Tuesday, June 24, 2014

Why the Phoenix housing market has swung in favor of buyers.

Arizona Property Management & Investments
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Payam Raouf
Designated Broker
Arizona Property Management & Investments

 Why the Phoenix housing market has swung in favor of buyers.

Kristena Hansen
Reporter- Phoenix Business Journal
 
A year ago, the Phoenix-area housing market was facing a chronic shortage of homes for sale and surging prices exasperated would-be buyers.

Today, however, nearly the opposite is true.Supply has now stabilized, with buyers having 64 percent more listings to choose from on April 1 than they did a year ago, according to Arizona State University’s monthly housing report released today.

Prices have also been cooling recently. The Valley’s median home price even slipped by a combined 5 percent in January and February, only to nearly fully recover in March when it climbed back up to $204,520.

Despite the market now having swung in buyers’ favor, demand remains weak — except for luxury homes. Sales of homes priced above $500,000 were up 11 percent year-over-year in March, the report said. But the gain in luxury sales was overshadowed by huge declines at the lower end, resulting in a 20 percent drop in sales overall.

“The underlying key problem for entry-level and mid-range housing demand is a lack of household formation. This has been dropping for a long time due to a number of factors including unemployment, falling birth rates, lower net migration and greater home sharing especially among millennials,” said Michael Orr, the report’s author and the director of ASU’s Center for Real Estate Theory and Practice. “If household creation were at the normal long-term average, we would quickly have a housing shortage here in Greater Phoenix.”

With persistent weak demand and the slow summer season approaching, Orr said the price recovery that took place in March could eventually be erased.

“The period from March to May is almost always the strongest part of the year for demand, and it is highly probable we will see pricing fade again during the summer months, when the luxury, snowbird and active-adult markets go relatively quiet,” Orr said. “We may still be looking at little to no annual price appreciation by the end of the year.”

But lenders and so-called boomerang buyers could be key in helping solve the demand problem, Orr said.
Lenders, also feeling the brunt of weak demand, have been hurting for business in recent months. Late last month, new mortgage applications fell to a 14-year low, according to the Mortgage Bankers Association.

Orr suggested this may finally push lenders into easing their ultra-tight lending restrictions, which have been exacerbating the demand problem.

Between 2015 and 2019, Orr said the Valley may also see an uptick in demand from boomerang buyers, meaning those who lost their homes to foreclosure or short sale and have finished waiting the required four to seven years to be able to qualify for a mortgage again.


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Monday, May 26, 2014

More people with 700 plus FICO Score are renting than ever before!

Arizona Property Management & Investments
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Payam Raouf
Designated Broker
Arizona property management & Investments


More people with 700 plus FICO Score are renting than ever before!

In the past three months I have seen more applicants with 700 plus FICO credit score,  good jobs and clean records applying to rent our homes than I have ever seen before. The  #1 concern when you asked them why is,  uncertainty in the market, their jobs and I agree, it is cheaper to rent than to buy these days. 

Most buyers in the market these days are either first time home buyers or are the ones who are re-qualifying to purchase a home after a bankruptcy, foreclosure or a short sell with a small down payment using FHA or VA products. 

Many of the homes for sale on the market these days- in the $150,000 to $250,000 range- are previously rental homes most of which are very basic with minimal upgrades.

Many landlords have carried these homes for the past seven years have ran out of funds and can no longer keep up with the cost of maintenance and owning a rental property. As the result, they might use their last financial resource, maxing out their credit cards to apply a fresh coat of paint on the walls and possibly put down a cheap carpet hoping they'll sell it before they go back under the water again.  Home prices in most areas have fallen nearly 10% since the height of the market in mid 2012.

There does not go one day that we do not receive several requests from such landlords to put their homes back on the market for rent as soon as possible.

Well, thanks God the rental inventory is still low as so many landlords have put their homes up for sale. It will not be long before that is going to change as most of these homes are now coming back on the market as rentals again.

My suggestions:

If you are in the market to buy, either wait till the dust settles, unless you find a gem out there that is worth owning, or keep renting till you come across the one that is worth signing you name to.

