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Canadian Homeowners

For every Canadian that is buying a home in metro Phoenix, 9 are selling, according to STAT.

The bottom of the Phoenix real estate market in 2010, 2011 and 2012 coincided with a great exchange rate for Canadians. Vacation homes in Phoenix were huge bargains for our Canadian friends.

Now, both factors make selling their Arizona vacation homes hugely profitable for our Canadian friends.

Phoenix home prices are way up from the bottom and the value of the Canadian dollar is way down, and that’s actually a good thing when you sell your Arizona home and get paid in U.S. dollars. Canadians take those U.S. dollars and exchange them for a lot more Canadian dollars than they would have gotten earlier.

“Canadian sellers who purchased at the bottom are cleaning up and out.”
Tom Ruff, ARMLS

Our Alberta friends have been having some economic stress because of the oil crash, so it’s nice they can make good money on their Arizona homes, if they need to.

Map of Where Canadians Own Homes in Metro Phoenix
Map Canadian home owners in Phoenix

Institutional Investor Homeowners

A while after bargain hunting Canadians hit the Phoenix vacation home market, several bargain hunting large institutional investors hit the Phoenix rental home market.

In my national blog, I wrote a short post, “Did Blackstone just accidentally call a market top?,” about the change to Blackstone’s buy and hold strategy.

  • Are they beginning to unwind their position by starting to sell some of their rental homes?
  • What does the smart money see?

Map of Where Institutional Investors Own Homes in Metro Phoenix
Map Institutional home owners Phoenix

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Arizona #7 for Job Growth
Arizona 7th in Job Growth

Phoenix #4 for Job Growth

Growing up in Phoenix, I thought Phoenix would always be the top 1, 2 or 3 metro area for job growth.

It was a point of pride for Phoenix. It was trumpeted in the local newspapers, television stations and chambers of commerce. And I kind of took it for granted. Maybe I was a little smug about it.

Then the Great Real Estate Bubble burst and Phoenix economic growth became… well, terrible. We were #23 out of the top 23 metro areas for job growth in 2010.

Now, it looks like the Phoenix economy is finally putting the Great Real Estate Bubble in its rear view mirror. It took awhile. 10 years.

I don’t know if Phoenix will ever get back to the economic growth of its younger days but I kind of miss those annual headlines about Phoenix being #1 or #2.

Phoenix Employment Growth

You can sign up to get weekly email updates that include graphs like these directly from Elliot Pollack and Company, HERE.

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Impromptu interview with my dog friend Larry Neaman of Nova Home Loans about down payment assistance programs in metro Phoenix.

A bunch of us dog people get together in the neighborhood park most evenings. Larry and I were the first ones there last night so I thought I would take advantage of it and pick his brain another time about down payment assistance programs.

The German Shepherd is Larry’s dog, Maiya. My 6-pound pretty papillion, Abby, didn’t make it into the video. She was probably at my feet begging to get picked up. Abby is great at only one thing, being held. It’s her superpower.

Larry’s phone is 480-500-3005.

Feel free to call Larry and pick his brain, too.

P.S. My phone was running out of juice. That’s why at the end the video stopped but the audio didn’t. Larry was saying at the end that Canada has 2 seasons – winter and mosquitoes. 🙂

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Now that I’m back mentally from my big bubble project, I wanted to dive into the Phoenix real estate market.

Most of the price action that happens with metro Phoenix home prices happens in the first half of the year, the high season.

Home sales are a bit slower the second half of the year and home prices have a strong tendency to move sideways in the second half.

My Phoenix Real Estate Market at a Glance graph is always great but let’s look at some other graphs from The Cromford Report (available to licensed real estate agents who are paid subscribers).

For metro Phoenix, the price per square foot is up 6% in mid-June compared to a year earlier. 

Price Per Square Foot

That’s nice but the story this year isn’t about good appreciation.

The story this year is two stories;

  • Some less expensive zip codes are appreciating fast, but
  • Prices in some of the most expensive zip codes are actually falling.

Northeast Valley

Scottsdale Price Per Square Foot

It looks like Scottsdale home prices have been moving sideways for a couple of years but that’s misleading.

Northeast Valley: Mar-May 2016 vs 2015, $/SF

  • 85266 (Carefree) -10%
  • 85251 (Old Town Scottsdale) +12%

Glendale

Glendale Price Per Square Foot

It looks like Glendale has seen good appreciation but it all depends on the zip code.

Glendale: Mar-May 2016 vs 2015, $/SF

  • 85310 (Farthest North) -6%
  • 85301 (Historic Downtown) +20%

Luxury Stagnation

The multi-year run of huge increases in luxury home prices is long over.

The luxury home market is sensitive to the stock market. Luxury home buyers tend to own a lot of stocks so when the stock market goes up, they feel good and buy luxury homes.

The stock market has been moving sideways, however, for a year and a half now and most of the recent stock market news has been blah, so it looks like luxury home prices will continue to mark time for awhile.

Lower Price Boom Continues?

This market is harder to forecast but since it’s been moving up so strongly, I’m expecting it to continue up unless the economy softens.

