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Our Real Estate Market Explained: Part Three “The Bottom Line”…
October 25th, 2022
THE BOTTOM LINE
This isn’t ’08. This is 2022. It’s a more dynamic, hyper-globalized world that feels like it could be breaking down. But we still have global trust that’s not eroding. Business leaders certainly won’t be flocking East after Russian’s actions in Ukraine. The US Government has told workers in the chip manufacturing sector that they must choose to live in America and work for America, or give up their rights as a citizen. Major lines are being drawn in the sand, and my guess is that people will stick around here.
The good news is there isn’t much activity with foreclosures, and so far, it doesn’t look like there’s that much danger.
If you keep an eye on all traditional markets, you start to see the game. When things break, officials step in. When the UK system broke, their central bank stepped in to save the day.
But I’ll say it now. We’re not the UK. We’re not Germany. China is going through their own version of ’08, and there’s evidence it’ll end up being worse for them long term as citizens make runs on the CCP banking system.
We’re the United States of America, the central powerhouse of the world. Where does money flow when there’s no safety left? The American dollar, value companies with long term plans and good cashflow, and housing/commodities.
That’s why we’re here.
We’ve been doing the same thing for over 200 years.
THE WHEEL KEEPS ON TURNING…
The last cycle ended June 2021. Last week, the September CPI came out .4% higher. At first, the market interpreted the report as hot, hot, hot, but that slowly turned into a neutral, even bullish reaction. The Kangaroo is back, jack! Relief may be coming.
But the higher number signifies inflation is still with us for now. I have a theory that it’s actually structural to our society as a whole, but we don’t need to get into that ’til 2024. Largely, I don’t think it matters. This isn’t specifically specific to our country. It’s global. And many economists feel like the recent Fed Rate changes are now taking hold, so there is reason to expect that Inflation will begin to show downward momentum.
I’m very excited about all the new rules they’re proposing which will help stabilize and strengthen the Western world. These measures should not only get us through this stormy period, but actually bring long-term growth back into the picture. If all things go according to plan, the US and EU will be energy independent and open for new business.
If you’re still scared, try and pry your head from the crowd. Your feelings will let you down because they’re not based in reality. They’re based in expectation.
And expectations are transitory.
Our Real Estate Market Explained: Part Two “Endless Cycle”
October 20th, 2022
Think Cycles…
What I want this time period to be is a boring lesson of monetary policy and supply/demand, not a surprise spanking from Jerome Powell. A friend of mine always told me to think in cycles. When people start to panic, it is the time to start getting excited.
Maybe you can’t get on board with my optimism. If it’s triggering to hear, we’re probably closer to a bottom than previously anticipated. Remember what I outlined earlier? When small time investors start to panic, big money starts to buy.
In the short term, things are volatile and unpredictable, but if you can see the long term, the trend is clear.
If you’re thinking in cycles, this is not only what you’ve been expecting, this is what you’ve wanted. Cyclical buyers bought post-2008’s pain, and they either sold 2021’s peak, or boosted their bottom line by refinancing and renting their property out. They’re not worried about 2023 when they know 2030 will pay for their retirement.
Phoenix is one of the fastest growing markets in America. Are you really trying to fade that growth? Good luck. Seriously! Selling closer to a bottom than a top doesn’t often work out, but if you enjoy adding stress to your life to make a quick buck, I say stick to your own plan. At the end of the day, you only have that, a plan.
“Okay, but I didn’t buy after 2008. I never got into the market. I’m never going to get my chance now!”
That’s fear talking, by the way. Brother of Greed.
If you thought you missed your chance, think again. Although prices have fallen, interest rates are still climbing. There’s no indication that the Fed is going to pause anytime soon. It’s a catch-22.
The average bear market lasts 289 days with an average of 37-52% declines. According to the numbers, we are at that 32% mark, so we know we’re close to the end. Can we go lower? Well, yeah. There is local speculation that home prices could dip as much as 15%. We think that is a bit high, and that prices are really just adjusting to the market. Perhaps we see asking prices adjusting and mistake that for a decline in values.
But again, we are trained to see the bigger picture. That drop in price is meaningless if rates rise. Why? Because you’re paying the premium of your mortgage anyway. But with a lower rate, you ensure a lower monthly payment. If rates go down in the near future, you can refinance and pay even less. It’s really as simple as that.
Using a metaphor: “You marry your house, you date your mortgage rate.”
BE LIKE GEORGE COSTANZA. DO THE OPPOSITE.
Every American dreams of being able to buy into a brand new emerging market, but they get scared when opportunity actually presents itself. Are you scared? Feeling a lot of complex emotions? If you’ve got this far, you should be breathing easy. Just do the opposite.
When people are shouting for relief, you should feel optimism. I know that sounds crazy. But let’s just think about this for a second. Imagine you bought a home in Arizona in 2010. You were told another housing correction was looming around the corner in 2011, 2016, 2018, 2020… Do you get the picture?
If you bought a house in Phoenix at that time, chances are you would have earned a pretty penny from holding that investment. It’s possible that purchase allowed you to lever up and take on new investments, which may have increased your worth tenfold.
The bears want you to think everything is over. But the bears are bulls, too. They want to buy! They’re just waiting for you to move out of the way. There’s plenty of anxiety to go around right now. They know you’re ready to bow out of the market.
But here’s the deal. You can buy into a bubble or you can sell into a bubble, and there is not much middle ground. This is how America functions. The old stuff dies, and the new stuff is born. Entropy prevails. It’s what we want to happen as a society, and what’s more important, this is what we can predict to happen! Think of the Fed as the buoy keeping things floating in the longterm. Now that a cycle has ended, short term, it brings the chop.
So, yes, the Fed is here. They’ve come with all the bad headlines. They’ve got the same stern, puckering faces, reminiscent of a scary, angry grandparent. But they’re doing everything in their power to make sure things don’t break.
When things break, it’s no fun. We’re at the point when the family member throws the monopoly game just to get out of his/her margin call. It’s also a little like getting sick. If you root out most of the excess, you can have meteoric rises in demand again. And that’s exactly what the Fed has set out to do.