If you are a landlord and have your house on the market for sale, either price it under the market if you can afford it and exit NOW or put it back on the market for rent IMMEDIATELY before the rental market is saturated again.

If you are a REAL investor, there are good opportunities out there to invest in. ! A lot of these landlords are desperate and all they want is to get out from under their obligations.  So, they are not looking for making a dime except to save their credit and stop the bleeding. So many of them walk into my office every week asking if we would buy their homes with a good tenant in place at substantially  below the current market value. We have been referring them to our investors as they come along.

In my humble opinion, this market is NOT going to see another substantial increase in prices for another 4 to 5 years. The whole world economy is going through transition and the news on the street is that things are going to get worse before they get better.

Obviously, there are always good deals out there and in the long run adjusted to inflation ( what your money can buy) owning a house may be a good investment. There are times that I heard someones daughter wants to paint her room pink and the landlord does not allow them. That in my opinion is a good reason to buy  a home if you ask me.

We buy, sell, lease and manage properties valley wide. Our rental policy standards are very high and as the result we have some of the best tenants in the valley. Over 70% of our tenants have been with us for more than 3 years and 95% of them renew their lessees every year unless they are moving out of the area or buying a house.

We offer ac complete package when it comes to investing in real estate utilizing Global Real Estate Investment, ( http://goglobalrealestate.com ) to market for sale and purchases, Arizona Property Management & Investments, ( http://azezrentals.com ) and Las Vegas Property Management and Investments ( http://timetorentvegas.com ) to keep our rentals occupied with quality tenants and BEST of it yet, we now offer full maintenance and home improvement services throughout the valley at affordable rates through Handyman Daily, ( https://handymandaily.com ) to keep our properties maintained , rent ready and marketable at all times.

Please let us know how we can be of any assistance by calling us  at (888) 777-6664 or






Friday, March 21, 2014

Investor exhaustion with investment properties hits: Blackstone’s acquisition pace has fallen by 70 percent from peak last year. Running the numbers on rentals in high priced markets.


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Investor exhaustion with investment properties hits: Blackstone’s acquisition pace has fallen by 70 percent from peak last year. Running the numbers on rentals in high priced markets.