If interest rates ever increased significantly it could really change the real estate market for years.

Current homeowners with low-rate mortgages – which is pretty much everyone now – would be less enthusiastic about trading up (or down), if that would mean they would lose the great mortgage rates they have on their current homes.

But right now it looks like interest rates may not increase significantly for several years.

A recession is far more likely than significantly higher mortgage rates.

Recessions, however, tend to hurt the lower end of the market the most. So a recession would take the wind out of lower price home sales and price increases.

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Tom Ruff’s commentary this month in STAT points out the dramatic impact today’s low interest rates have on mortgage payments.

$200,000 Home

  • June 2006 | Interest Rate = 6.68% | Interest Per Month = $1,113
  • June 2016 | Interest Rate = 3.66% | Interest Per Month = $610

The Recovery

He also talks about the peak (2006) and trough (2011) of home prices and which zip codes have “recovered” the most and the least.

  • Most Recovered = Arcadia and North-Central Phoenix
  • Least Recovered = West-Central Phoenix and the far Northwest Valley.

See Tom’s piece for more details.

Curmudgeon Says

A curmudgeon might say 3.66% mortgage rates are responsible for the “recovery” of home prices and not so much a stronger Phoenix economy.

I’m starting to think we may never see mortgage rates above 6% again in my lifetime and Tom’s example suggests how fragile Phoenix home prices would be if we did see 6% mortgage rates again.

Where’s My Hammer?

But the danger of permanent low interest rates is what happens during the next recession?

The Fed can’t really lower rates any lower. That tool’s all used up.

With a smaller toolkit, it would be harder for the Fed to fight the next recession.

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Over on my national website, RealEstateDecoded.com, using Zillow data, I created a new graph which shows you the percentage of homes increasing in value for 20 metro areas.

I’m still checking out the “Percent of Homes Increasing in Value” metric but I think I like it.

It gives me more information than just how fast home prices are rising or falling to estimate changes to the underlying demand.

Phoenix Has Mojo

This new metric shows that Phoenix has a ton of upward price mojo. Only Portland, the hottest market in the country right now, has similar upward momentum.

Portland and Phoenix Mojo

Next Week

I’ll update the “Phoenix Real Estate Market at a Glance” graph next week when the MLS comes out with their April data.

It’ll be interesting to see if this new metric foreshadows changes to Phoenix home prices.

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Paradise Valley Home Sales

Valid for Two Weeks Only
Link expires April 30

Click here to see recent homes sold in Paradise Valley, AZ.

You can do your own custom sorting such as sorting by cost per square foot. Just click the “List” tab and then click on any column heading.

To get email updates on homes sold in Paradise Valley are anywhere else in metro Phoenix, call me at 480-463-4475. -John

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Oh, and by the way, the mortgage finance system is still broken 8 years later.

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At least according to this article.

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I got a call from a reader yesterday about the Scottsdale real estate market. She was worried that home prices might be weakening in her area. Also, she had watched this video of mine where I stumbled onto some erratic graphs for the Scottsdale real estate market.

Before I checked out the situation in her community, I reviewed the Scottsdale real estate market as a whole and that’s what I’m showing you here.

Click any of the charts to enlarge them.

Scottsdale Price per Square Foot Weird

Scottsdale Price per Square Foot Homes Sold

The price per square foot in Scottsdale increased sharply from October to January but then fell sharply in February 2016. What’s going on? Is February an anomaly or a trend?

Scottsdale home sales strong

Scottsdale Home Sales

The number of homes sold in Scottsdale in February were up 3% compared to February 2015. So the number of home sales is fine.

Number of homes listed for sale up 14% in Scottsdale

Scottsdale homes for sale

That inventory change could be causing some of the market weirdness.

Inventory up 21% in far North Scottsdale

North Scottsdale homes for sale

Okay, home sales are up a bit in Scottsdale but the supply of homes for sale is up a lot more, especially in far north Scottsdale in zip codes 85266 and 85262.

New listings hitting the market up 24% in Scottsdale in February

Scottsdale New Listings Feb 2015 vs 2016

There’s the culprit! More people are putting their homes up for sale in Scottsdale this year. But was February a fluke or a trend?

Number of new listings in early March double last year!

Scottsdale New Listings March 2016

It’s only 4 days so I assume it’s a fluke but, Yikes!, double is a big number.

I’m going to assume it reflects a longer term trend this year of more people in Scottsdale deciding to put their homes up for sale.

Conclusions

It’s still early in the high season. I’ll have a much better idea of what the 2016 Scottsdale real estate market is going to look like in a month.

I had assumed that Scottsdale home prices would increase strongly in 2016 – as strong or stronger than in 2015.

But if the number of homes hitting the market continues at the February pace, then Scottsdale home price appreciation won’t be as high in 2016 as it was in 2015. 

I don’t know exactly why the new listings are increasing so much. If you have a theory, please leave a comment.

I don’t think the rest of the Phoenix real estate market is seeing this but I was only diving into the Scottsdale market today.

Stay tuned.

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