Overall, you’d be hard pressed to find people celebrating this type of market. Rising rates plus a tightening balance sheet does not equal a great party.
Largely, it feels like it’s up, down, turn around. One term for this type of market is a kangaroo market within a larger bear market, but none of those terms matter. In reality, it is the bullwhip effect of supply and demand as issues in the chain get resolved. Demand rises, but supply can’t keep up. Supply then goes up, but the demand is squashed by the Fed.
Now that you see the cycle, you understand how big money looks at trends: long term.
Read our final, Bottom Line Summary in Part Three, posted tomorrow.
Our Real Estate Market Explained: Part One “Just The Facts, Ma’am…”
October 18th, 2022
This mid-October we are exploring the current real estate market shift. In this three part series, we examine where we are, where we think we are going and why we are optimists for Arizona.
The Cromford Report is the number 1 resource for Arizona housing. It tracks the history and current status of the Greater Phoenix residential market.
Let’s start with October numbers first:
Active Listings (excluding UCB & CCBS): 20,084 versus 7,649 last year – up 163% – and up 7.4% from 18,694 last month
Active Listings (including UCB & CCBS): 22,580 versus 11,622 last year – up 94.3% – and up 5.0% compared with 21,506 last month
Pending Listings: 4,862 versus 7,605 last year – down 36.1% – and down 13.3% from 5,607 last month
Under Contract Listings (including Pending, CCBS & UCB): 7,358 versus 11,578 last year – down 36.4% – and down 12.6% from 8,419 last month
Monthly Sales: 6,361 versus 9,377 last year – down 32.2% – but up 0.7% from 6,315 last month
Monthly Average Sales Price per Sq. Ft.: $277.40 versus $251.87 last year – up 10.1% – but down 3.3% from $286.79 last month
Monthly Median Sales Price: $439,000 versus $410,000 last year – up 7.1% – but down 1.3% from $444,900 last month
Pachinko
The economy is a complex beast. With so many numbers, smoothed-out averages, and other colorful lines on complex charts indicating future price direction, it is extremely hard to pinpoint exactly what is going on at any given time. But when you zoom out, it’s easier to understand the cycles at play, and it allows you to focus on long-term value.
When things change, people start to forget about reality. Investors start to wonder whether the macro conditions are bringing down traditional markets for good. Highly unlikely, of course, and I’ll tell you why in a second. Perhaps there is a natural reset that rebalance the markets at the end of each cycle.
We know that housing is a core factor of our economy. That’s a fact that’s not changing anytime soon. Blackrock wasn’t buying up all the homes in the country in 2020 for fun and games. They bought because they saw the bigger picture.
They got the best interest rates in town, so I doubt they’ll sell anytime soon. But let’s say they wanted to get out of their purchases, where might they park their hard-earned dollar? Stocks? Bonds? Gold? A 9% return is great, but that number is nowhere near what housing historically has returned.
There’s nowhere to hide. Like all good bears, they will sleep with their purchases until the grueling winter is over. What’s even better is they know renters will pay the premium. Oh, crap. Should’ve bought a house last month, right?
The market has been heading to a more balanced state for almost a year and a half. Short-term buyers/flippers see a downward trajectory. They operate out of two impulses, fear and greed. However, when you zoom out through the decades, you can clearly see the macro trajectory. Up only, baby!
The time to be strong is now. I’ll tell you why in Part Two, posted tomorrow.
A Lost Japanese Masterpiece: The Imperial Hotel by Frank Lloyd Wright
July 21st, 2022
Our Owner Debbie Jarson has a unique and sentimental remembrance of Frank Lloyd Wright’s demolished Imperial Hotel.
My father told me a story several years ago about his time in the Army just after the end of WWII. He was fortunate to serve in Tokyo as an Honor Guard to General MacArthur and then later as a driver to the War Tribunal Soviet General Zaryanov. But he was most fortunate to spend time in Tokyo and experience much of the great architecture that existed at that time. Notably The Imperial Hotel.
For my father this was just another building albeit one that was stunningly beautiful. But for me to experience it through my fathers stories, I was in awe of his ability to walk the grounds and wander the hallways. What would it be like to stroll through the lush gardens, have tea at the edge of the ponds strewn with water lilies, sit for a midday meal while looking out over the vast expanse of beauty? Well now, what I only dreamed of is coming true in this wonderful virtual tour provided by Open Culture, a free cultural and educational media accessible on the web.
I hope you enjoy this as much as I have…
The Imperial Hotel has now been digitized for viewing. It’s a WOW – Check it out!
Here at azarchitecture/Jarson & Jarson Real Estate our knowledge base runs deep. We are always watching for trends and analyzing data for our real estate market. One of our best assets is the subscription-only service provided by The Cromford Report. In addition to nearly real time analysis, The Cromford Report recently announced the market statistics comparing July 2021 to July 2022. First, let’s take a look at the hard numbers for 7.21.2022.
– 14,406 active listings for sale +152.8% in one year (up 52.6% from 9,439 last month).
– 8,621 listings under contract +24.2% in one year (down 15.9% from 10,249 last month).
– $474,374 Monthly Median Sales Price +19.5% in one year (down 0.1% from $475,000 last month).
– 8,059 Monthly Sales -20.9% in on year (down 7.7% in one month).
Fast facts and a lot of changing data. “Okay,” you ask, “so what’s this all mean?” We’re here to help you break it all down.
BUYERS:
With an increase of 152.8% of supply, buyers are increasingly finding themselves in better conditions. Homes over $400k have surged over the last year, giving buyers an abundance of options. Supply of homes under $400k are rising. While this is the fastest rate of supply in history, the supply is rising simply because buyers have pulled back (for fairly obvious reasons we will explain).
In a nutshell, our market is headed to “balance”. Typically we’d expect a balanced market to feel, well… “normal”. But this is a normal market put under highly irregular circumstances as it follows a period of shortages and frenzy. But now, when sellers have to compete because of rising inventory and softer demand, buyers get normality. And there’s nothing a buyer loves more than just that.