By: Dr housing Bubble

Existing home sales had another weak month and the blame continues to be on the notorious polar vortex.  On the other hand, California is in a record drought and we are in an endless summer yet sales have hit multi-year lows as well.  Could it be that over paying for a pre-World War II house is not exactly fitting in the budget of the regular local buyer?  It is one thing to speculate but another to see what is happening on the ground.  The granddaddy of rental investors, Blackstone has tapered off its investment buying binge dropping in acquisition volume by 70 percent from their record highs from last year.  These are folks that run the numbers in bulk.  I speak to many local investors and many have not purchased properties in SoCal since early 2013 since the numbers simply did not make sense then and they certainly do not make sense now for cash flow opportunities.  The rest of investors are the late comers and the speculators, otherwise known as flippers.  It is interesting to see the mindset shift once again similar to 2006 when the volume was turned up so high that even uttering the words “correction” labeled one as a “doomer” or some other attack not based on numbers.  Unless you see real estate going up forever, you are basically camping out in a nuclear war shelter counting your stockpile until the end of days.  Yet numbers matter.  In many states and in certain markets, prices do make sense and have room to grow.  Not so much in California at least in the short-term.  This is why as we mentioned a site dedicated to housing data Zillow has reached 70,000,000 unique readers a month.  Apparently “setting it and forgetting it” does not apply to housing.  Let us run the numbers assuming you were looking for cash flow properties in Arizona and California.
Looking at investment properties in Arizona and California
In SoCal $500,000 gets you very little especially in L.A. and Orange Counties.  It might get you a nice condo in a sought after market.  As an investor, you are looking at cash flow on a variety of fronts.  Tax benefits are overplayed in many cases and most long-time investors understand this.  In fact, most seasoned investors will tell you to allocate close to 50 percent of your gross rents to costs outside of the regular mortgage payment.  Many investors that I know are not your Blackstone’s.  They are folks that buy properties with at least 25 percent down and finance the rest through conventional banks or through other lenders.  They do put a large amount of skin in the game so the numbers absolutely matter.
So let us take an example of two markets right now with Arizona and California.  It is very doable to find a $150,000 property in Arizona that will rent for $1,500 and a $500,000 condo in California will get you close to $2,500.  This is very common.  For some $500,000 in SoCal seems like a great deal so we’ll run with that.  I think people assume that this unlimited investor buying spree is going to continue deep into the future.  We are already seeing near record low sales volume even though prices went crazy in 2013.
So let us put together some figures here:
property analysis
Sure, some will tell you to close your eyes and simply pick a place and buy since real estate always goes up in certain markets.  But for investors, numbers absolutely matter and if Blackstone was optimistic on the future they would be buying up these high priced properties but they are not.  I think the above numbers highlight why investors are balking big time.  Novice investors will throw out figures like “that $2,500 a month in rent on that $500,000 home is great!”  $30,000 in gross rents seems great when you don’t crunch the numbers.  They fail to mention that you will fork out $132,000 of cold hard cash and still have a $375,000 mortgage as well.  I was very optimistic on the low HOAs above because in some areas in Orange County HOAs of $300 and higher per month are routinely common especially with condos.
You’ll notice that even in Arizona that $150,000 investment property with 25 percent down is going to bring in something like $445 per month assuming no vacancies, maintenance, or other unforeseen costs after your outlays are factored in.  Your tax benefits will absolutely depend on your tax bracket but if you are shelling out this kind of money, you are probably already at a very high tax bracket so any rental income you get is going to get taxed nicely.  Something tells me Blackstone is not a poor organization.
But look at the figures for California.  You are running in the red with a 25 percent down payment here.  This also assumes you are fully rented, no monthly expenses, and you don’t need to do any major repairs.  People are waiving contingencies on these crap shacks and fail to realize that a roof or slab work will likely eat up a few years of profits.  Plumbing work?  Flooring?  Labor is not cheap in SoCal.
What about appreciation?  This is where speculation dives in and this is why a correction is very likely to occur.  You pay rents from net monthly income!  Investors are 30 percent of the market in SoCal.  If they are seeing these crude numbers is it any shock that they are slowly pulling back?  So when the year-over-year gains go stale and even negative (which is very likely) do you think they will ramp back up?  The current pace makes no sense for investors already.  The only reason to purchase would be to flip and this is practically the definition of a mania if we are not seeing underlying incomes increase.  It is also why California is largely becoming a part of the new renter nation.
As an investor seeking out rental cash flow you can see why investing in California overall is a poor proposition.  The momentum we see today comes from the 21 percent jump in the median home price in 2013:
housing gains
It is interesting to hear those that talk about gains not actually putting their money where their mouth is.  If you assume that prices will go up, go for it and buy that house in Culver City or Pasadena.  Why not?  This is a sure bet from their perspective.  Make it a rental and reap those unlimited rewards.  As I mentioned from talking with investors that are deploying their own hard cash, California is not even on their radar.  The flippers on the other hand are still out there.  Whether you rent or buy, you should understand the nature of running the numbers especially on the biggest purchase of your life.  California for a generation has been nothing but boom and bust.  So it is interesting to hear these same people talk about a permanent plateau as if this was the history of SoCal:
hpi los angeles
The facts show boom and bust.  Just the reality of our market.  I’m sure the 7,000,000 folks that lived through a foreclosure wished they ran the numbers.



Arizona Property Management & Investments
(888) 777 6664

Saturday, March 1, 2014

Attn: LandLords and Tenants in Arizona. (Arizona Residential Landlord and Tenant Act)

Payam Raouf
Designated Broker

Arizona Property Management & Investments
(888) 777 6664

Attn: LandLords and Tenants in Arizona. (Arizona Residential Landlord and Tenant Act)


It is important to know what you are signing up for when you lease a house. Leases are getting longer, rules stricter and at the time that one out of three rental properties in Phoenix Metro Area are owned by institutional investors, enforcing the terms of the agreement is done by certain processes and procedures leaving less room for a property manager to make certain decisions in case a tenant breaches the terms of the agreement.

