desirable. This is what is occurring in areas such as Paradise Valley and Scottsdale. Both are known for a luxury, high-end lifestyle that wealthy households are seeking."

Hensley said he's noticing more activity in these luxury areas from speculative and semi-custom production homebuilders alike.

"There appears to be unmet demand in these areas," he said.

Between March 31, 2021, and April 1, 2022, the Valley's four wealthiest ZIP codes — all located in Paradise Valley and Scottsdale — had 735 land transactions totaling $614.13 million, compared with 744 transactions totaling $527.99 during the same period the previous year, according to research conducted by RL Brown Housing Reports.

The majority of those deals were in the 85262 ZIP code of north Scottsdale, with 475 land deals totaling $221.6 million between March 31, 2021, and April 1, 2022. That compares with 418 transactions totaling $143.36 million during the previous year.

Jim Daniel, president of RL Brown Housing Reports, said a majority of activity in that 85262 ZIP code is for custom home lots rather than production homes in that north Scottsdale/Rio Verde area.

The reason there were so many sales is that there just happens to be more lots available for sale in that area, he said.

"There is a pretty wide range of builders in the area with Lennar Homes, K Hovnanian, Shea Homes and Toll Brothers among larger builders," Daniel said. "Other builders with a luxury focus that are active include Rosewood Homes, Camelot Homes, Cullum Homes and Morgan Taylor Homes."

Scarcity of lots

Rod Cullum, founder of Cullum Homes, a Scottsdale-based custom homebuilder, speculated that there are only about 40 to 50 undeveloped lots in all of Paradise Valley.

"There are maybe five or six large parcels that could be subdivided down,” he said.

Cullum is under contract for one of those parcels and is working to replat that 10-acre parcel down to seven lots.

Otherwise, potential homebuyers can buy an older existing home and raze it or remodel the home, he said.

"Because of the age of the homes in Paradise Valley, there's quite a few more teardowns," he said. "A lot of these homes were built in the 1950s and 1960s in Paradise Valley. A lot of the lots were even five acres in Paradise Valley back when they first started developing."

When Paradise Valley incorporated, town officials adopted a one home per acre zoning requirement, he said.

"That's when people started splitting up land and taking larger parcels down to smaller parcels," Cullum said. "Because of the housing stock in Paradise Valley, there's many more teardowns as there are renovations." 

Paper spec

Katrina Barrett, owner and broker for Paradise Valley-based Local Board Real Estate, has a 4.5-acre parcel listed in "Billionaire's Row" within Paradise Valley — where some of the region's most expensive homes sit on lots ranging between five acres to more than 20 acres.

Homes on "Billionaire's Row" can range up to 20,000 to 30,000 square feet of livable square footage. Most of them offer views of the entire Camelback Mountain — head to tail — which is the most iconic views that Paradise Valley boasts, said Scott Grigg, founder of The Grigg's Group.

"I personally refer to it as Arizona oceanfront," he said.

A potential homeowner could either buy the vacant parcel or pay $33.68 million to have a 16,844-square-foot home designed by award-winning architect CP Drewett built for them, which would make it the most expensive home for sale in Arizona, Barrett said. 

"It is absolutely a space race for land right now," she said. "I have never seen land go faster or for higher prices."

For existing homes, Barrett said she is seeing endless demand for homes priced over $20 million. 

"We have the buyers and not the supply," she said. "If the $33 million home was built today, it would already have sold. People want deliverable; turnkey; instant gratification; furnished if possible." 

Cullum Homes is actively building luxury homes in one of the Valley's wealthiest ZIP codes — in the Village at Seven Desert Mountain in Scottsdale.

Cullum Homes is actively building luxury homes in one of the Valley's wealthiest ZIP codes — in the Village at Seven Desert Mountain in Scottsdale.

JIM POULIN | PHOENIX BUSINESS JOURNAL

Lot sells, and sells again

Speaking of demand, Grigg said he has sold one lot in Paradise Valley five times.

A 3-acre lot at 6750 N. 39th Place recently sold for $2.98 million to an out-of-state buyer a week after Grigg listed it. It was the highest price so far, selling for $980,000 when he first sold it in February 2014.

It's one of the few lots that has views of Camelback Mountain and the downtown Phoenix city lights, he said.

"You don't see that very often," he said. "Every time it comes back available, we've been able to sell it fairly quickly."

Grigg said it changed hands so many times over the past eight years because a lot can happen when someone is planning to build a home. Plus, he said, it takes a bit longer to build on a hillside. 

"Some of these hillside lots can be up to a 4-year project," he said. "In four years, a lot of things can change for people."

In a recent record-setting deal, Walt Danley and Catherine Jacobson of Walt Danley Christie's International Real Estate in April sold a mansion in the Cameldale area of Paradise Valley for $21 million, which was the highest priced home sale in the town's history.

Demand vs. supply

Finding lots within the Valley's wealthiest ZIP codes can be tough for homebuilders new to the market, said Ryan Huffman, Arizona division president of Aliso Viejo, California-based Thomas James Homes Inc., which expanded to Phoenix last fall.

