Arizona Startups Showing More Sucess

The Phoenix Business Journal recently reported that Arizona entrepreneurs are creating more jobs, making more money, and expressing more optimism about the future of the economy than their counterparts in other markets.  This is according to the Global Entrepreneur Indicator(GEI).  The GEI surveys members around the world to measure their success and predictions for the future. 

In the past six months, 62 percent of Arizona entrepeneurs added full-time employees compared with a global average of 59 percent.  During that same time period 71 percent of Arizona entrepenuers reported an uptick in revenues while the global average was 68 percent.

Additionally, 60 percent reported a boost in net profits in the past six months while only 16% decreased. 

Though fewer than half are optimistic about the national economy's future, 85% stated they would start a new busines in the current climate in Arizona. 

Article was by Tim Gallen

Jumbo Loans Making Comeback

Finally, some good news on the Jumbo mortgage front.  It appears that lenders are increasing the numbers of jumbo loans made at a fairly rapid clip.  In a recent Wall Street Journal article by AnnaMaria Andriotis, it was reported that Private-market jumbo loans accounted for 15% of the total dollar amount of mortgages issued by Bank of America, up from 4% a year earlier.  At Wells Fargo, volume more than doubled during the first six months of this year over the same period last year.  Citigroup also reported increases.

In all, lenders loaned out around $38 billion in Private jumbo mortgages during the second quarter of 2012, up 65% from a year earlier.  This is the highest quarterly dollar amount since the first quarter of 2008 according to Inside Mortgage Finance. 

Jumbo financing is becoming more affordable with rates around a half a percent higher than conforming loans.  This is translating into more sales as over $1 million plus sales increased by 19% in July over the previous year.  This according to the National Association of Realtors. 

This is good news as this was the market segment showing a tepid recovery compared to the non-jumbo market.  The luxury market (not super luxury market) is typically the last to weaken and the last to recover.  This appears to be further evidence that we are in the beginnings of a residential real estate recovery.

Arizona Adds 58,000 Jobs

Arizona ranked 7th among all states in raw job number increases between June 2011 and June 2012 and 5th in terms of percentage gain with a 2.42 percent increase.  In total, 58,000 jobs were added according to research from On Numbers.

Travelers Vote With Their Dollars and Scottsdale Wins!

With hotel capacity near 95 percent, this spring's tourism season in Scottsdale set records.  A single day attendance record was set for the Arabian Horse Show, near record attendance at the Barrett-Jackson auto auction occurred, records for area Cactus League baseball attendance were shattered, and the rowdy crowds at the Waste Management Open enjoyed some of the best weather in years.  There were as many in attendance for the golf tournament on Saturday as most tournaments get in four days. 

Hopefully, this is yet another sign of life in an economy battered by issue after issue over the past five years.  Certainly the Chamber of Commerce weather did not hurt!

For help with the purchase or sale of a property in the Scottsdale/Phoenix market.  Please contact Christopher Cole by visiting DiscoveringScottsdale.com.

Mythbuster: Multitasking

Recent research at the University of California San Francisco has punched a rather large hole into the notion of Multitasking.  According to their research only 2.5% of us can multi-task efficiently while many of us only think we can.  This is how they found out.

By using the cocktail-party effect, they found that we can focus on one conversation at a time due to the auditory cortex boosting some sounds and tuning down others so we can hone in on what we want to hear.  It is the same for our visual cortex. 

Those of us who only think we can multitask are shifting their attention between the tasks rapidly not truly multitasking and not getting the full effect of any of the tasks. 

Does texting and driving come to mind? 

One fun (or not so funny) test of this effect is to have a husband and wife try to have a conversation during a football game.....

It should be noted that this writer does not accept responsibility of the result....

