Valley home values rebounding to pre-recession levels

Better days have arrived for the housing market, with many neighborhoods back to pre-crash levels and high demand from first-time buyers.

Out of the rough 150 metro Phoenix zip codes, 30 of them are back to pre-crash levels and 40 are within 10 percent of those levels, says Catherine Reagor of The Arizona Republic. Other neighborhoods were hit harder in the crash and will take longer to recover.

There has been an increase of houses on the affordable side, which is generally considered to be $300,000 or less. Many of those affordable neighborhoods – central Mesa, central Glendale, central and northwest Phoenix – are being filled by younger, first-time buyers. Those areas are becoming stronger because it’s what people can afford, Reagor says.

Neighborhoods around Buckeye and Pinal Country are still struggling, but they are showing signs of improvement, Reagor says. The percentage of homeowners underwater is at eight percent today compared to 50 percent in 2009.

Nearly 8,000 apartment units went up last year, and over 9,000 more are planned to be finished by the end of this year. Many of them are concentrated in central Phoenix, with some popping up in central Scottsdale as well. However, the market is seeing that more people are looking to buy and not rent. Reagor says she could see some of the luxury apartments downtown be converted into condos if the demand is there.

“There’s more demand than supply and not only from millennial buyers but also investors,” Reagor says. “Home prices under 300k easily get a dozen offers within an hour on the market. Investors are coming in and gobbling up everything and they all pay cash.”

Reagor says she is happy to see the market doing so well, but she still has her guard up, saying she’s “always cautious because of the tears from the crash.” However, the rampant subprime mortgage issue that was at the root of the last crash isn’t present this time. Also, if prices climb too high, first-time buyers won’t be able to afford them. That will cause the demand to drop, Reagor says, and prices will drop soon after.

Transcript:

TED SIMONS: HOME VALUES IN THE PHOENIX AREA ARE REBOUNDING TO PRE-RECESSION VALUES OR EVEN HIGHER, WITH THE SHARPEST INCREASES IN HOMES, WITH MEDIAN PRICES BELOW $300-THOUSAND DOLLARS. JOINING US NOW WITH MORE IS ARIZONA REPUBLIC REAL ESTATE REPORTER, CATHERINE REAGOR. GOOD TO SEE YOU AGAIN. THANKS FOR JOINING US.
CATHERINE REAGOR: GOOD TO SEE YOU TED.


TED SIMONS: ALL RIGHT, SO ARE WE BACK TO PRE RECESSION LEVELS? SOME OF US ARE BACK? SOME AREN’T? WHAT’S GOING ON HERE?


CATHERINE REAGOR: YOU JUST DESCRIBED IT SO WELL. YES, SOME OF US OUR BACK. WE BREAK IT DOWN BY ZIP CODES. WE CALL THEM NEIGHBORHOODS BECAUSE IT’S THE BEST WAY TO TRACK HOME SALES. WE HAVE ABOUT 150 METRO PHOENIX ZIP CODES, 30 ARE BACK PAST THOSE BOOM LEVELS OF 2006, PRICES HIGHER, ANOTHER 40 NEIGHBORHOODS ARE WITHIN TEN PERCENT AND THEN SOME OTHER NEIGHBORHOODS FURTHER OUT WERE HIT HARDER DURING THE CRASH AND HAVE FURTHER TO GO, BUT HALF OF ALL THE NEIGHBORHOODS.


TED SIMONS: OKAY, LET'S TALK ABOUT THE GOOD NEIGHBORHOODS. OR THE THINGS WHERE THINGS ARE HAPPENING--THEY ARE ALL GOOD NEIGHBORHOODS. BUT WHERE ARE THINGS HAPPENING?


CATHERINE REAGOR: REALLY SEEING IT ON THE AFFORDABLE SIDE, LIKE YOU MENTIONED, $300,000 OR LESS. AND SEEING THOSE NEIGHBORHOODS CLOSER IN, WHERE BUYERS, PARTICULARLY FIRST TIME BUYERS, THE YOUNGER BUYERS, THE MILLENNIALS WANT TO LIVE AND CAN AFFORD. AROUND DOWNTOWN PHOENIX IT’S THE WEST DOWNTOWN, 85009, LAST YEAR SAW MEDIAN HOME PRICES CLIMB ALMOST 30 PERCENT.


TED SIMONS: WEST OF CENTRAL, SOUTH OF WHAT?