"We're actively looking in those ZIP codes based on the demand we're seeing as well as lack of supply," Huffman said. "We do expect to be building in those ZIP codes here in the short-term future."

Competition is fierce, he said.

This 3-acre lot at 6750 N. 39th Place in Paradise Valley sold for $2.98 million.

This 3-acre lot at 6750 N. 39th Place in Paradise Valley sold for $2.98 million.

THE GRIGG'S GROUP

"It is difficult to find opportunity," he said. "Nevertheless, the opportunity is there and we're certainly going to find it. We'll be building in these ZIP codes as soon as we can."

Huffman said he was surprised to see a lot more inventory in the Paradise Valley ZIP code than the top three Scottsdale ZIP codes. 

"There are 93 active homes in the MLS in 85253 right now," he said. "Twenty-one are new builds that are under construction that are active on MLS right now. Compare that to 85255, there are only four new custom builds. For somebody who wants a $5 million to $10 million home, there's a lot less inventory available."

Location is key asset

Cullum Homes is building in the top three wealthiest ZIP codes, Cullum said.

"In those three ZIP codes, they're all at the turning point where you have very few lots left," he said.

Cullum just finished building a 19-home community at Silverleaf in the 85255 ZIP code and is building 33 homes in the 85262 ZIP code at the 8,300-acre Desert Mountain.

Seven Desert Mountain is golf community built by Cullum Homes, including 33 home sites on the surrounding golf course.

Seven Desert Mountain is golf community built by Cullum Homes, including 33 home sites on the surrounding golf course.

CULLUM HOMES

He has about 15 lots left within Seven Desert Mountain, the newest community within Desert Mountain located near the seventh golf course.

Boasting seven golf courses, Desert Mountain has 2,389 total lots, with about 300 of those being vacant lots. 

"About half of the existing vacant lots are now being held by homeowners to preserve their views," said Jack O'Keefe, a managing partner with Russ Lyon Sotheby's office at Desert Mountain. 

Security and privacy are driving people to Desert Mountain, which is north of Cave Creek and Pima roads in north Scottsdale, he said.

 

"Location used to be our challenge, it's become a huge asset," he said. "Two years ago, the entry price point for a home was around $1 million. Now, it's closer to $2.5 million, with $3 million to $5 million becoming the norm."

Posted in Market Updates
April 22, 2022

Construction of Coyotes arena in Tempe could cost Sky Harbor $21.5M a year, study says

Source: Phoenix Business Journal | Brandon Brown

If Tempe allows the Arizona Coyotes to build their proposed arena, entertainment district, hotels, office buildings and luxury apartments, it could cost Phoenix Sky Harbor International Airport millions of dollars a year, according to Phoenix officials.

During an April 21 Phoenix Aviation Advisory Board meeting, Jordan Feld, Phoenix’s deputy aviation director, said that the airport, along with an outside economist, ran a study to see how Sky Harbor could be impacted by the construction phase of the proposed $1.9 billion project.

The answer: A loss of $21.5 million every year.

The study also suggested that there would be serious delays at Sky Harbor and that the airport’s capacity could ultimately be limited. Furthermore, the study said that, because of the impact on the airport, the larger Phoenix economy could lose $264 million a year.

Cranes cited as issue

The main factor leading to the financial impact and annoyance for travelers would be the cranes being used to build the project in Tempe.

The Coyotes have proposed to build the Tempe Entertainment District (TED) on 46 acres at the northeast corner of Priest Drive and Rio Salado Parkway in Tempe — currently a city dump. The proposal was submitted in the summer of 2021, but the city of Tempe has yet to decide on it or even make the proposal public. The Coyotes have been showing a version of the proposal around town, and based on proposed building and crane heights, Feld and other airport officials have determined that cranes could be higher than some pilots and airlines would prefer.

Graphic showing how cranes and proposed buildings could impact flights from Phoenix Sky Harbor International Airport.

Enlarge

Graphic showing how cranes and proposed buildings could impact flights from Phoenix Sky Harbor International Airport.

Feld showed a graphic during the meeting that illustrated how cranes could be five to 50 feet above the one engine inoperative surface — a predetermined height that gives pilots an idea of how they can land if the aircraft becomes damaged in a serious way.

“We recently met with the Airlines Pilots Association and showed them this graphic, and they were very concerned,” Feld said.

Feld said that airline officials feel the same way. In February, Jay Leitner, the principal engineer at American Airlines, the largest carrier at Sky Harbor, said that the proposed development and cranes associated with it could result in a significant reduction in payload as well as passenger restrictions, especially during summer months when the air is heavier, and airplanes need more room to take off.

“Seventy percent of long-haul flights are going to request the north runway to depart,” Feld said. “That creates a delay factor because you have to taxi the airfield longer and the arrival stream on that north runway is now delayed.”

The Coyotes issued a statement to the Business Journal in response to the city's study.

"We are significantly confused by the assumptions that seem to underpin Sky Harbor's estimate of the economic impacts of TED's temporary construction cranes," the statement said. "As a result, we are urgently requesting any data that they might be using, since it appears their assumptions do not reflect the facts of our constructon plan. In any case, however, this so-called analysis excludes the net new economic benefits that TED will deliver to the county — benefits that include $5.9 billion of new spending, $12.5 billion of net new direct output, 8,700 new jobs and $225 million in net new tax revenue over the next 30 years."