Source material from Wall Street Journal, Elizabeth Bernstein

Phoenix Housing Rising Like a Phoenix

One of the first real estate markets in the nation to fall from its heights is leading the nation back.  After falling 55 percent from its heights in late 2005 thru the end of 2011, Phoenix area home prices are increasing and leading a housing recovery.  The recovery appears to be broad with only the million plus market lagging.  Low prices have been attracting investors for several years now.  Half of Canada owns property here now!  Just kidding.  However, several large investment funds have set up shop over the past several years now that the market has bottomed, more are showing up every day.  They are going to have a hard time though because inventory has collapsed and multiple offers are occurring for most well priced properties under $500,000.  Forget trying to find something under $100,000.....individual investors are playing along with the investment groups in this price range and they are being snatched up as quickly as they hit the market.  Prices at the courthouse steps are being bid up to retail or better and the fix and flip crowd has been squeezed out for the most part. 

No one here sees this ending anytime real soon barring another major financial crisis, but even then, the word has gotten out on both affordability and rental returns and until this dynamic changes, the froth will continue.

Owning a Home is Gaining in Appeal as Rents Head Higher

The Wall Street Journal recently had an article indicating that rent increases are making home ownership more appealing day by day.  In 2011 alone, the number of investor owned homes increased by 65 percent during 2011 and represented 27 percent of all sales.  This number is certanily higher in investor markets like Phoenix.  With returns on more traditional investments very low compared to risks associated with them, more and more people are turning to the rental market as a way to develope a nest egg.  With returns of 6-12 percent and the good possibility of future price increases, it makes a lot of sense to this. 

However, if one compares rents to house payments in many markets, ownership makes more sense as affordability reaches heights not seen in decades.  Apparently, many are making this assessment and are pouring back into the market helping tamp down inventory to even lower levels.

Phoenix Leads Home Price Increases

In a recent article in the Phoenix Business Journal, it was reported that home values in both the metro Phoenix and Arizona markets eclipsed the rest of the nation once again in June......by a long shot. 

Core Logic reported on August 7 that Phoenix area home values, including distressed sales, surged nearly 17 percent year-over-year in June----the highest percentage of any metropolitan area in the nation.  In second place was Houston at 4.5% and then Washington DC Market at 3.3%. 

Statewide, the number was 13.8% eclipsing Idaho at 10.4% and South Dakota at 10.1%.  This compares to Nationwide numbers of 2.5% year over year and 1.3% up from May.  The good news is that only 4 states showed year over year declines.

More and more evidence is pointing to a sustainable housing recovery. 

Phoenix Number 5 For Income Growth

On Numbers published a new study recently that shows that only four regions experienced greater income growth from 1970 to 2010.  Personal income in the area was $4.3b in 1970 ad $152.8b in 2010.  That is an annual growth rate of 9.35%.

We The Taxpayer Made a Profit on Mortgage Debt

Will miracles never cease?  In a surprising announcement, the Treasury Department recently reported a 25 billion dollar profit on the mortgage bonds purchased at the height of the financial meltdown.  Treasury had spent $225 billion on purchase over 16 months before it began selling the securities last year.  While this may be bad news for purists, it would suggest the government can unwind a rescue package without roiling the markets.  I think that no matter where your philosophy is on this matter, we all pray we do not have to ever see this tool being used again in the future.  However, it appears to be another arrow in the quiver should the need arise.  Now if Fannie and Freddie can ever get us paid back that would be even better news!

Phoenix Prices Gain as Foreclosure Resales Dwindle: DataQuick by Esther Cho

The following article is by Esther Cho regarding the Phoenix real estate market.

After being known as one of the hardest-hit cities, Phoenix has been gaining recognition for its rapidly rising prices.

Dataquick reported the median sale price of a home in the Phoenix metro area in June rose for the seventh month in a row to $152,000, the highest level since late 2008. The figure is a 23.1 percent yearly increase from $123,500 in June 2011. In May 2012, the median sale price was $150,000.

DataQuick, which tracks real estate trends nationally via public property records, still found that June’s median sale price was 42.4 percent below the all-time peak of $264,100 in June 2006, but 28.4 percent higher than the median’s post-peak low of $118,347 in August 2011.

DataQuick explained one of the reasons behind the boost in the median sale price is the area’s mid- to high-end markets have represented a larger share of total sales.

In June, 34.1 percent of all sales were for homes priced above $200,000, compared with 25.6 percent a year ago.