CATHERINE REAGOR: SOUTH OF MCDOWELL, KIND OF A LONG STRIP. BUT IT HAS DIFFERENT HISTORIC NEIGHBORHOODS, STILL AREAS COMING BACK BUT HAS THAT COOL EDGE--CENTRAL MESA DEFINITELY SEEING THAT. SOUTH PHOENIX, CENTRAL GLENDALE, NORTHWEST PHOENIX.
THOSE NEIGHBORHOODS ARE JUST VERY STRONG CAUSE IT’S WHERE PEOPLE CAN AFFORD.


TED SIMONS: I WAS GOING TO SAY, AND NOW THE AREAS THAT ARE HAVING THEIR STRUGGLES, THOSE ARE THE WAY OUT THERE AREAS? PROBABLY STILL HAVE A BUNCH OF BRAND NEW SPEC HOMES OUT THERE DON'T THEY?


CATHERINE REAGOR: SOME DO. AND THE LAND IS LESS EXPENSIVE, SO HOUSEBUILDERS CAN COME UP AND BUILD HOUSES FOR LESS THAN THEY SOLD IN 2006. AND SO YOU KNOW THE BUCKEYES AND PINAL COUNTY AREAS NOT AS STRONG, BUT THEY ARE DOING BETTER. THEY ARE SEEING IT, AND IT’S THAT COMPETITION WITH THOSE NEW HOMES THAT ARE LESS. BUT THEY ARE STILL--THAT’S WHERE YOU’LL FIND MOST OF THE HOMEOWNERS UNDERWATER. BUT THE NUMBER, THE PERCENTAGE OF HOMEOWNERS UNDERWATER IS UNDER I THINK EIGHT PERCENT. AND WE REMEMBER IN 2009, IT WAS 50 PERCENT. WE TALKED.


TED SIMONS: WE TALKED ABOUT THAT ON THIS PARTICULAR PROGRAM. OKAY, THESE AFFORDABLE HOMES, THE ONES THE MILLENNIALS ARE GOING AFTER, THE $300,000, THAT AREA. IS THERE MORE SUPPLY THAN DEMAND OR VICE VERSA?


CATHERINE REAGOR: OH, VICE VERSA.


TED SIMONS: MORE DEMAND, HUH?


CATHERINE REAGOR: YES, AND NOT ONLY FROM THOSE MILLENNIAL YOUNGER BUYERS, BUT INVESTORS. WE HAVE SOME INVESTORS COMING IN, A BIG ONE OUT THERE BUYING, JUST GOBBLING IT UP, PAYING CASH AND COMPETING. AND YOU KNOW HOMES PRICED UNDER $300,000 VERY EASILY GET A DOZEN OFFERS WITHIN AN HOUR OF GOING ON THE MARKET.


TED SIMONS: AND THESE AGAIN IN MANY CASES ARE MILLENNIALS. AND THESE ARE PEOPLE LOOKING FOR THEIR FIRST HOME TO LIVE IN, WHAT A CONCEPT, TO LIVE IN.


CATHERINE REAGOR: YES. I TALKED TO A COUPLE WHO BOUGHT IN THAT 85009, AND THEY WERE GETTING BEAT. AND THEY BOUGHT FROM A WOMAN WHO LIVED IN A HISTORIC NEIGHBORHOOD, LIVED THERE AND DIDN’T WANT TO AN INVESTOR AND HER HOUSE WASN'T EVEN ON THE MARKET--AND THAT’S HOW THEY HEARD ABOUT IT. ANOTHER COUPLE, THEY LOOKED AT 82 HOMES. AND THEN THEY UPPED THEIR PRICE TO 400,00 AND THAT’S WHY THEY WERE ABLE, AND THEY WERE THERE ON THE FIRST DAY.


TED SIMONS: YOU KNOW WHEN YOU HEAR ABOUT INVESTORS SWOOPING IN AND BUYING EVERYTHING THAT’S AVAILABLE AND THEN SOME, IT BRINGS BACK BAD MEMORIES.


CATHERINE REAGOR: IT DOES. WE HAVE THIS INVESTOR SURPLUS, WHICH IS A WALL STREET HEDGE FUND, AND THEY’VE BOUGHT ABOUT 700 VALLEY HOMES FROM UNDER 300,000 SINCE NOVEMBER. THEIR BROKER SAID THEY WANT TO BUY 4,000, SO THAT UPS THE COMPETITION. THE DIFFERENCE IS, THEY’RE PAYING CASH. AND WHEN WE HAD THOSE, WE CALL THEM SPECULATORS, DIFFERENCES YOU KNOW, BUT THEY WANTED TO HOLD THE HOMES LONGER, BUT THE SPECULATORS WERE COMING IN WITH THESE LOANS, WITH NO MONEY DOWN, AND THINKING WHY BUILD EQUITY IN A YEAR AND THEN WALKING AWAY, SO THEY DIDN'T. SO WE ARE NOT SEEING ANYTHING LIKE THAT, JUST A REAL COMPETITION FOR THOSE BECAUSE THERE’S SUCH DEMAND FOR THE FIRST TIME HOME BUYERS. AND A LOT OF YOUNG MILLENNIAL FIRST TIME HOMEBUYERS DON'T NECESSARILY WANT TO DO ALL THE WORK, SO THESE OTHER GROUPS THAT ARE COMING IN AND FLIPPING THEM--AND WE’VE TALKED ABOUT THE PHONE CALLS, CAN I BUY YOUR HOME?


