2015 Phoenix Real Estate Market Outlook – ASU’s Dec. 2014 Report

Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business, is kinda following my “boring market” theme.

“Price increases look tame over the last 12 months and even tamer if you examine just the last six months. There is no longer any real upward price momentum greater than the general level of inflation.” [My bolding.]

Here’s my take on the millennials problem that Mike explores below.

In fact, the amount of single-family-home sales dropped 5 percent from last October to this October. Activity from first-time home buyers has been unusually low, in part because some people had their credit badly damaged during the housing crash and also because millennials are waiting to enter the home market until later in life than previous generations. These are also reasons the rental market is strong. Rents have increased 3.7 percent over the last 12 months in the Phoenix area.

Mike concludes with a discussion of the new 3-percent down payment loans from Fannie and Freddie.

Some expect the coming introduction of conventional home loans with lower, 3-percent down payments next year to stimulate more interest, but Orr isn’t sure this will make a major dent. He anticipates small, incremental improvements. [My bolding.]

I haven’t figured out if the new 3-percent down loans will have a big impact on sales and prices. I guess I agree with Mike, “small, incremental improvements.”

Full ASU Press Release.


Let me know what you think in the comments below.

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Phoenix MLS Real Estate Market Report – December 2014

Don’t let that first chart fool you. Phoenix is in a balanced/normal/average/boring market.

The number of homes sold is down but the number of homes hitting the market is down as well. We have a balanced market in metro Phoenix.

Now, your particular neighborhood may be different but for Phoenix as a whole, the market is balanced.

Click to see full report (14 charts)

Phoenix Real Estate Market Dec 2014


What do you see happening to the market in your area?

Let us know in a comment below.

Thanks!

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Boring is good

Boring in real estate means you won’t run into people who talk your ear off humble-bragging at a Christmas party about the killing they just make on a house they flipped.

Boring means you won’t hear real estate radio shows telling you you’re a loser for not investing in real estate.

Boring means your dying sister doesn’t lose her home.

Boring means you don’t feel fear in the pit of your stomach when you check out home values in your neighborhood.

Real Estate is Boring

Lansner talks about how the Los Angeles real estate market is boring/normal/average.

The numbers are different for the Phoenix real estate market but the conclusion for 2015 is the same – boring.

Maybe it’s because I’m an economist by training and economists focus on the economic damages caused by booms and busts.

Or maybe it’s because I’m an nerd by temperament so I like things to be stable, predictable, boring.

Or maybe it’s because I’ve seen the human pain caused by the Great Real Estate Bust and I hope to never see it again.

Whatever the reason, I like boring – a lot.

Get Rich Slow

Slow and stable home appreciation is good.

[And in addition to the social benefits, it has the added personal benefit that you don’t have to patiently listen to a blind-optimist bragging about how he made as much in one flip as you made in the whole year, and how he kind of insinuates that you’re a pessimistic loser for thinking that home prices could ever fall, and how he’s going to buy twice as many properties next year.]


Do you think boring is good or bad? Please let me know in a comment below.

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Top 5 appraisal problems and solutions

This post on appraisal problems and appraisal solutions is from Alabama but it sounds like most of it applies perfectly to Arizona appraisal problems as well.

Appraisal Problems

  1. Appraiser did not include my updates
  2. Appraiser did not know my area
  3. The recent FSBO sale down the street was not included in my appraisal
  4. Appraiser did not come into my house

Appraisal Solutions

CLICK HERE to go to the original post and see the proposed solutions.


Have you had a problem with an appraisal? Please talk about it in a comment below.

FYI, it’s been my experience that Arizona appraisals done for refi loans come in a lot lower than appraisals done for purchase loans but I don’t quite have the “why” figured out. Is it because Arizona appraisers just want to make their clients happy?

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Home prices FELL in several U.S. cities in last 12 months

I’m surprised by the number of cities, especially in the Northeast, where the median home price fell between the 3rd quarter of 2013 and the 3rd quarter of 2014.

New York and New Jersey have been extremely slow to foreclose on homes so they still have huge numbers of homes in the foreclosure process – their shadow inventory – which no doubt hurts their home prices.

But on the other hand, so does Florida but its home prices are increasing. Of course, Florida home prices got hammered in the real estate bust and New York’s didn’t so Florida home prices had some catching up to do.

Arizona moved through its foreclosures more quickly than any other state. Because of that, metro Phoenix was one of the first areas where home prices rebounded. Phoenix home prices jumped a ton in 2012 and 2013.