The process of buying a home can slow down. Buyers are able to weigh their options carefully. It takes a few more days to close a contract, and there’s suddenly some breathing room for scheduled showings.
Of course, buyers are also aware that interest rates are rising as Lenders are following the cue from the Federal Reserve rate hikes. This explains the decreased demand we are experiencing as some Buyers are simply “priced out” due to higher payments. However, rates usually don’t stay fixed in one direction or the other. They can rise, and then they can decline. They usually revert toward some kind of mean once the economy appears stable. The Mortgage Bankers Association predicts mortgage rates will decline to 4.4% by 2024. The current rates are circling 5.5%.
For example, if you bought a home today for $425,000 at a mortgage rate of 5.5%, you would pay approximately $2,413 per month. If rates dropped to 4.4% by this point, a refinance of the remaining balance would lower the payment to $2,068, saving $345 per month. It is important to note that renters are not paying off an investment, or anything except maybe their landlord’s kid’s college fund! They are paying off someone else’s loan or providing income for others. That may seem obvious, but if you’re on the fence about buying a new home, this is a fair reason not to sit on cash.
SELLERS:
As competing supply rises sharply, sales measures are expected to change in tandem. Even if a seller market has weakened, well-priced properties can still receive multiple offers and sell over their asking price. What is normal? This last year saw an average of 19.2% in average sales price per square foot. That’s $300.48 versus $252.09 last year. It’s only down 1% this month.
We’re on the path to “normalcy” in that balanced market. It has taken some time for the Fed to act, but the process of taming inflation is underway and that’s the key to our current market conditions. As a seller, you should expect just that. “Normal” includes, but is not limited to, buyer contingencies, price negotiations, paying for home warranties, and eventually closing cost assistance. These aspects are expected to return to the marketplace before sales prices react. All the things that we are used to seeing in a “normal”, balanced market.
Lastly, this isn’t a buyer’s market. But after spending some short time at the highs of 2021 and early 2022, it may feel like one to some.
Conclusions:
You’ve heard the saying before, what goes up must come down. Right now, you’ve probably been hearing it a lot. It makes your heart pound, your pulse race, and your palms soak as you imagine the worst scenario possible unfold.
Well, the inverse is often true, too. What goes down, must go up. If you’re trying to time the roller coaster, you’re going to get caught in the cross fire. You’ll buy the peaks and sell the valleys, and the fees will tear you apart along the way. Buying or selling with emotions like fear at the steering wheel will only lead you toward the path of least resistance: missing out on the next big party.
The fundamentals of our real estate market, and the Arizona economy at large, bode well for the next few months, even years, in spite of interest rise and increased inflation. There is simply no logical data that points to a substantial decrease in prices and values of residential real estate in our market.
The bottom line: The Fed isn’t done tightening the markets. They have just begun. Historically, we have seen interest rates climb to highs of 18.36%. That was only fifty years ago. Buyers should remember that, while prices can come down and supply may still climb, interest rates can still rise against them. This is a squeeze where strong buyers will prevail. Don’t forget Lenders will try to provide some relief with assorted loan programs that keep home ownership possible for the most payment sensitive buyers.
In as early as the Fall of 2022, the Fed is doubling their tightening on assets. Buyers could find themselves with higher mortgage rates than they would have if they bought months prior.
Again, these are just observations, not predictions, and we all know that predictions are rooted in hope and fear. Don’t make guesses. Don’t wait for the herd to act. Put emotions aside. Make your own plan and stick to it.
It is still a seller’s market. And it’s still a great time to be a home owner. Seller’s will find themselves now having to reasonably compete and that will lead to some correct market pricing.
This could be the market pause that finally offers buyers a chance to act, with opportunity!
Market Update: Industrial Development is Accelerating in the Valley
May 20th, 2022
In 2022, Phoenix has become the number two growing market for industrial development, behind only Dallas-Fort Worth. Industrial demand is higher than ever. And people are moving here in big numbers.
People want to live in Phoenix. The recent numbers show a sweeping migration into the Valley. In 2022 alone, Arizona added 269 new people every single day with no signs of slowing down. Why? Phoenix is beautiful, for one. But it’s also a city with a lifestyle perspective, and with the state’s pro-business policies at the forefront, it can support a thriving and collaborative ecosystem that embraces growth.
In a rapidly evolving economic environment, Arizona has sought to make sure it’s at the forefront of design and infrastructure. Major tech companies are eyeing their chance to create avenues toward alternative fuels, like solar, and Arizona is throwing its weight into the fight. It’s good timing, as the state is already ramping up efforts to attract the engineering talent that will fuel growth in the alternative energy sector.
It’s worth a little effort to make your city memorable, and Phoenix has managed to integrate innovation into its community model.
Historically speaking, Industrial manufacturing has been a huge contributor to jobs in the greater Phoenix area. 138,000 manufacturing jobs are in the region now, and more growth is expected to come. “We are seeing an industrial technologies renaissance, led by semiconductor companies like Taiwan Semiconductor Manufacturing Company building a massive campus in north Phoenix and Intel expanding with Fab 52 and Fab 62 in the southeast Valley that are driving a whole ecosystem of investment,” says Chris Camacho, president and CEO of Greater Phoenix Economic Council.
Employment in this sector is expected to increase faster in Greater Phoenix than in any other competitor markets, adding 5,400 jobs over the next five years.
Out of a potential regional investment of $90 billion and 49,000 new jobs, 177 of those companies are industrial. 30,000 students have enrolled in engineering programs across Arizona, and with more investments expected to pour into STEM education across the Greater Phoenix, the ecosystem should continue to expand.
In 2021 alone, the Arizona Commerce Authority successfully won more than 90 competitive projects from companies that committed to creating more than 23,500 projected new jobs while investing more than $27 billion in the state. This includes battery manufacturing, electric vehicle assembly, and semiconductor laser manufacturing.
Demand for industrial space in Phoenix has spiked considerably in recent years. Despite the pandemic and government shutdown, there are low vacancies and major investments contributing to the metro’s role as a regional distribution and manufacturing hub.
