Phoenix's Next 'Silcon Valley' starts to Blossum

According to Forbes, we may actually be in the midst of a tech revolution right here in the valley.  As many of us know, we have been pushing the Silicon Desert idea for years, but recently new companies are moving or setting up shop here.  The word is getting out and it is just so much cheaper to begin a start-up here than in California's Silicon Valley.  According to another blog writer, Francine Hardaway, there is a talent war in the Bay area that drives up the price of technical talent and the high costs are causing them to run out of money too soon.  In addition, while it may be controversial, housing more conducive to young affluent buyers in downtown Scottsdale for instance can only help.  While the low cost of doing business here is an asset, the funding mechanisms are not yet following as quickly.  However, slowly but surely the word will be out and the venture capitalist will follow. (we hope)

'Short Sales' may become 'Shorter'

A recent announcement from the Federal Housing Finance Agency stated that as of November 1st loans held by Fannie Mae and Freddie Mac will start limiting the amount second lien holders can collect at $6,000.  It is hoped that this will reduce greatly the time is takes to close the contracts on these properties since the second lien holders can no longer hold up the process by trying to negotiated higher settlements.  If these properties were to foreclose, the second lien holders would not receive any proceeds from the sales.

In addition, it was also announced that homeowners with significant financial difficulties but not behind on their mortgage payments may also be eligible to short sell their homes.  I know of one major bank who is doing exactly that.  It seems with all of the recent data from foreclosures, the banks may have figured out they are better off short selling rather than foreclosing.  If they foreclose, they risk damage to the asset(dwelling) either by an angry homeowner or vandalism and having to sell at more of a market discount than a short sale.  In most short sales, the property will be taken care of better by the owner since they will probably live in the property until right before the sale closes escrow.

Sales of New Homes Rise Rapidly

"Sales of newly built homes rose briskly in July, and inventory fell to the lowest level on record, suggesting the housing market is showing continued signs of recovery and that builders may need to ramp up construction in the coming months."

This, according to Robbie Whelan of the Wall Street Journal.  The article went on the state that builders sold an annually adjusted rate of 372,000 homes in July, up 26% from the same month last year.  In addition, inventory of new home s fell to 142,000 units, the lowest level recorded since the government started tracking the figure in 1963. 

A separate report showed that prices for previously owned homes rose 1.8% in the second quarter from the first, the biggest quarterly jump in more than six years.  With existing home inventory dwindling in many markets, frustrated buyers are turning more and more to new home builders even though pricing may be higher. 

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%.