Ways to mitigate

Because the project has yet to be approved or even publicly discussed by the city of Tempe, dates and timing are unknown, but Feld said construction on a project of this size could last two to five years.

But that doesn’t mean cranes would be a problem the entire time. Chad Makovsky, the director of Sky Harbor said during the meeting that he anticipates the Coyotes to propose taking the crane down during certain points of the day or trying to limit how long they must be at the tallest point.

“There are ways to mitigate,” Makovsky said during the April 21 meeting. “But that doesn’t address the point of whether pilots will fly over it.”

After a lengthy dispute with the city of Glendale, the Coyotes are winding down the team's final season at Gila River Arena this month. The team has inked a deal to play in the new 5,000-seat multisport arena under construction on the University of Arizona Tempe campus starting with the 2022-2023 season.

The negative financial impact on Sky Harbor is just the latest in a number of problems Sky Harbor and the city of Phoenix have presented in conjunction with the Coyotes proposal. The Coyotes have pointed out time and time again that none of their proposed buildings are violating any height restrictions and that they are willing to work with authorities to make the project happen.

Earlier this month the FAA sent a letter to the city of Tempe about concerns the federal agency has about putting apartment buildings so close – just under two miles – from the end of a runway.

The FAA’s main concern is the noise the planes would cause for residents. It also said that because of the proximity the city and the developer would have to take certain precautions and that the FAA and other federal funds could not be used in these efforts. 

 

Posted in Lifestyle
April 14, 2022

Purchase mortgages cross dreaded 5% threshold

Source: Housing Wire | James Kleimann

The 5% threshold has been crossed, and given all the headwinds in the U.S. economy, it doesn’t appear that mortgage rates will be dropping below that mark anytime soon.

Purchase mortgages this week averaged 5%, up 28 basis points from 4.72% a week ago, according to the latest Freddie Mac PMMS. A year ago at this time, rates were at 3.13%. The GSE’s index accounts for just purchase mortgages reported by lenders over the past three days.

“This week mortgage rates averaged 5% for the first time in over a decade,” said Sam Khater, Freddie Mac’s chief economist. “As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation.”

The gulf between the average 30-year-fixed rate conforming mortgage and a 30-year jumbo, a product for wealthier borrowers, widened to 42 basis points, according to Black Knight‘s Optimal Blue OBMMI pricing engine, which considers refinancings and additional data from the Mortgage Bankers Association (MBA). Jumbos on Wednesday were locked at 4.69%.

Rates on conforming 30-year fixed-rate mortgages overall averaged 5.12% on Wednesday, according to Black Knight, with LOs telling HousingWire that clients had locked loans in the low 5% range this week.

On Thursday, New York Fed Chair John Williams said that a 50 basis point interest rate hike in May is a “reasonable option” to help control inflation.


With mortgage rates on the rise here are some products originators should tap into

HousingWire recently spoke with David Peskin, president of Reverse Mortgage Funding, who said entering the reverse mortgage business could allow originators to break into a growing market with significant demand that is largely untapped. 

Presented by: RMF

The central bank has signaled that it will raise rates another six times in 2022, and likely several more times in 2023, which will likely trigger a corresponding rise in mortgage rates. The Fed since early March has been letting its purchases of mortgage-backed securities run off. There is consensus from the Fed governors to stop replacing up to $35 billion of maturing MBS assets each month.

The Fed’s agency MBS holdings currently total about $2.7 trillion and, so far, it is continuing to replace maturing assets in that portfolio as they run off the books. 

Cutting another $35 billion from the Fed’s monthly MBS purchase tally will create a lot of new supply in the market, which will likely further increase pressure on interest rates, which could be amplified by other potential world events, Lawrence Yun, chief economist for the National Association of Realtors, recently told HousingWire.

“Directionally, it means higher mortgage rates,” Yun said. “… If China reduces its holdings of U.S. government bonds or GSE-related [government-sponsored enterprise] securities, then interest rates will rise even further. 

“The soaring federal deficit requires even more buyers of bonds, and some government bond sales may make it more difficult to issue MBS securities, unless with higher interest rates.” 

The 15-year fixed-rate purchase mortgage averaged 4.17% with an average of 0.9 points, up from 3.91% the week prior, according to Freddie Mac. The 15-year fixed-rate mortgage averaged 2.35% last year. The 5-year ARM averaged 3.69% with buyers on average paying for 0.3 points, up from last week’s average of 3.56%. The product averaged 2.80% a year ago.

Mortgage applications dropped 1.3% from the past week, and refi applications were down 62% from a year ago. Less than 5% of homeowners can save on a refinancing these days.

And despite incredible gains in equity owing to soaring home prices, inflation — which touched 8.5% in March — has sapped strength from the renovation market. The lumber futures fell to $870 per 1,000 board feet in Chicago on Monday, a 30% decline from the start of March, according to Bloomberg.

 

Posted in Market Updates