CBRE’s Phoenix Industrial Market report for Q1 2022 shows construction activity is remaining strong, with 26.6 million square feet under construction to start 2022. A high volume of construction should continue throughout 2022. Out of all under-construction product, 17.7 million square feet, or 66.5%, is in the Southwest Valley. In addition, construction activity in the Southeast Valley is rising, specifically in the Phoenix Mesa Gateway area where 5.3 million square feet is expected to come online in the future. Currently, 35.2 % of the product under construction is committed, displaying a demand in the market for new construction.
Colliers in Arizona’s Q1 2022 industrial market report for Phoenix also examines the sector’s impact on jobs. According to Collier’s report, Phoenix’s industrial labor market is running parallel to its commercial growth, which “remains red hot and consistently performs better each quarter.”
As of February of this year, Metro Phoenix had grown its labor force by 89,600 employees over February of last year, a 4.1% increase. Over the same period, transportation, warehousing and utilities supersector jobs increased by 40.3%, manufacturing jobs by 3.9% and construction jobs by 3.0%.
Arizona is such a key center for innovation, and it’s one of the most popular destinations for residential home buyers. As such, it remains a fantastic opportunity to buy a new home.
Earth Day: Responsible Real Estate
April 20th, 2022
For those of us who live in this unique desert environment, climate issues have become so intertwined with our daily lives. Climate change has led to hotter temperatures and drier conditions. We’ve come to understand that just about everything is connected, and therefore, how we live affects our community. Like our heat-sculpted western landscape, climate is far more than the weather. It’s what we create, what we are, how we live, and how we move about the Valley.
You might think your home is just that – a home. But it’s also an important piece of the environment. The good news is that Eco-friendly homes aren’t just sustainable. With rising energy costs looming, they might actually save you money in the long run.
azarchitecture/Jarson & Jarson Real Estate remains deeply committed to historic preservation and are proud EcoBroker® Affiliates.
GEORGE 5600/CHRISTENSEN’S COURT | STUDIO MA ARCHITECTS
With amazing details, stunning modern eco-friendly design, luxurious floorplans, and a convenient location that calls both North Central Phoenix and the Biltmore Corridor it’s home, The George is one of the most interesting and refined in-fill properties developed in Phoenix.
At first glance, you might not think “green.” But this 2,400 square foot home uses durable materials that last for decades. Xeriscape landscape design with natural paving ensures little to no irrigation. Decomposed granite and a perforated driveway actually allows water to percolate back to the aquifer. Native plants adapt to heat and use less water. The steel facade is even recyclable.
A dynamic arrangement of eye-catching metal skins blend in with the coloration and textures of the neighborhood’s pecan-lined streets and the dark rust color of the Arizona mesquite. Low-e glass lowers heat transfer and keeps interiors cooler, and its breathable structure promotes improved air quality.
This eco-friendly dream home reminds us that sustainability and modern living are not mutually exclusive.
TEMPE URBAN LIVING | Baldinger Studio Architects
In the desert, there is an abundance of sunlight. How a building shapes that light is an important design decision. This project uses a type of solar shading system known as Brie Soleil (French for sun-breaker) that employs a series of horizontal or vertical blades to control the amount of sunlight and solar heat that enters a building. This architectural element shades windows from hot sun and allows natural light with lower summer heat gain.
Three unique levels are connected by an open stairwell that acts a light shaft, drawing the sun from a large skylight deep into the dwelling unit. Semi-enclosed roof top terraces expand the livable space year round and frames views of the city’s skyline. The dwellings are open-plan, uncomplicated and feature energy efficient mechanical systems, enhanced day-lighting, and minimalist Architectural detailing.
The property runs off of a High SEER HVAC, but it has a solar hot water option, making it environmentally sustainable and climate-resilient. As if that wasn’t cool enough, it’s situated near the Light Rail, encouraging use of mass transit. The modern living experience here, and it’s green.
PRD845 | STUDIO MA Architects
Developed by Greenroof LLC and designed by Studio Ma, PRD 845 is an urban infill project in Downtown Phoenix, adjacent to the Roosevelt Historic and Arts Districts. A sensitive cluster of twelve condominium homes, this enclave is organized around two, private “mews” that mix cars and people in an intimate and compelling urban-type environment.
Unit sizes range from 900 to 2,200 square feet and are designed to accommodate an active, live-work life style with ground floor garage / studio spaces and large outdoor roof decks with views of downtown Phoenix and the surrounding mountains. The folded roof plane creates volumetric slots through the complex giving PRD its unique, “skyline” profile.
Carefully chosen building materials compliment the south-west desert environment and include an innovative rain-screen design wall design made of a low mass, corrugated, fiber-reinforced concrete panels on furring channels that allows accumulated heat to escape through a slot at the top of the wall.
These homes are situated near the Light Rail to promote multi-modal transportation, which minimizes the impact on the natural environment.
The architects make it a point to acknowledge the dynamic relationship between objects and their surrounding environment. This is at the heart of sustainability consciousness.
LOLOMA 5 | Bruder+Partners Architects
The first built under the City of Scottsdale Green Building Program, Loloma 5 is a thoughtful and sophisticated acknowledgement of the traditional and modern roots of its Old Town Scottsdale context. A place with pride in its false-front, covered boardwalk, and “old west” friendly downtown image. The project creates a live/work environment in the heart of Scottsdale that celebrates both the historic and physical context of the place. Just like the others, it’s designed with sustainability in mind.
Approached from the west face along Marshall Way, clients and friends of the Loloma community are welcomed by a small natural desert garden. The project emerges from the plane of the land by a first level architectural plinth of sandblasted rose gray concrete masonry units. Above the block, the west façade serves as a shield against the sun with its ribbed gray Rheinzinc cladding and deep recessed narrow vertical windows of varied widths.
Along the south, patios connect in a linear courtyard to create intimate entries for each of the five units. Angled planes project outward above the doors, breaking down the verticality and further expressing each individual unit. These corrugated metal planes seem to fly passed one another, connected only by a long sliver of light from recessed slot windows. Limiting the intense southern light, each of the corrugated planes is punctured only with a single simple square of glass.