Now we’re back to reasonable home prices and normal home price appreciation that is sustainable in metro Phoenix.


Mouse-over cities in the map below to see the exact change.


If you know what’s going on with home prices in any other cities, please leave a comment below.

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Why are Phoenix home sales a little slow? The Millennial generation?

The number of homes sold in metro Phoenix is low by “normal” standards. It’s the same in most of the United States.

One of the reasons for the relatively low number of home sales is that the Millennial generation (about 18-33 years old) hasn’t started buying homes yet, at least not like their parents did when they were the same age.

Why aren’t Millennials buying homes?

  • Student loans
  • The slow economy in recent years hit younger people who were just getting established economically very hard.
  • Millennials are delaying marriage and marriage has a big impact on home buying.

Student Loan Debt

The graph below gives you a good idea of the magnitude of the first problem, student loan debt.

Student Loans and Home Sales

For those 25 to 44 who did end up buying a home, student loan debt was by far the #1 thing that delayed them in saving up their downpayment.

Student loans were a bigger problem than credit card debt or car loans in pulling together the downpayment. That certainly would not have been the case for their parents at the same stage in their lives.

The student loan problem isn’t going away.

Slow Economy

Employment is growing slowly and it’s growing most for Millennials.

The slow economy problem is definitely improving for Millennials.

Delayed Marriage

Is it delayed marriage or a renunciation of marriage?

If Millennials are delaying marriage because they don’t have the money, then their marriage rates will rise strongly with their economic fortunes.

If, on the other hand, Millennials just aren’t that into marriage, then their marriage rates – and their home purchasing rates – won’t improve as much as expected as the Millennials gain economic strength.

If Millennials are cool to marriage, it means cooler home sales going forward.

The delayed marriage problem will improve but we may be seeing a permanent change with lower marriage rates and lower homeownership rates in the future.

Conclusion

What happens to Millennials economically and socially has a large impact on Millennial home buying, of course, but it also has important impacts on home sales (and therefore, home prices) for buyers and sellers of all ages.

Millennial home buying rates will increase but because of high student loan debt and low marriage rates their ultimate home ownership rates will probably end up being less than their parents’ rates were at similar stages in their parents’ lives. That would mean weaker demand for home ownership and stronger demand for rental homes. 


Now, if you have any insights into why Millennials aren’t buying homes like their parents did, please leave a comment below.

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Canadians prefer Arizona homes far more than California or Texas homes

Arizona is second only to Florida with Canadian home buyers.

Where Canadian Buy US Homes

I bet Arizona is the top destination for home buyers from British Columbia and Alberta.

It’s become super convenient for Canadians to travel to Arizona. The number of daily direct flights from western Canada to Arizona has skyrocketed over the last 10 years.

For example, with a quick online search I found 7 direct flights in one day from Calgary to Phoenix. Direct flights take only 3 hours so it’s a quick way to get a break from the Canadian winters. (For example, the high temperature on a recent day in Edmonton was -9 degrees celsius.)

In addition, property taxes are phenomenally lower in Arizona than in California or Texas (or Florida, for that matter) which greatly lowers the overall cost of owning vacation homes in Arizona.

  • Factoid: About 86% of Canadians paid all cash for their American homes according to a study published last year by economists at the National Association or Realtors.

Are you a Canadian? Please leave a comment comparing Arizona to other states for your winter home. Thanks!

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I just recorded a radio interview!

ADDED: Click here to listen to the interview!

I was just interviewed in studio by Steve Goldstein on KJZZ radio about the Phoenix real estate market and my 2015 forecast. It’ll probably be on this afternoon.

It will be on tomorrow afternoon (Friday, November 14) on “KJZZ’s The Show” 2:00-3:00 with Steve Goldstein. I know it will be on tomorrow’s show because they just promoted the interview at the end of today’s show. Cool!

Check it out.

I was trying to be animated. Hopefully, I didn’t go too far… :) You tell me!

The interview was largely based on this blog post.

Welcome KJZZ listeners!

Thank you, Steve Goldstein!

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Do you have a home security camera? You must read this!

Please remember it’s VERY important to set strong passwords on security cameras unless you want the whole world to see inside your home.

“Randomly clicking around revealed an elderly woman sitting but a few feet away from a camera in Scotland. In Virginia, a woman sat on the floor playing with a baby; the camera manufacturer was Linksys. There was a baby sleeping in a crib in Canada, courtesy of an unsecured Foscam camera, the brand of camera most commonly listed when pointing down at cribs.”

Read the whole article at, Peeping into 73,000 unsecured security cameras thanks to default passwords.

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