Federal, State, County, City rules and regulations and Arizona Landlord Tenant Act provide some relief for both parties to make sure both Landlord’s and Tenants’ right are protected by law.  

The Neighborhood Services Department of city of Phoenix is home to the only city-run certified Landlord/Tenant Counseling Program in Arizona. Counselors provide education to both landlords and tenants on their rights under the Arizona Residential Landlord and Tenant Act.



The Landlord/Tenant Counselors provide counseling and housing mediation services to city of Phoenix residents, and information to landlords and tenants in-person and on the phone. Counselors also conduct workshops to educate the public about the provisions of the Arizona Residential Landlord and Tenant Act.

Contact Information
Landlord/Tenant Counselors Program
Neighborhood Services Department
200 W. Washington St., 4th floor
Phoenix, AZ 85003
Phone: 602-534-4444
Email: landlord.tenant.nsd@phoenix.gov
Arizona Landlord Tenant Act

If you are a landlord and own one or a few rental properties in Arizona I highly recommend that you read the lease that your property manager has drafted on your behalf and approve of it first. 

At Arizona Property Management & Investments, We offer a worry free Landlord/Tenant environment in a market that continues to become more complex with changes in legislation, placing greater responsibilities on the Landlords.

If you need assistance in leasing and managing your property (ies) in Phoenix Metro Area, Please either call (888) 777 6664 ext 114 or fill out the form below. Thank you.
  


Arizona Property Management & Investments
(888) 777 6664

Saturday, February 15, 2014

Has the Phoenix housing market finally balanced out? 2014 could provide the answer


Arizona Property Management & Investments
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Las Vegas Property Management &; Investments
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Has the Phoenix housing market finally balanced out? 2014 could provide the answer

Reporter- Phoenix Business Journal
Feb 14, 2014, 2:42pm MST 
 
 
When it comes to home prices, supply and demand, the pendulum has been swinging from one extreme to the other in Phoenix since the housing boom of a decade ago.

The metro Phoenix housing market went from a pre-recession sellers’ market to a buyers’ market amid the foreclosure crisis. Then it went back in the sellers’ favor again these past two years when inventory levels and interest rates were at all-time lows.

During these shifts, the Valley saw prices peak, plunge to record lows and then, finally, pick up the pace again at a staggering rate in recent years. But now in 2014, the pendulum could swing yet again. 

Despite the fact that there were 36 percent more homes on the market Valleywide in December than a year earlier — thanks to double-digit boosts in home prices all last year that pulled many homeowners out of negative equity — demand has continued to fizzle since July. That’s according to the latest Arizona State University housing report released today.

In fact, single-family home sales were down 17 percent year-over-year, the report said. Even with a 12 percent increase in listings priced below $150,000 — where the supply shortage had been most severe and demand highest — sales in that range plunged by a whopping 47 percent.

For buyers, this has meant more to choose from and less competition. But for sellers, it means fewer showings, longer wait times for offers to show up — and cutting prices.

The median Phoenix-area single-family home price in December stood at $205,000 — up a sharp 25 percent year-over-year, but only a 2.5 percent increase from November.

 Despite the fact that there were 36 percent more homes on the market Valleywide in December than a year earlier — thanks to double-digit boosts in home prices all last year that pulled many homeowners out of negative equity — demand has continued to fizzle since July. That’s according to the latest Arizona State University housing report released today.

In fact, single-family home sales were down 17 percent year-over-year, the report said. Even with a 12 percent increase in listings priced below $150,000 — where the supply shortage had been most severe and demand highest — sales in that range plunged by a whopping 47 percent.

For buyers, this has meant more to choose from and less competition. But for sellers, it means fewer showings, longer wait times for offers to show up — and cutting prices.

The median Phoenix-area single-family home price in December stood at $205,000 — up a sharp 25 percent year-over-year, but only a 2.5 percent increase from November.

“We have been through enormous turbulence since 2002 and it will be a relief for many to be operating in a more balanced market,” Michael Orr, the report’s author and housing expert at ASU’s W.P. Carey School of Business, said in the report. “However, if the current cooling trend that started in July continues for much longer, 2014 could easily see average and median home prices move a little lower than they were at the end of 2013.”

