Market Notes January 21, 2012: Active listings fell slightly over the last week in a market that is starting to heat back up. Available homes listed now stand at 254, listed at an average of $60.90 per square foot. Homes pending close of escrow currently stand at 238, and another 35 homes closed escrow last week, closing at an average of $48.39 per square foot, and bringing this years sales total now to 93 homes sold. Our winter weather thus far this year has been nearly perfect, sunny skies and high 60 degree temperatures have been the norm, and has facilitated the busy home shopping season very well. In addition to that, there is a tremendous amount of excitement about all of the development going on in the area that is soon to make Maricopa one of the best communities in the Phoenix area to live in. Intel is completing their new Fab Plant, which is just a ten minute drive away; the Banner Health Summit is putting the finishing touches on their 40,000 square foot health facility; the College of Central Arizona has begun building their new main campus and across the street from that, the City of Maricopa has begin construction on the new City Hall; the Ak Chin/Harrah’s Casino group continues to construct their new and ambitious 126,000 square foot entertainment complex featuring bowling alleys, movie theaters, restaurants, shops and an outdoor ampitheater, and the Gila River group has just signed on to build a large outdoor outlet mall featuring restaurants and lot’s of shopping – so it’s easy to see why so many people are interested in our small town. And that being said, values are slightly on the rise, but that being said, there still remains a fair amount of time for primary residence, and second home buyers to take advantage of historically low home values. While the foreclosure market has slowed, the amount of shadow inventory (those homes still in the foreclosure process) will ensure that those interested in purchasing still have approximately 12-18 months to secure one of those properties, however the demand in that area is substantial, so if you are actively pursuing a bank owned, or short sale home in the $60K to $90K range, it’s important to act quickly. Most, if not all of these properties receive multiple offers within the first day or two, so don’t delay in getting your offer in. I can tell you that in Arizona, the buyer has a ten day inspection period following the acceptance of a residential purchase contract, during which they can back out of the deal fro nearly any reason, so there are protections. If you would like more information regarding the process, please call or email me at anytime.

Valley wide, the light at the end of the tunnel turned out not to be a train. Real estate experts predict the Valley’s years-long housing glut is reaching its end and, as early as this spring, could stun home buyers by transforming into a shortage. The crunch is expected to be more pronounced in the East Valley, where some subdivisions are approaching build-out and other builders are raising prices. The prediction may seem outlandish given how gloomy real estate news has been for years, said Mike Orr, director of the Arizona State University Center for Real Estate Theory and Practice. But a growing demand and shrinking supply has driven home prices up in recent months, he said. Orr thinks that’s gone unnoticed to people who will enter the market this spring, in what is typically the peak time for sales activity.

“They’re going to be surprised that it’s so hard to buy a house. They’ve been hearing for so long that there’s a glut of homes,” Orr said. “They’ll go out and find there’s not a lot to choose from and every time they bid, there’ll be three or four other offers.”

The shrinking supply is a mirror image of what happened in 2006, when there was a lag before the public realized the number of new homes had ballooned into a problem, Orr said. About 58,000 homes were on the market by late 2007. The long-term average is about 33,000 homes listed at any given time. That’s down to 25,000 now or 19,000 when accounting for homes that have deals pending, Orr said. The unusually short supply will continue to shrink. “By the time we get to 2013, it’s quite likely that we’ll need a lot of new homes,” Orr said.

A short supply should trigger price jumps for existing homes this year, said Jim Belfiore, president of Belfiore Real Estate Consulting. Prices went up 3.1 percent last year, but he argues they should have rose 20 percent in response to a 41 percent drop in real estate listings. He expects that 20 percent jump will happen in 2012, starting with a 6 percent to 11 percent rise by March. Belfiore’s company surveys each of the Valley’s 400 active subdivisions on a regular basis to gauge prices and sales activity. Belfiore predicts shortages will grow as 2012 goes on because 34 percent — or 136 subdivisions — will be sold out in a year. 

“The East Valley is a top performer,” Belfiore said. “In Gilbert, there are 58 subdivisions that are active today. It might be the most active submarket in the southwestern United States. Builders are pining for new lots. There’s a land shortage in Gilbert. Chandler is the same deal.” The number of permits issued last year was a 40-year low, at about 7,000, Belfiore said. He expects that will grow to 10,400 this year, 15,800 in 2013 and 23,200 in 2014. The construction should further boost the economy. Each new home creates 2.5 jobs for three months, Belfiore said. Belfiore expects a strong 2012 because of falling unemployment, exceptionally low prices and record low interest rates. The market could be especially strong if employment gains continue and banks relax their lending standards, he said. This year’s real estate market should be the best in five years, Orr said. It will take several years to resemble a normal market and any increases will be far short of what created the bubble, he said. “I don’t think there will be the same speculation there was, but there might be a lot of people who do want to buy a house in the next two years, thinking, ‘If I don’t buy now, I might miss out,’” Orr said.

The number of foreclosures and short sales remains high but will be less of a factor in the market as time goes on, said Bob Bemis, CEO of the Arizona Regional Multiple Listing Service. Distressed homes are mostly the target of investors. Families tend to focus on new homes or traditional resales, he said. The market showed signs of returning to health last year, he said. Median sale prices rose 6.5 percent to $117,000, and average sale prices were up 3.5 percent, to $162,000. He expects a burst of activity at some point in 2012. Bemis said he expects potential buyers could dismiss a real estate professional’s rose-tinted predictions, given how they are known for saying there’s never been a better time to property. But he said skeptics should give weight to Orr, whose role at ASU divorces him from having any skin in the game. “We’re very close on agreement on where we’re headed,” Bemis said. “It’s just a matter of degree.”