Additionally, the portion of foreclosure sales has been diminishing. According to DataQuick, foreclosure resales, defined as homes that were foreclosed on in the prior 12 months, fell to 21.2 percent of the resale market in June. The figure is the lowest level since January 2008, when foreclosure resales accounted for 18.6 percent of the resale market.

In May, the foreclosure resale level was 24.3 percent and 49.6 percent a year ago. In March 2009, foreclosure resales hit a high-point at 66.2 percent.

The Phoenix area lost 2,087 properties in June to foreclosure, which is a 13.6 percent decrease from May and a 56.5 percent drop from a year ago.

The number of homes lost to foreclosure between January and June numbered 14,591, down 54.1 percent from the same period in 2011.

While the metro has taken a break from foreclosures, downward pressure on home prices is inevitable if the backlog of foreclosures held by lenders are released into the market.

Short sales increased month-over-month, accounting for 13.7 percent of resale activity compared to 12.6 percent in May. Short sales were down compared to last year’s 14.2 percent.

With 9,556 properties (home and condos) sold in June, Phoenix experienced a decline in sales activity from the month and year before, when properties sold numbered 9,896 and 10,425, respectively.

Phoenix Employeers Are Lootking to Hire

It seems like news is released every day on the recovery here in the greater Phoenix/Scottsdale market. 

A recent Manpower Employment Outlook Survey indicated that 20 percent or 1 out of five employers were planing to hire in the second quarter.  This is up from 17 percent a year ago.

Mortgage Banking Revenues On the Rise

First quarter results are in and banks saw big gains in mortgage banking revenues and profits on the back of strong refinancing activity.  Part of this is due to the spreads between the mortgage rates and mortgage backed securities being twice their normal.  This is good for the banks to help them get on more sound financial footing but some would argue that mortgage rates, already below 4%, should fall even more.  With rates so low as they are, most would prefer the financial system get on more sound footing rather than have lower borrower rates which would have minimal effect on the monthly payment.

Arizona Top State for Startups

A recent Phoenix Business Journal Article revealed that Arizona is rated as the top state for entrepreneurial activity and Phoenix was rated as the third highest city in the nation.  This is according to the Kauffman Foundation research.

It revealed that 520 of every 100,000 adults stared new businesses last year, well above the 320 per 100,000 national average.

Vacation Home Sales On The Rise

According to the Wall Street Journal, sales of vacation homes are back on the rise.  After a decline of 56 percent between 2006 and 2010, sales were up 7 percent in 2011.  This is good news especially for the Arizona and Florida markets.

Phoenix Housing Inventory Plummets

According to an ASU report released at the end of March 2012, inventory levels have dropped 42 percent and foreclosure sales are down 52 percent from the prior year.  Foreclosures and short sales now only make up 20 percent of total sales.

Arizona Foreclosure Rate Falls

The Arizona mortgage delinquency rate fell to 6.35 percent in the first quarter of 2012, down from 8.23 percent during same same period last(2011) year.  This is according to the Mortgage Bankers Association.  The actual foreclosure rate was 3.57% compared to 4.81 percent a year prior.

What does this mean?  Fewer homes going to foreclosure lessens the inventory of homes for sale at a discount.  This in addition to falling inventories of traditional and short sales coupled with rising demand means upward pricing pressures are back.

Residential Real Estate Bidding Wars Are Back

Home buyers are stunned to see the bidding wars for properties coming back.  I posted in my blog "You Heard it Here First" back in November that the numbers were stacking up for a boost in sales prices.  There were many buyers waiting on the sidelines to see a bottom and they have jumped in to the buyer 'pool' at the same, even as inventory levels continue to decline.  Sellers, seeing this, are holding back if they do not need to sell and that leaves very little existing inventory with prospective homeowners competing with investors. 

This is not just a local phenomenon here in the Phoenix/Scottsdale market but appears to have a widespread nation wide reach.  One index that measures the number of contracts signed to purchase previously owned homes rose in March  to its highest level in two years gaining to 12.8% from 4.1% according to the Wall Street Journal. 

My personal opinion is that this will not stop until rent rates to sales price ratios decline and investors start falling away.  However, that means that housing prices will be higher when that happens.  Most indices including the Case Shiller Index for the Phoenix are market indicate we are back at 2000 to 2001 pricing so we do have a little ways to go to reach long term trend lines.  The only thing to put restraint on the rapid appreciation is the employment picture, but even that is improving in our market.