TED SIMONS: YES, THEY’RE ALL OVER THE PLACE. THEY NEVER LEAVE YOU ALONE.


CATHERINE REAGOR: YES, IT IS. MY HUSBAND GETS THEM ABOUT EVERY HOUR.


TED SIMONS: IF THE MILLENNIALS ARE OUT THERE, YOUNGER MILLENNIALS ARE OUT THERE, THEIR BUYING HOMES, THEIR FINALLY BUYING HOMES. WE HAVE BEEN WAITING FOR THIS.
AND THEY’RE STARTING TO DO THIS, WHAT’S GOING ON WITH THE APARTMENT MARKET? THE RENTAL MARKET?


CATHERINE REAGOR: A LOT OF NEW APARTMENTS. ABOUT 8,000 WENT UP LAST YEAR, 8,000 APARTMENT UNITS. ANOTHER MORE THAN 9,000 PLANNED THIS YEAR. A LOT IN CENTRAL PHOENIX. IF YOU’RE IN DOWNTOWN PHOENIX YOU’RE SEEING THEM ON EVERY CORNER. CENTRAL SCOTTSDALE, STARTING TO SEE SOME CONCESSIONS OVER THERE. SOME OF THE BIG HOME APARTMENT OWNERS ARE OFFERING MAYBE $250 OFF ON A MOVE IN, MAYBE A FREE MONTHS RENT IF YOU SIGN A LONGER LEASE--THAT SHOWS SOME PRESSURE. ALSO FOR THE FIRST TIME IN SEVERAL MONTHS, RENTS WERE FLAT IN FEBRUARY AND MOST AREAS AGAIN IN MARCH AND EVEN SAW A DIP. THAT'S AN OKAY MARKET CORRECTION. THAT'S A NORMAL, HEY, BUT WHAT DO YOU DO WITH ALL THESE ONES THAT ARE HALF BUILT?


TED SIMONS: RIGHT. COULD THEY BECOME CONDOS?


CATHERINE REAGOR: YOU KNOW THAT'S A VERY GOOD QUESTION. IF YOU LOOK AT SOME, PARTICULARLY THE SMALLER ONES, YOU COULD SEE IT BECOME CONDOS AND THOSE CONVERT.


TED SIMONS: THEY’RE ALL LUXURY APARTMENTS ANYWAY. YOU MIGHT AS WELL JUST TURN THEM INTO CONDOS.


CATHERINE REAGOR: YEAH, PARTICULARLY SOME OF THESE OLDER ONES IN THE CENTRAL AREA, AND THE WAY THEY ARE BEING DEVELOPED. I COULD SEE THAT, IF THERE’S THAT DEMAND VERSUS RENT.


TED SIMONS: ALL RIGHT. LET'S TALK ABOUT OTHER CONCERNS, INTEREST RATES. WHAT ARE THEY DOING? HOW ARE THEY AFFECTING?


CATHERINE REAGOR: YOU KNOW, THEY’RE HIGHER. WE DON'T SEE IT REALLY DETERRING. AND OF COURSE IF WE GO BACK IN 2006, IT WAS SIX AND A HALF PERCENT, SO AROUND FOUR DOESN'T SOUND HORRIBLE. IT’S KINDA THAT MENTAL THING WHERE YOU GET IT.
BUT NOT NECESSARILY THE CONCERN NOT SEEN AS MUCH IN METRO PHOENIX.
AND IT’S INTERESTING, I TALK TO REALTORS AND THAT’S NOT WHAT BUYERS-- I'M WORRIED ABOUT INTEREST RATES, I’M BUYING FOR INTEREST RATES. IT’S NOT DRIVING IT AS MUCH.


TED SIMONS: YOU KNOW WE MENTIONED CONDOS AND APARTMENTS AND SUCH. WHAT’S GOING ON WITH TOWNHOUSES, CONDOS, IS IT THE SAME KIND OF THING REFLECTED IN SINGLE FAMILY HOMES?