Demand has been falling for several reasons. Rising interest rates and poor consumer confidence, largely ignited by the government shutdown, are among them. On top of that, many wannabe buyers don’t have the money for a down payment or have poor credit from a previous foreclosure or short sale. This comes as lending standards remain tight.
Additionally, Wall Street-backed investors have been losing their interest in the Valley as home prices rebound and foreclosures lessen. Institutional investors made up 19.3 percent of Valley home sales in December — less than half their peak market share in July 2012, Orr said.

Household formation is also working against the market. Orr pointed out the nation had negative household formation last year for 205,000 homes, according to the U.S. Census Bureau.

“A larger portion of the population is simply choosing to rent, instead of buy,” Orr said. “That includes much of the millennial generation and those who lost their homes to foreclosure or short sale. They either prefer the rental lifestyle, don’t feel that secure in their jobs, or don’t have the credit history or down payment needed for a purchase.”

Orr noted that the Phoenix luxury market — homes priced above $500,000 — is the only sector that hasn’t seen this slowdown. Luxury sales in December were up 21 percent year-over-year as access to jumbo loans is much more accessible than lower-end financing, and will stay that way should the stock market continue performing well.
Patrick Jones is CEO and designated broker of Carefree-based Better Homes & Gardens Real Estate — Sonoran Desert Lifestyles, and also is past chairman of the Scottsdale Area Association of Realtors.

Jones said Orr’s analysis of the luxury market is the only aspect of the report he disagrees with, at least in the North Scottsdale/Cave Creek/Carefree area in which he mostly works and where many individuals own second homes.
“I think the luxury market’s struggling too,” he said. “You can talk to any Realtor in that area. The luxury market is not as hot as that report says.”

Jones described his area of the market right now as a direct contradiction to Economics 101: prices continue climbing as demand is falling.

He thinks part of the reason is because sellers operate on what they read in the news, which is always based on data that’s one or two months old. Buyers, on the other hand, know what’s going on in real time because they’re out there every day, he said.

Overall, Jones is glad the market has lost its momentum. “I was hoping it was going to slow down because I was starting to get nervous ... I think this year we will sort of find our norm,” he said.

 
 
 
 

 

Saturday, February 8, 2014

RENTAL MARKET CONDITION IN SURPRISE ARIZONA AND A FEW SUGGESTIONS.


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Las Vegas Property Management &; Investments
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 RENTAL MARKET CONDITION IN SURPRISE ARIZONA AND A FEW SUGGESTIONS.

Payam Raouf
Arizona Property Management & Investments
Designated Broker


According to Arizona Multiple Listing Services (MLS) as of today Feb 8, 2014, there were over 6000 rental homes that have either been rented or are up for rent in the city of Surprise between January 1 2011 and January 1 2014. There is easily another 3000 to 5000 rentals in this area that are not included in this report since a lot of landlords and property management companies do not utilize MLS to market their homes.

It is difficult to know the exact number of investment properties in a given area since many were mortgaged as owner occupied initially then turned into rental. Simply based on the numbers above, it is fair to estimate that there are somewhere between 9000 to 11000 rental homes in Surprise.

According to 2010 census the population of surprise was 117,517. If there were only 4 individuals living in each property, there should be somewhere around 30,000 homes in the city of Surprise. Therefore one out of three homes in Surprise is a rental property.

Since 2011, when RealtyTrac began tracking the data, institutional landlords have amassed roughly 500,000 homes nationwide, including nearly 31,000 in metro Phoenix.

The concentration of most of these purchases was in the North West Valley, Surprise, Peoria and Glendale as well as South West Valley in Avondale, Goodyear and Laveen. 

Based on this information, it is safe to assume that almost 25% of homes in Surprise are owned by Institutional Inventors. In addition, over 1500 rental homes in Surprise are owned by Canadian, Chinese and Australian Investors and when you throw that into the mix, over 30% of rental homes in Surprise are owned by foreign and institutional investors.

