GSN Real Estate 082122

re1

REAL ESTATE

GILBERT SUN NEWS | AUGUST 21, 2022

Housing market has changed, but not crashed

BY MINDY JONES GSN Columnist

R

eal estate market seasonality varies by state depending, on which extreme weather condition you are

ED

2021

ST

BESTOF

see MINDY page RE3

LI

2022

market of 19 to 32 with price changes increasing, contingencies more frequent, and the listing success rate falling – all normal signs of market deceleration.

Remember, prices aren’t crashing, appreciation is slowing. The median house price in Gilbert two years ago was $370,000 and we’re now up to a whopping $575,000.

With annual appreciation still in the positive, new listings coming to market at a much slower pace and no Valley cities experiencing excessive supply, we should start to see less downward pressure on pricing on the horizon.

Coupled with the fact that we’re expecting a ton of people ages 28-32 to

ST

BESTOF

buying if they are selling so they won’t be upsetting the inventory balance by much when they move.

There’s no mass exodus from Arizona, no mass job layoffs, and we’re coming into our best weather of the year, which means we’ll get our tourists back again soon.

In Gilbert, pricing looks very similar to what it looked like back in February or March of this year.

But instead of having to dig up $60$70K over asking in cash, you’ll likely be able to get into a house closer to list price and have it appraise. That means you can finance that difference over 15 or 30 years.

Inventory has tripled in that time frame and we went from an average days on

JU

trying to avoid.

While Realtors don’t really have blackout dates in the Arizona real estate calendar – considering we’re really only talking about avoiding higher temperatures, some pesky wind and maybe a few extra bugs - the third quarter is typically our slowest season.

And for the first time in three years, we are being reminded of what that feels like.

An extreme deficiency in inventory following years of underbuilding, population growth and artificially low interest rates in 2020 created one of the most unusual markets Arizona has ever experienced: Offers 10-20% over asking, waived appraisals, lease backs until your kids decided where they were going to college and everything but the first born.

Investors picked up everything they could with the cheapest money around – and by investors I mean anyone who had access to a little cash or anyone in prop tech, real estate tech, tech tech or with the

words “venture capitalist” in their name.

It became an absolute market frenzy where not only did seasonality not play a part but neither did words like “comparables” or “contingencies.” It was one of the most profitable times in Arizona real estate history for buyers and sellers but also very stressful and logistically complicated.

Now that seasonality is back in the picture – and so are more houses, more negotiation room, and still a net increase in property values for sellers of nearly 40% in the last few years – buyers have gotten back on the fence.

Add in a few spikes in interest rates, gas prices and some PTSD from the market crash a decade ago and we’ve got some of the lowest buyer demand that we’ve seen in history.

The good news, and there’s actually a lot of it, is that while our inventory went from 4,000 homes on the market to 18,000 in a blink of an eye, we seem to have stopped the flood gates – or at least plugged them a bit as we’re not seeing nearly the drop of new listings that we did in June and July.

We’ve cycled our way through the second homes, investment properties, and other expendable income properties and made our way back to our primary homeowners – who for the most part will be

BESTOF

2022

Melanie Nemetz

Come see this great single level home offering 4 bedrooms & 2 baths with vaulted ceilings in the award winning community of Power Ranch

Call Melanie (480) 221-3034

Our extensive, high quality marketing of your home combined with our thorough preparation of listing the home for sale, will help your home sell faster and for more money. Here is a sample of the marketing for our listings: ◆ Home Staging Report by Interior Designer & Stager ◆ Professional video of home ◆ Professional photos of home ◆ Twilight photos ◆ Community photos ◆ Aerial drone video/photos ◆ 3D Interactive floor plan - Matterport www.fosteringre.com Each office is independently owned and operated ◆ Open house first weekend on the market

480.221.3034

See Page 3

re2

REAL ESTATE

GILBERT SUN NEWS | AUGUST 21, 2022

Small Gilbert apartment complex sells for $3.8M GILBERT SUN NEWS

A

company that includes the managing partner of an international real estate investment group in Los Angeles earlier this month bought a small Heritage District apartment complex for $3.8 million – more than twice what the seller paid for it four years ago.

Heritage Ranch Owners LLC bought three single-story buildings housing a total 12 apartments in the 200 block of N. Elm Street, Valley real estate tracker vizzda.com.

The deal is a small but a typical example of a trend in apartment complex sales in the East Valley over the past year that appears to be driven by es-

A California investment firm bought this 12-unit apartment complex in Gilbert’s Heritage District for more than twice what the seller paid for it four years ago. (Special to GSN) calating rents and Maricopa County’s soaring population.

More than a dozen complexes throughout the region have sold in the past year for twice to three times what

the sellers paid for them two to five years earlier.

Built in 1963 and 1972 on about a half acre, the small Elm Street complex had been purchased by the Grupe Com-

pany in August 2018 for $1.5 million, according to vizzda.

Heritage Ranch Owners LLC lists its partners as Gregory Heller, Sharon Heller and the Richard J. Heller Bypass Trust, all at the same Los Angeles address, according to Arizona Corporation Commission filings.

Gregory Heller also is managing director of the Harbor Group in LA, a global real estate investment and management company that boasts a portfolio of multifamily, retail and office properties valued at a total of more than $19 billion.

The Elm Street deal represented a price per unit of $318,750 and a square foot price of $408, vizzda reported.

Homebuilders backing off as sales start to plummet GILBERT SUN NEWS SERVICES

J

ust a few months ago, builders couldn’t put homes up fast enough to appease the hordes of eager buyers. They boasted about lengthy waitlists, even holding lotteries to choose those lucky enough to purchase their newly constructed homes.

Those days are now over as the housing market corrects after two years of runaway prices.