In scale, proportion, details, and finely articulated materials, Loloma 5 draws carefully from its local context and environment, carving out a unique place between the history and future of Scottsdale, for comfortable and sustainable urban desert living. azarchitecture/Jarson & Jarson operate out of this special Will Bruder designed complex.
Subterranean Culture: A Spotlight on the Jimenez House – Part 2
March 25th, 2022
It starts as a dream. An echo in the desert sand. A stirring in the brush. And then movement.
About a week ago, I wrote a blog post about Ray and Fae Jimenez’s subterranean house. The house was garnering a lot of attention on the internet, and I couldn’t stop thinking about it. I wanted to know more about its history, to gain more insight into what went into making this dream a reality.
To settle my own curiosity, I managed to get ahold of Desmond Jimenez, Ray and Fae’s oldest son. The house just cleared escrow, and he was willing to give me some insight.
We decided to get lunch at Los Olivos, a restaurant I had always loved as a kid, but had failed to return to in about a decade. Desmond came through the door sporting a Taliesin Foundation cap, a forest green vest, and a friendly smile. The house just sold, and he had one day left here.
“It’s done,” he said with a sigh of relief.
After a quick introduction, he looked at my well-used vintage car and asked, “Do you want to walk?”
The temperatures were rising, but it was a nice, spring day and it might’ve been the last time I could feel a cool breeze walking across the street. I wanted to talk about the house, to get a general history, and maybe dive deeper into the how and why. Des grew up in the valley, too. As it turned out, his wife was best friends with my aunt.
“Nora stayed at the Jarson Ranch when she was working with Sony. She stayed with your grandfather, and your aunt was there at the time, I think. Your grandfather was one of a kind. It’s been super cool to reconnect with everyone.”
My time at my grandparents’ ranch were distant memories, but they felt close. It wasn’t an underground house, but it was a meeting center. Every holiday was an excuse for a wild party, the rooms were bursting with people. An entire scene went on there, back when that sort of thing could happen.
I told him I agreed. My grandparents were definitely one of a kind.
When we rounded the corner, I pivoted back to the house. “There’s been a lot of talk about the subterranean house your dad built.”
“That’s great. This has been a whirlwind. I mean, it’s all happened so fast. Which is good. I’m not complaining.”
We both stopped to wait for the light to signal us to walk.
Then he laughed. “Well, I am complaining. Let’s just get right into it. My parents lived in the house for forty-freakin’ years. And it has the biggest closet on the planet. So, I mean, seven thousand pounds to the landfill, and I’m on my second set of donations to the charitable organization, and I gotta be gone tomorrow, you know? It’s been intense. That’s the end of the whining, okay?”
I almost forgot about the enormous closet inside the house. In the back of each room was a door that led to the storage closet. It was like a catacomb that ran across the perimeter of the home. The design was actually pretty cool and handy, but it must have been a lot of work to sort through every item after decades of collecting them.
I had pages of notes, but as I read through them, they read like gibberish. It didn’t matter what I wrote down the night prior. That was just work, setting up a frame I could use as a jumping off point. We were just talking, and once we stepped into the restaurant and ordered food, I closed my notebook. That’s when our conversation really began.
I want to talk about the house. What was it like at get-togethers or parties? I assume when people were over, the courtyard or atrium was heavily utilized.
Well, it was the main function even before it was a house. I was this big, [gestures with his hands, about the size of a baby] and I was living with my mom in Central Phoenix. It was just Fae, my mom, and me in a ‘48 Plymouth. We were probably living at 56th Street and Exeter, in the grove where they invented frozen OJ.
Back then, the roads ended at Camelback and Scottsdale Road. You didn’t go past that, really. She met with a real estate agent, drove out to the edge of town there, and looked at the land. It was 1955, maybe 1956. I was just months old. That’s when they bought the land. They paid $2,000 for 3.2 acres of desert.
Not a bad price.
Laughs. Later, my dad was an engineer at Motorola. They would all go out there. When I was in high school, we called them Boondockers. They would just build a fire in the middle of that property, bring chairs, and my mom would make cowboy beans, and they would drink beer and talk crap about politics. That’s what they did.
It really was a meeting center, even before it was a house. It was this weird hub of aerospace engineers, who would just go out there at least once a year and do stuff like that.
That atrium was designed to keep that happening, even though there’s a house all the way around it.
Was your father an architect prior? How did this come together?
My grandmother Gertrude was one of two women in her graduate class in 1924. She was a draftswoman, so that’s as close to being an architect without going to architect school. So she was the one who actually did the design and drew out all the blueprints.
Thinking to himself. Let’s see, the big crash was in 1929. Her husband had come from Panama.
She had something to do with the canal, right?
Yep. She was a draftswoman in the Panama Canal design.
Have you traveled there?
Oh, yeah. We went looking for her house. She had a couple of houses there. I lived in Costa Rica. And in 1968, we went to see if we could figure out what was going on with the houses because she had all the deeds and everything. But there was some stuff going with the government. Everything had turned over.
She came to the U.S. in 1946 in a banana boat with my dad and my brother. They tried to leave in ‘45, but apparently there were still U-boats that didn’t get the message. They thought the war was still going. So they had to wait for the banana boat.
Then they were in Eureka, Illinois for about a year. And then they moved to Arizona, to a Sun City town home.
What made her move to Arizona after Illinois?
The cold.
Makes sense. I wonder what Scottsdale was like in 1946.
1946, there were 40,000 people here. Can you imagine?
It makes you nostalgic for something you never even experienced.
Totally.
She eventually sold the Sun City home, and part of that money went into the financing of my dad’s place. The banks wouldn’t loan him the money.
It was all self-funded?
Yeah. He was one of the first hundred employees at Motorola. He had a good job. I mean, you wanna buy a track home? It’s 1955. There’s a million of them. Basically, they were creating the baby boom. My dad had this one idea, and he worked on it for about twenty-years. He had enough cash to at least dig the hole and build half of it. And that’s what they lived in for about a year. Then it was a ten year project to finish it, to get what you’re looking at right now.