Over Supply of Rental Homes in Phoenix Metro:

Institutional investors have flooded the market by their rent ready properties, new paint, carpet, appliances etc. They offer lower rents and in many instances they do not require any security or pet deposits in addition to offering Realtors a huge incentive to rent their properties first.

More renters are re-qualifying to buy homes and are moving out of the rentals and quite a few of them are renewing their leases waiting to re-qualify to buy within the next year or two. 

There are only a few bank owned properties on the market. Banks are selling directly to institutional investors so tenants do not need to move any more like they used to between 2007 and 2011.

According to MLS, average days on the market for rental homes are over 90 days in most areas.

According to Bloomberg, private-equity firms are now planning to sell bonds backed by lease payments, the latest step in turning a small business into a mature industry. They have the money to maintain and renovate these properties and the holding power to keep them for as long as they want.  

What should a homeowner who has one or a couple homes do  in such a competitive environment? What are your financials like? Most rental home owners I know are on very tight budget.

Here are a few suggestions, please do your own due diligence:

Either sell it NOW or keep it for the next 5 to 10 years. Don’t procrastinate! Most analysts think the next exit point that makes the most financial sense is sometime from 2019 to 2023.

If you can not keep it that long, then you might want to consider doing one of these:

A) Sell NOW if you can! We see more home owners who have one or a few rental properties in the valley have either already sold or are putting their homes on the market to sell. According to MLS, the inventory of homes for sale has increase from 8000 last year this time to approximately 28000 today. It is estimated that this number will go up to 35000 by the years end. Over supply means more competition resulting in lower prices.

B) If you slightly owe more than what your property is worth: Either sell NOW and pay the difference to save your credit or renew your current lease with your tenant at all costs. 

C) Consider a 2 to 5 year lease with option to buy with the tenant being responsible for most of the repairs! We specialize in that.

D) If you still owe a lot more than your house is worth after the huge spike we have had in the prices in the past 14 months, consult with a financial adviser or your attorney to see if short sale is an option. Banks have been very accommodating lately. Also talk to your financial institution; they might even consider lowering your mortgage.

I hope this information helps you make a better decision. Some of these predictions are based on my personal observation of the market. I am a hand on owner and designated broker of Arizona Property Management & Investments, one of the top ten property management companies in Phoenix Metro as well as a business partner at Global Real Estate Investments where we do most of our sales and acquisitions. We also use Arizona Handyman and Remodeling Services LLC dba Handymandaily.com to take care of our maintenance and remodeling business to save our investors a substantial amount of money.

If you are interested in knowing what the true value of your house is these days, Please let me know and I will do a comprehensive research to help you make an informed decision. I don’t just rely on comps on mls. I am very familiar with almost every floor plan, community and the desirability of properties in Surprise. I follow all market trends on a daily basis  to give you a better knowledge of what your property is worth. This is a complimentary service with no obligations. Please fill out this form and I will get back to you within 24 hours.

If you would like to speak with me directly, please call (888) 777-6664 ext 114 and I will be happy to answer your questions.

Payam Raouf

Thank you for reading my blog.

Sunday, February 2, 2014

3 bold predictions for the Phoenix real estate sector in 2014

Arizona Property Management & Investments
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Las Vegas Property Management & Investments
(855) 855 8182


3 bold predictions for the Phoenix real estate sector in 2014

Kristena Hansen
Reporter- Phoenix Business Journal
 
What’s in store for the Phoenix real estate sector in 2014? Experts say the housing market should see less dramatic price gains, higher interest rates and dissipating interest from Wall Street investors. Meanwhile in the commercial sector, a we’re likely a few years away from a healthy recovery. Here’s a closer look at what to expect in 2014:

Prediction No. 1: The housing market keeps recovering, but at a slower rate.
The metro Phoenix housing market has been in recovery mode for two years, and it’s been a roller coaster every step of the way. Local real estate experts are confident the rebound will continue in 2014, but at a much slower, and even more “normal,” pace than we’ve been experiencing lately.