CATHERINE REAGOR: AND CLOSER IN. SO NEW CONDO SALES WERE UP 57-PERCENT LAST YEAR. AND WE HAVE A LOT. OVERALL CONDO SALES WERE UP 12-PERCENT. THE PRICES ARE GOING UP THOUGH BECAUSE LAND FOR NEW CONDOS ARE UP. SO WE'LL SEE WHAT PEOPLE ARE WILLING TO PAY AND HOW CREATIVE THEY GET WITH THE SPACES BECAUSE WE SEE ON OUR SKYLINE THERE ARE A LOT OF CONDOS UNDERWAY. AND IF SOME OF THESE APARTMENTS COULD BE CONVERTED MAYBE FOR THE RIGHT PRICE AND AFFORDABLE. MY CONCERN IS ON OUR AFFORDABLE HOUSING BECAUSE PEOPLE COME HERE AND THEY MOVE HERE BECAUSE THEY CAN GET JOBS AND THEY CAN AFFORD THE HOUSING. AND IT’S THAT PRICE, PRICE PER HOUSE, VERSUS YOUR WAGE. AND IF ONE--


TED SIMONS: I THINK YOU WROTE ABOUT A COUPLE THAT CAME FROM CHICAGO, AND THEY WOUND UP IN CENTRAL MESA. THEY’VE GOT SUCH NICE NEIGHBORHOODS IN CENTRAL MESA.


CATHERINE REAGOR: THEY DID. AND THEY DIDN'T HAVE A JOB. THEY WERE JUST TIRED OF THE SHOVEL THEY SAID. THE SHOVEL EVERY WINTER. AND SHE GOT A JOB AT ASU IN TEMPE, AND HE MANAGES A RESTAURANT IN CHANDLER. SO THEY’RE HALFWAY IN BETWEEN, AND THEY LOVE IT. THEY HAVE A SWIMMING POOL, THEY HAVE A DOG FOR THEIR BACKYARD. THEY’RE JUST THRILLED. AND AROUND $300,000.


TED SIMONS: YEAH, THAT'S THAT MAGIC PRICE. WHAT'S GOING ON WITH MUCH MORE EXPENSIVE HOME, AND I MEAN LIKE, YOU KNOW, ZOOMING ON UP THERE. IS IT JUST THE WAY IT’S ALWAYS BEEN? IS IT JUST A MARKET UNTO ITSELF?


CATHERINE REAGOR: IT IS. BUT WHAT’S INTERESTING, AND WE’VE HAD THREE CONSECUTIVE RECORD PRICES FOR HOMES, 15.6 MILLION IN DECEMBER, $17 MILLION IN JANUARY AND THEN THE LAST ONE WAS $18.8 MILLION IN DC RANCH, SILVERLEAF AND SCOTTSDALE. AND WE ARE SEEING, PARADISE VALLEY HAD A SIGNIFICANT INCREASE IN PRICES. PARTLY BECAUSE OF THE
NEW HOMES, BUT WE’RE SEEING THAT MARKET DOING BETTER.


TED SIMONS: I GUESS EVERYONE’S HAPPY. SO WE’RE HAPPY NOW, EVERYTHING'S GOING GOOD, WE ARE PICKING UP THE PHONE. DO YOU WANT TO BUY YOUR HOUSE?
SORRY I MISSED YOU. I LOVE THAT ONE, SORRY I MISSED YOU. WHAT DO WE EXPECT FOR THE REST OF THE YEAR?


CATHERINE REAGOR: YOU KNOW WHENEVER WE GET, BECAUSE WE ARE A BOOM AND BUST REAL ESTATE ECONOMY, AND OF COURSE WE GET NERVOUS WHEN WE SEE THINGS GOING REALLY WELL. AND WE’RE LIKE BUBBLE, BUBBLE. WE DON'T HAVE THE BAD LOANS OF THE CRASH AND THE BOOM. WE DON’T HAVE THOSE. IF PRICES CLIMB TOO HIGH AND FIRST TIME BUYERS CAN'T AFFORD, THEN THE DEMAND IS GOING TO DROP AND THEN WHAT HAPPENS THEN, AND OF COURSE PRICES WILL DROP. SO JUST KINDA BEEN IN GOOD TIMES, AND MAYBE YOU KNOW COULD FULLY RECOVER PRICES THIS YEAR, BUT I'M ALWAYS CAUTIOUS BECAUSE OF THE TEARS SHED FROM THE CRASH.


TED SIMONS: THERE ARE MANY TEARS STILL OUT THERE WATERING LAWNS ALL OVER TOWN.
WELL ENCOURAGING NEWS. GOOD TO HAVE YOU HERE. GOOD TO SEE YOU. THANKS FOR JOINING US.


CATHERINE REAGOR: THANKS.