Ten years is a long time.
He really started laying it down in 1975. So it took him about twenty years to really think it through.
What was the main driving force behind the idea? To conserve energy?
We have pictures of him in, I think, 1973, There was the OPEC oil crisis and gas went from oh, twenty-nine cents per gallon to a buck fifteen. Everyone thought it was the end of the world. You know?
Have you looked at the price at the pump lately?
We both laugh.
The home has conventional heating and cooling now, right?
Where my family lives now, we get the Delta breeze off the bay, so it drops to sixty degrees. But when you’re outside at night in Phoenix in the summer, it’s still about a hundred.
Initially, it was just evaporative cooling. That’s all they had. Day to day variations were about five degrees, and they still basically are. Twenty years later, my mom wanted it a few degrees cooler in the summer. The energy bill averages about $20 bucks a month.
I can’t even imagine.
Well, I should add that the home is photovoltaic. Solar. There’s that design element that allows multiple generations to interact with the home. It’s all very functional.
Not only is there a ramp leading you into the atrium, you can also choose the stairs.
Well, the ramp was put in to get a refrigerator out. Otherwise, you gotta get a crane. Laughs.
Everything comes back to stories for me. If there’s no story, there’s no heart, no reason to push forward. A world without stories is empty. And what your home has made me realize is that these are not only places of shelter, but places of gathering. Let’s go back to the history of the house. How did it come to be?
It was a combination of my dad’s engineering skills, and my grandmother’s ability to convert that into a design. But what was more important was that my mom was a painter. She wanted the light. There’s this video of her saying, “I don’t want to live in a cave,” and an awful lot of earthbound homes are dug in, so you don’t get any light. There’s conservation, but it has to be aesthetically pleasing.
Spaces have an energy that shape us.
You know, I think my favorite car was a 1950’s Bugatti. At the time the guy built that car, he was quoted as saying, “No feat of engineering is ever considered complete, until it’s aesthetically pleasing.” And I think that’s kind of what my mom pushed, to give the house that feeling. That was the element that made that house work.
You can definitely feel it just by looking at it.
My dad also knew how to live in the desert. He really did. He got here when he was thirteen, he went to North High School, which meant he rode five miles on a bike to school. In the summer, that distance doubled when he wanted to play baseball. They were all wearing wool uniforms back then. So he understands the desert intuitively.
Systems really shape the rhythm of a society. And I want to get back to that before we wrap up. Where were you in all of this?
Well, I left Arizona when I was eighteen. I came back when I was twenty one, and I went to Tucson for ten years. I was in the military until 1977. I had the good graces of being brought up around a lot of culture, a lot of different people. You know, when you’re young, you’re a little in the backwater. There’s some turbulence out there, but that’s good.
I love this topic because when you’re looking at homes, you’re making up stories in your head to allow yourself to feel a bit of it, real or not. It’s not just an investment of money, it’s an investment of time. There is both love and hardship. Big things happen in these places.
Totally.
At the heart of a home, there’s a center that brings everything together. It doesn’t keep, it allows people to travel freely, and if you’re lucky, its geometry is respectful to the mood. That center is sort of like a petri dish of culture. Everyone mixes together, and something is made.
Yeah. Have you been to Amsterdam?
A few times. Beautiful city.
So you know how that worked. I mean, that’s another example, a human petri dish. A center sectored off by waterways, and a ton of people experiencing things like sardines. And then, of course, you have the outside world, which was either coming or going. It’s just… pleasant.
I think in many ways it’s time for a jumpstart, or a new set of rules to apply that’s congruent with modern technology. But it can’t be cheap and easy. We need ideas that resonate, and it can’t just be one person. My hunch is that it’s already happening, that we’re seeing it play out, and right now we’re experiencing some of that turbulence you were describing.
I think the question that we ask is, why? Why do we do what we’re doing? We grew up spiritually, but my father didn’t have any real religious upbringing. What my dad did was find himself in the desert, unsure what that why was. He built boxes that would protect electronics for the Gemini space capsules. So his whole thing was we’re going to outer space, then it went into learning all about energy conservation. That was his why. Then that translated into how was he going to live? The house was really his how. He was thinking, “We should live better.”
Thanks for your time, Des.
Thank you.
Subterranean Culture: A Spotlight on the Jimenez House – Part 1
March 9th, 2022
Back when the world felt endless, every mile was a journey into the unknown. A map could get you to the other side of the desert, but what sites would capture your attention?
There was a level of mutability to the earth, a collective transcribing of dreams as the world first opened its eyes to the modern world. And in a desperate quest to find itself and fully awaken, people sought to establish a center. Movement was made with cement and steel, basic materials salvaged from the earth, tumbling into great machines that allowed for breathtaking speed and sturdy development.
Now that we’re here, the world feels so small. But in reality, there’s still an endless amount of ways to experience its unparalleled wonders. The southwest, for example, carries a magic in its heart that is nearly indescribable to most people unaccustomed with the terrain. In cartoons and fiction, it’s a death trap with hovering vultures and vicious rattlesnakes. But of course, that’s not it at all.
In 1978, Ray Jimenez sought to dispel the myth by building a home – underneath the earth.
With oil prices rising due to the infamous embargo in ‘79, local energy prices spiked across the board. If that sounds familiar, you might be chuckling to yourself. So might Ray.
In that atmosphere of uncertainty, Jimenez had a visionary idea: Make something that didn’t rely on technology. Use the desert to create a home that not only survived, but that also gave back to its guests.
“I was convinced you could live in the desert without air conditioning or heating,” he once remarked, a wild thought in a city that boasts 120 degree temperatures on a yearly basis.
As children fried eggs on the hot tar of their freshly paved neighborhood street corners for fun, Ray was staring into the flat desert, wondering how it might work to live without modern conventional heating and cooling.