Buyers are now canceling orders and extracting themselves from waitlists as higher mortgage rates have pushed their dreams of owning new construction beyond their financial reach. Sales are down, including in the Phoenix area.

Builders are responding by throwing out incentives, like spaghetti against a wall, to see which ones attract buyers.

Some have begun cutting prices, and the majority are slowing down the pace of construction—despite the nation’s dire housing shortage that’s hit crisis proportions.

“We should anticipate fewer homes being built over the next 12 months,” says Ali Wolf, chief economist of Zonda, a real estate consultancy. “The new-home market is struggling right now. Demand has cooled more than you would imagine this

This two-story home, also in Ahwatukee, was among the top sellers in the last two weeks at $1.07 million. The 3,983-squarefoot house, built in 1996, has five bedrooms and four bathrooms, boasts 180-degree mountain views and sported numerous upgrades. (Special to GSN) time of year.”

Many buyers were already reeling from record-high home prices. Add in higher mortgage rates, and suddenly many were unable to afford the monthly payments on a new home, which are often more expensive than older properties.

Some would-be buyers have decided to sit tight for now to see if they can get a better deal down the line.

“You raise rates to this level, and you’re going to have folks who can’t qualify” for mortgages, said Devyn Bachman, senior vice president of research at John Burns Real Estate Consulting.

“There is a very large group of buyers who could buy but are choosing not to be-

This two-story house in Ahwatukee recently sold for $825,000.

Built in 1989, the 3,134-square-foot house has four bedrooms and three bathrooms, a family room with fireplace, a master bedroom with a sitting area and balcony overlooking the mountains. (Special

to GSN)

cause they’re worried about a recession, inflation, and the national economy. People are afraid they’re going to buy a home and a year from now it will be worth less than it is today.”

In June, there was a roughly 31% decline in sales in new-home developments compared with the same time a year ago, according to data from John Burns. The number of sales fell even further in July, according to preliminary data.

That’s given builders pause. They don’t want to put up the money to construct homes if they’re not confident they can sell them.

“Without a doubt, the first half of 2022 qualifies as a housing recession,” said

Robert Dietz, chief economist of the National Association of Home Builders.

“Building had a big drop-off,” said Realtor.com Chief Economist Danielle Hale.

“Unfortunately, with this pullback in building, that shortage is unlikely to be solved anytime soon.”

Roughly 87% of builders are now planning to slow down their pace of construction, according to Zonda. Bachman expects builders to take out 5% to 10% fewer permits for new homes next year.

The largest homebuilder in the nation, D.R. Horton, reported that about 24% of orders for new homes were canceled

see HOMEBUILDERS page RE3

re3

REAL ESTATE

GILBERT SUN NEWS | AUGUST 21, 2022

from April through June. PulteGroup, the third-biggest homebuilder, reported cancellations were up to 15% in the second quarter of the year—compared with 7% a year earlier. Orders for new homes dropped 23% from a year ago.

“We are seeing increased cancellations, which is an early sign of distress in the new-home market,” said Bachman.

In a sharp shift from earlier this year, homebuilders are now wooing prospective buyers with a slate of incentives.

These perks vary by builder, but they

can include companies offering to buy down mortgage rates so that their customers have lower rates, shouldering some of the closing costs buyers are traditionally responsible for, offering fancier finishes and amenities, and ending the premiums they charge for corner lots and other locations with views.

About 20% have cut prices, which many builders view as a last resort.

This report was provided by Realtor. com.

HOMEBUILDERS from page re2

ED ST LI

is a sense of urgency to take advantage of the ease of making a move because that’s what’s changed for most of us over the last two months.

ST

come into the market, the reality that we are still sitting at about four million houses short nationwide for our population growth, and the obvious factor that A LOT has changed about what we want and need in a home and its location in the last three years, Arizona will likely not sit in balance very long.

Without being in the fortune-telling business and not knowing when or for how long these conditions will last, there

3907 S Coach House Drive Power Ranch

JU

MINDY from page re1

Mindy Jones, a Gilbert Realtor and owner of the Amy Jones Group brokered by EXP Realty, can be reached at 480-250-3857, Mindy@AmyJonesGroup.com or AmyJonesGroup.com.

Come see this great single level home offering 4 bedrooms & 2 baths with vaulted ceilings in the award winning community of Power Ranch.

The covered front porch offers a warm welcome to the home. Security screen door, shutters & sunscreens are an added bonus. 3 of the 4 bedrooms offer walk-in closets. Living & Dining rooms could make a great teen space or office. The open kitchen includes a spacious island, brand new stainless steel appliances, & pantry which is open to the family room & breakfast nook. The primary suite includes a spacious room with shutters & the bathroom offers dual sinks, a separate tub & shower, a walk in closet. Dog door & dog run on side of home with full size gate. The beautiful backyard includes two paver patios, one with a ramada to take in our Arizona outdoor living.

BESTOF

2022

Call today to schedule your showing (480) 221-3034

Melanie Nemetz

480.221.3034 • www.fosteringre.com Each office is independently owned and operated

Buying or Selling a Home?

Call Erik First!

1850 E Northrop Blvd #170 | Chandler AZ 85286 480-206-5592 cell | www.ErikGeislerRealtor.com Join me in supporting my charity partner,

CULTIVATE GOODNESS

Cultivate Goodness is a nonprofit organization that focuses on helping with needs in our community. We invite members of our community to get involved and wrap arms around those that could use a lift. We believe if everyone puts in their piece, whatever the size, it adds up to be a mountain of good.

Go to http://cultivate-goodness.org

Serving the Valley, for over 15 Years!

Erik Geisler REALTOR® Your Real Estate Agent