Experts say the 25 to 30 percent year-over-year price spikes Phoenix saw consistently throughout 2013 will look more like 6 or 8 percent in 2014. We’re already seeing signs of this too; according to Arizona State University last week, October’s median price — $200,000 — was 27 percent higher than a year earlier, but up by only one-half percent, or $1,000, from September. Last year, the median price climbed 4.6 percent between September and October.

The other thing to watch for next year will be in the mortgage sector. Experts agree that the days of 3.5 percent interest rates are long gone, but it’s unclear how much higher they’ll climb in 2014. The Federal Reserve said last week it will begin to wean the economy off of its $85 billion monthly bond buying program next year in an attempt to lure private capital back to the mortgage sector, but it’s unclear how investors and the financial markets will react.

The potential upside to higher interest rates, some experts say, is looser underwriting standards for potential borrowers, which we’ve already been seeing in the jumbo-loan market.

Local housing experts are also expecting continued improvement in the home-building sector, although the degree of optimism varies. Growth in the new-home market this year was far below everyone’s expectations as land prices skyrocketed to what many describe as unreasonable heights. Analysts had predicted roughly 17,000 new-home permits for the Phoenix area in 2013, but it looks like we’ll end the year with less than 13,000. Next year’s predictions are as buoyant as 20,000 permits and as conservative as 14,700 — which, either way, still is a fraction of the 60,000 or so issued during the housing boom — while some expect land prices to come down.

Prediction No. 2: Wall Street’s home-buying binge passes

It’s been about two years since Wall Street got into the home-buying and renting business, and metro Phoenix — once plush with foreclosures and bargain deals — was among its top targets. (Note: Institutional investors generally are defined as larger firms, many of which are publicly-traded hedge funds or real estate investment trusts, that own more than 200 single-family homes in the Valley.

The institutional investor buying spree in the Valley peaked in July 2012 with the acquisition of 831 single-family homes. Today, the nine firms that fit into the “institutional investor” category own roughly 13,400 rental homes across Maricopa County — which may sound like a lot, but it’s really only 5 percent of all single-family rental inventory and less than one-half percent of the Valley’s total housing stock. Additionally, Wall Street’s buying activities in Phoenix have slowed to a trickle this fall, netting a record-low 63 home purchases in October.

With foreclosures and short sales now extremely hard to come by and Valley home prices up dramatically this past year, Wall Street investors are setting their sights on other markets, and local real estate experts predict this will continue through 2014.

With the buying spree winding down, there are fears these groups will soon see dollar signs in the recent price increases and thus dump their portfolios all at once. Many local experts say that’s highly unlikely, but if it were to happen, the impact would be minimal given their small market share and 2014 won’t be the year.

However, it should be noted that the bulk of these groups’ portfolios are concentrated in select neighborhoods rather than spread out evenly throughout the Valley. Also, some of the early entrants into the rental home business have already begun purging their assets elsewhere in the country. And because this is an untested businesses model, skeptics say only time will tell whether the strategy is successful and what the long-term impact will be for the housing market.

Prediction No. 3: Construction industry still struggling 

The multifamily market has been on fire this year, and demand has been driven by the recent housing bust that turned many homeowners into renters. Experts tell me they expect that sector won’t lose any of its momentum until after 2015, and without any threat of overbuilding.

Industrial construction has been doing well in recent years, but the demand has been driven solely by a handful of big users, so experts say that the sector still is two years away from recovery when we start to see the smaller mom-and-pops making a comeback.

Experts also say 2014 won’t be the big rebound year for office and retail construction either. Those two sectors have been hard-hit by advances in technology, whereby employers are shrinking their office footprints with the proliferation of mobile connectivity. Retailers are staying competitive by growing their e-commerce platforms.
Local experts say office construction won’t make a comeback until sometime around 2017, when jobs return and absorb the glut of vacant space still remaining. Retail, which usually follows the other real estate segments, will come thereafter.

The other concern is the shortage of skilled construction workers. The industry has struggled with a shrinking workforce for the past three decades, but the issue was exacerbated by the recession and, in Arizona, immigration reform. The home-building sector has already been feeling the labor crunch as demand has picked up in recent years. Experts say that will continue to be problematic through 2014 and as commercial construction makes a gradual comeback.