When an architect draws their line in the sand, using the soil as paint brush rather than a placeholder, a symbiosis between human and habitat is allowed. Restoration becomes possible, if not somewhat of a self-fulfilling prophecy. Integration was key for Ray and his wife, Fae.
What did that look like?
At first glance, the property is either overlooked or disregarded. If Tarkovsky made a western, it would take place here. That is, if you even noticed it on the screen. A bond villain might dare to live in such a unique environment, but what about a three or four person family?
The subterranean property is a flat 2.5 acres, and it’s easy to miss from afar. As you walk onto the land, the home blossoms beneath the desert soil. A cherry gate surrounds a much-hidden courtyard like candy cane gift wrap, and 14 feet below, a salmon brick path creates a walkway that meanders through tropical plants and flowers. All of it is encircled by gorgeous open windows leading to each room of the home, packaged underneath a set of lights that illuminate the courtyard after that iconic desert sunset.
Imagine, reading a book, underneath the strong heat of the desert summer, listening to the hypnotizing sound of cicadas, all while still retaining a natural cool temperature. How about suntanning on a lazy Sunday to the sounds of the radio as the wind tunnels in, calmly cloaking your back?
In the middle of August that seems impossible. But it’s not.
Symmetry is at the heart of the structure, but I wouldn’t describe the shape as a square. This is a subterranean diamond in the rough terrain of Phoenix, Arizona, and it’s as intricate and beautiful as one might or might not expect. The experience shines through.
Inside this home, you tend to feel like you’re in another world. One might imagine spending time in a villa in Barcelona, or enjoying a cup of warm tea in Morocco. In these cities, there is an obvious history that bleeds into the nooks and crannies of every street corner. Jimenez’s subterranean home shares that sentiment.
So how does it work?
After spending 25 years learning about heat transfer and structural dynamics at GED and Motorolla, Ray took an interest in sustainability. This led to the studying of Arizona’s history, specifically Native American dwellings in the southwest. Solar water heating, solar energy, wind powered electric generation, rain collection and storage, and a year round vegetable growing greenhouse were all items on the table.
Like any experiment, it required staying dynamic. Learning from actually living in something allowed for this whole thing to be a success. Both the summer and the winter had to be habitable. If one season required an uptick in conventional heating and cooling, the structure would lose some of the balance it boasted. It had to be designed properly, and that required financing.
It wasn’t cheap. It took two entire years for the city to give it approval. Banks wouldn’t loan the Jimenez’s money. The idea was too wild, an investment too risky. To build it, they had to fund it on their own dime. Month by month, they got it done, and by the time the 1980 New Year’s ball fell over Manhattan, the desert dwelling was fully built.
The unique and sophisticated courtyard is what allows the home to stay cool, or in the winter months, warm. Meanwhile, a 25-foot berm prevents the heat of the summer from penetrating into the home. This creates what is called a thermal sink, a way to absorb the heat and transfer it elsewhere. This is desert living at its finest. It just works.
“Summer doesn’t get here until fall,” Ray said. And he was right. Offsetting heat is a game-changer to someone paying upwards of $400 in energy bills a month.
Just to be safe, there is conventional heating and cooling on the property now, but the prices are one-tenth per square foot what they cost on the average suburban pressure cooker. The desert can be brutal, but this home is adaptable. As solar panels replace old energy systems, this 2.5 acre property has a major leg up in design.
Of course, a lot went into this that has been unsaid. This was no easy feat. Like the hidden pathways to a courtyard in the subterranean center of the desert, there were an ample amount of things to figure out.
Originally, Ray thought it ideal to bury the house entirely. But innovation is not singular, nor is any idea put together by one person. It requires collaboration, a host of people to put the pieces of the puzzle together.
As it turned out, Ray’s wife, Fae had some reservations with living in the center of the earth, closed off from any, if not all natural light. There was plenty of sun in Arizona to spare, and it wanted to be used, so why not give this underground property an open arena that connected to each and every room, symmetrically, allowing it to breathe?
This was their center, the glue that held the property together. This fourteen-foot deep trench was what gave the home magic, transporting guests from out of town to other worlds and exotic locations.
That’s because stepping inside this home allows Arizona to feel like something new. A Phoenix home, as exotic as a Sicilian palazzo.
Even by today’s standards, this home is unique, energy efficient, and gorgeous. And to understand just how earth-shattering some of these ideas are, it’s important to look at what’s lasted and what hasn’t in modern design. Ray and Fae’s home is only one generation old, but it feels new and sustainable. That’s what makes this place so exciting.
When we talk about sustainability, we lean on metrics. Data comes in as numbers on a sheet of paper, but that doesn’t tell the whole story. Our stories are the fuel to our souls, turning cities into vibrant communities that connect rather than separate. A hole in the ground may seem a bit introverted, but when the center acts as a heart, it brings guests together.
Places need stories, too. Those living in places without them find themselves existing in the threadbare center of city planning, through agreements made without thought or care as to how this might shape people’s behaviors. Have you ever stepped into a room that punishes you just for walking in? That’s a design flaw with consequences.
Perhaps Ray and his wife, Fae weren’t thinking about those consequences. But by opening themselves up to the structure of the home, it pulled everything together like a web.
In the summer of 1978, Ray Jimenez had a new vision for desert living. And now, 45 years later, this newly sold desert haven is a testament to that dream. Another lucky owner will soon get the glory of inhabiting such a unique home. If they look back, they’ll get echoes of Ray and Fae’s story.
The age of stone and metal set the stage for massive development, but in its wake, something new was born. Culture had solidified like concrete. A few good blueprints were decided upon. And now, we take for granted the way things have become. But have we ever stopped to ask ourselves what was lost along the way?
Better yet, as heat sweeps through the valley, and energy prices climb, how can we make this uncertain future work for us? A restlessness stirs in the hearts of many desert-dwellers. Sustainability is at the forefront of everyone’s mind, but beyond necessity, imagination must blossom structures into something we want to inhabit. Without that thread or connection, we distance ourselves from the world. Ironically, we find ourselves underground, eyes blocked to the sun, open only to the artificial glow of our tablets.