Scottsdale to Add 4,400 acres to Preserve

The city of Scottsdale has announced that there are plans to add about 4.400 acres to the McDowell Sonoran Preserve.  This would bring the city to around the halfway point of a total goal of 34,000 acres in the McDowell Mountains and surrounding areas.

Time to buy in the Phoenix real estate market

With prices stabilizing and actually rising year over year, historically low interest rates, falling foreclosures, Fannie Mae & Freddi Mac contemplating renting foreclosed homes instead of selling them, and now the Fed mulling over how to help households repair their balance sheets, there has been no better time in over a generation to purchase residential real estate here in the Phoenix market. 

Inventory is low and getting lower, so at some point prices were bound to start rising.   And now they have.  MLS statistics indicate a year over year increase of 6.36% in median pricing.  Yes, you heard that correctly.  Median prices based on MLS stats increased 6.36% year over year in Arizona's largest market. 

The Wall Street Journal agrees.  In a recent column, Jack Hough went into great detail on this subject.  If you have been waiting for the bottom, it has come and gone.  Time to start looking.

Phoenix Area Foreclosure Rate Declines

According to CoreLogic as reported in the Phoenix Business Journal, foreclosure rates continue to decline to a 3.1 percent rate as of November 2011, down from 4.8 percent a year earlier. 

The Real Estate Market-Now What?

First we had a frothy real estate market and prices rose rapidly keeping some out of the market and forcing others to make bad purchasing and loan decisions.  Then we have had several years of falling prices, foreclosures, short sales, bankruptcies ect.  What in the world can happen next?

Answer: Can you believe a shortage of inventory?  Yes, real estate professionals all over the country are reporting a shortage of housing inventory as the number of homes on the market are plummeting.  Here in the greater Phoenix market, inventory is as low as it was at the peak of the frothy market.  At some point, this is going to effect pricing.  In fact, in some neighborhoods, it already has with price stabilization and some appreciation.  Listing prices are on the rise so it appears a struggle between buyers and sellers and don't forget the loan underwriters and appraisers. 

Phoenix Housing Prices Up In Latest Case Shiller Release

The Phoenix area housing composite was the only market in the 20 city index to record a month over month increase from October to November of 2011.  With inventory near all time lows, this trend is expected to continue with year over year numbers to be in positive territory in the next one or two releases of data.

Arizona up in population rankings

According to the Phoenix Business Journal, Arizona is poised to overtake Indiana and become the 15th most populous state.  Population was expected to hit 6,553,719.

Careful of what you wish for

In a recent article, the Arizona Republic pointed out that those who are thinking of doing strategic foreclosures or sympathize with those who do may be doing their own pocketbooks harm.  As we so often forget, most loans are sold off to FNMA or Freddie MAC, so any loses on those loans is now costing us, the taxpayer.  They would have absorbed the costs themselves in the past but the government has stepped in due to their insolvency and the burden of the loss has been place squarely on our shoulders. 

Now the two government sponsored entities are getting banks to pony up for losses due to faulty underwriting but that is a drop in the bucket.  It is hard not to sympathize with people who are 30-50% underwater because we see big businesses do it all the time.  There is a sentiment out there that "Wall Street got theirs, where is ours?"  I would never be one to judge someone for what they decide to do but keep in mind, it is not harming the Banks as much as you think.  As usual, it is coming to rest on the shoulders of we, the taxpayers.

Wealthiest Zip Codes in the Phoenix MSA

The numbers are in from the end of last year and according to the Phoenix Business Journal the five wealthiest zip codes were, in order:

85253 Paradise Valley with a median net worth of $808,289 and average new worth of $1,716,970
85262 Scottsdale with a median net worth of $804,999 and an average net worth of $1,728,889
85263 Rio Verde Foothills with a medium net worth of $705,209 and an average net worth of $1,571,223
85266 Scottsdale with a median net worth of $699,486 and an average net worth of $1,590,101
85255 Scottsdale with a medium net worth of $646,958 and an average net worth of $1,507,681