A new report by Realtor.com lists the Metro Phoenix area as one of the top ten real estate markets to watch next year. Catherine Reagor, real estate reporter for the Arizona Republic, will discuss the Valley’s real estate market.
Ted Simons: Coming up next on Arizona Horizon, a new report proclaims the Phoenix area as one of the top ten real estate market for 2015. We'll discuss the challenges Veterans face when getting post-military education and how they plan to use data centers. Those stories next on Arizona Horizon.
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Ted Simons: Good evening and welcome to Arizona Horizon. I'm Ted Simons. A new report lists the metro Phoenix area as one of the top ten real estate markets to watch for 2015. Here to tell us more about the report is Catherine Reagor, the real estate reporter for the Arizona Republic. Top ten markets for 2015, who did this report?
Catherine Reagor: Realtor.com, and they get the information from all the cities, and this is their new chief economist, and they did not rank the top ten, but Phoenix was in the top ten, and they are very bullish.
Ted Simons: And if they are, I'm interested inside because not a lot of folks are very bullish about a variety of aspects of the Arizona economy. They are looking at high potential for income growth.
Catherine Reagor: And we can only go up. We all hope with the jobs, we do have income growth so that is good, and I think when they are comparing us to other cities like Los Angeles, san Jose made the list, and San Francisco, and Washington D.C. , and it does look like we would be in a good spot and we'll watch and see what happens with the jobs.
Ted Simons: So they are saying job grossed and income growth and they're seeing increased new home construction. Really?
Catherine Reagor: Yes, and we have it our home building industry has not recovered from the crash, and in October, we had a very bad month for home building, the market dropped 33% from the year before, we're 15% off last year's pace. By this time, we thought we would see more of a recovery. The big problem there is that we have the biggest spread historically between resale prices and new home prices, so it's tough to afford a new house right now based on.
Ted Simons: Even with the market in the doldrums, that separation still exists?
Catherine Reagor: A lot of it is the prime land areas like Gilbert and Chandler, very popular with buyers, and it is more expensive, but yes, and they are doing a lot more urban projects, and those are more expensive, so the median price is higher, but that is -- many people who cannot afford new homes are staying out of that market.
Ted Simons: And I also noticed report they mentioned the population is expected to increase, again, we're hearing that one of the problems that we're having is the folks are moving here like they have in the past.
Catherine Reagor: Yes, sometimes there is a disconnect we see between the national economists and local economists, and the end story was interesting. I am hearing on the other side good things about the housing market, not the same good things that the report said, but, different good things.
Ted Simons: So what are you hearing?
Catherine Reagor: You know, looking really at the spring, really optimistic, groups, and analysts that call it the crash and the bubble and started recovering in 2012, going to be strong in the spring. Of course, the Super Bowl always gives us a boost because everyone comes from colder areas and says, what a great time to be here. Houses. But, lots of things like maybe lending guidelines. A bit looser so more people can get a loan.
Ted Simons: Explain that more. What are we seeing out there and what are you expecting?
Catherine Reagor: It has been really tough since the new guidelines were put in place last January, and you know, the higher down payments, people can do that, but it's the expensive paperwork, lenders being more cautious, which is not always a bad thing.
Ted Simons: Right.
Catherine Reagor: But to the point that you have stellar credit and you have the money in the bank, and it's just become such an arduous process, do I want to go through this, and hearing more private lenders, possibly coming to the table because they have the money to invest, and they will still, you know, want to be sure that they get a return on the money, and the borrowers can repay, but lots of strains and pressure from the Federal Government, and on lenders to encourage more mortgages.
Ted Simons: And I would imagine that we're now seven years into this housing, whatever, what have you. And at seven years, is usually the time when folks who had early trouble can wander their way back into the market if they so choose.
Catherine Reagor: Yes. Very much so, starting with the foreclosure crisis, and now where we are, people can buy again and people who may be could have bought a couple of years ago would have been saving money, can buy again. Home prices are flat after rising for the past few years, so that's a good time to buy when prices are flat, and look at interest rates. How low they are. Supply isn't huge. We don't have an oversupply at this point. But, there are houses out there, and homeowners who want to sell, so, good conditions if the lending conditions improve.
Ted Simons: If springtime does see a big increase in attention to the market, could we have an, a shortage of homes out there?
Catherine Reagor: I think that there are a lot of homeowners, and you probably know them, and I do, too, who are waiting to sell. And they are looking for that increase in the demand again, and they want to get a slight boost in the price, so I think it will draw more homeowners who can sell to put their houses up.
Ted Simons: You mentioned foreclosures down a lot. Give us a better education on what's going on out there.
Catherine Reagor: We are back down to early 2007 levels, so almost a boom level, other parts of the country, like Nevada and even parts of Florida are seeing increases, and we are not seeing increases again. So, a good sign that people can continue to pay their mortgage, and if you could not, unfortunately, not in that position any more. Or have been able to sell because we did have half of a rebound in home prices from the crash, but no, our foreclosures are low, and they will remain low.
Ted Simons: What kind of investors, what kind of activity?
Catherine Reagor: Investors, some are selling, and maybe a dozen homes, you know, but they own a month, but they own, you know, 1,000, no rush for investors to sell, I think that they are also waiting, and huge demand from renters right now because they cannot buy, they are not ready to buy, in metro Phoenix, and or they want to live in an area where they can afford to buy. Urban housing is very popular right now.
Ted Simons: Interesting, and you mentioned a demand by the rental market is strong.
Catherine Reagor: Yes. Rents are up 6% from a year ago, and the number of homes for rent is down. And it continues to grow, and it adds to the investors, but strong demand and it's either because they can't buy because of lending or they cannot afford where they want to buy, and strong demand.
Ted Simons: It sounds, from you and from others, it sounds like the market is dog paddling, and circling the lake, and waiting to find a way out, and I don't know. I am getting lost in my metaphor, but the bottom line, it seems like things will happen coming up in the next few months.
Catherine Reagor: And that's everything that I am hearing, and seeing, and it's not just hype, you know, like let's say the market improves, no, they are seeing investors talking, and different groups talk about lending and different groups targeting Phoenix for projects, and because they believe that demand is there.
Ted Simons: Is that demand there for certain types of homes over others?
Catherine Reagor: We're generally seeing a lot of cool, interesting new urban housing, not just in central Phoenix, but Tempe, Scottsdale, and so far, buyers are going to the products, those houses, sorry, houses.
Ted Simons: High end market as opposed to low end? Are we seeing?
Catherine Reagor: The whole range.
Ted Simons: Even condos and townhouses.
Catherine Reagor: Great townhouse, around 300,000, and that's the median for a new home, a resale home is 210. But you are in central Scottsdale, and you are going to get a two-car garage and a three-bedroom townhouse and a good location close to light rail, and in those areas closer, and that's all that's left for land, in the high density, so, but not, you know, I think that there are about 800 condos, townhomes, you know, on the area that are being built, and that compares to 8,000 during the boom, and only half of those ever were built, and some of them were turned into rentals, so we're not anything like that.
Ted Simons: Well sounds encouraging. We'll see what happens. If nothing else, it sounds like we're waking up out of the slum The dog paddles waiting out of a slum.
Catherine Reagor: I love them.
Ted Simons: All right. Good to see you again.
Catherine Reagor: Thanks.
Catherine Reagor:Real Estate Reporter, Arizona Republic;