But perhaps it isn’t so black and white. Perhaps, a new journey has begun. Right under our noses, deep within the desert soil.
We can thank the Jimenez family for attempting to dig us out. The story of their subterranean home is a tale of discovery. It was an investment on an idea. What’s so remarkable is that it speaks for itself.
Roll up to the flat property. Dust off the sand between your toes. And take a dive into one of Phoenix’s coolest houses.
Market Update – January/February 2022
February 21st, 2022
Here is what you have been waiting for… the ARMLS stats for February 1, 2022 compared with February 1, 2021 for all areas & types(YTY):
Active Listings: (excluding UCB & CCBS): 4,876 versus 5,180 last year – down 5.9% – and down 15.6% from 5,776 last month
Active Listings (including UCB & CCBS): 8,380 versus 9,727 last year – down 13.8% – and down 2.9% compared with 8,630 last month
Pending Listings: 7,798 versus 7,070 last year – up 10.3% – and up 22.6% from 6,359 last month
Under Contract Listings (including Pending, CCBS & UCB): 11,302 versus 11,617 last year – down 2.7% – but up 20.8% from 9,353 last month
Monthly Sales: 7,114 versus 7,354 last year – down 3.3% – and down 23.3% from 9,271 last month
Monthly Average Sales Price per Sq. Ft.: $274.45 versus $217.47 last year – up 26.2% – and up 2.5% from $267.87 last month
Monthly Median Sales Price: $433,500 versus $339,000 last year – up 27.9% – and up 2.0% from $425,000 last month
You may be wondering, “What do these stats mean for me if I want to buy or sell a home?” Well, we believe that the best way to win in this market is to be in the know. That is why we rely on companies like the Cromford Report to help us understand exactly what is happening as it happens. The Cromford Report is a data based reporting service based in Maricopa County that provides daily market insight into the Phoenix metropolitan area residential re-sale real estate market based on historical data collected over the years from the Arizona Regional Multiple Listing System (ARMLS). The Cromford Market Index measures the balance of supply and demand in the residential resale market. If the values fall below 100, the market is favorable for buyers. If they’re over 100, you’re looking at a seller’s market. For most of the past two years, the Cromford Market Index has been well above 100. In January of 2022, it continued to rise to 474.6. This indicates that home values will most likely rise faster over the next few months.
The current seller’s market is being driven by a severe lack of supply coupled with an increase in demand. As of the end of January, supply is still severely anemic at over 74% below what would be considered a historically “normal” level of supply. Demand, while not exceptionally high, is still higher than what would historically be considered “normal” and is holding steady at around 21% over “normal”.
To give you a better idea of what is under contract versus what is available, let’s break down Maricopa County a bit. As of 1/29, there were 1,231 properties in escrow in the Northeast Valley Cities (including Cave Creek, Carefree, Rio Verde, Fountain Hills, and Scottsdale) with only 734 active listings. There were 2,172 properties in escrow in Maricopa County Southeast Valley Cities (including Tempe, Chandler, Gilbert, Mesa, Queen Creek) with on 998 active listings. There were 2,945 properties in escrow in West Valley Cities (including Glendale, Peoria, Sun Cities, El Mirage, Youngtown, Surprise, Wittman, Waddell, Wickenburg, Buckeye, Tolleson, Goodyear, Litchfield Park, Laveen). There were 1,996 properties in Escrow in Phoenix (including Ahwautukee, Anthem, Desert Hills, Desert Ridge) and only 957 active listings. In every area mentioned above, there are significantly more properties under contract than there are active listings.
Because we are in such a hot sellers market, approximately 42.6% of homes sold over asking price. In a “normal seller market” we would typically see approximately 15-18% over asking. This is looking slightly better than mid-2021 however, when, in June of 2021, approximately 60% of homes sold over asking price.
So just how much over asking price are homes selling? Recently, the data shows that homes have been selling for a median price over list of $10,000. This is up from an average of $2,000-3,000 in a “normal seller market” but down from $20,000 over list in June of 2021.
One area that has improved over 2021 is the median sales price. Currently, the median sales price is $437,000. That is up 28.6% over January of 2021. If you are trying to calculate annual appreciation, it would be worth noting that annual appreciation is currently 26.1%. This is significantly higher than a historically “normal seller market” average of 4-10%, but lower than June of 2021 where appreciation hit 39%.
One additional statistic that tends of be indicative of which way the market is headed is the number of days a property sits on market prior to going under contract. The current Days on Market (DOM) Prior to Contract is 9 days. This is higher than DOM for much of 2021; however, looking at the data, experts says that DOM is likely to go back down to 5 again this Spring.
What does this mean for you as a buyer or seller? Two very different things! If you are planning to buy, do it now as prices are still going up. It would be smart to partner with an agent like someone from the azarchitecture team to help you find and secure the property you want. If you are thinking about selling, do it! Partnering with a seasoned agent as a seller will help you maximize this market and get the most for your home in the shortest amount of time. We would highly recommend that you have a game plan for what you will do once you sell though, and we are happy to help you develop one. Reach out to us to set up a private consultation today!
Make Your Best Offer!
January 10th, 2022
In today’s hectic sellers market, being a buyer can feel overwhelming. We feel it is our duty to ensure that our clients are as informed and educated as possible on how to put their best foot forward when they are looking to purchase a home. We think these five tips may just give you the best possible chance of securing the home of your dreams:
Budget: The notion of budgeting applies to both money and time. A smart buyer will know exactly what they can afford, and what they cannot, as far as price goes, but they will also be prepared with a timeline for the transaction as well. As a buyer, you might want to think about some of the following things when mapping out your time budget as well as your financial budget: How much can you afford to spend on a home? Are you planning to pay for your new home with cash or are you planning to get a mortgage. If you are getting a mortgage, how much are you planning to put down as a down payment? Are you looking to purchase a new home or a resale or are you planning purchase a lot or land to build a home? If you are planning to purchase a resale, do you need to move into the home right away or would you be willing to let the sellers stay in the home for a period of time after closing if they requested to do so? Are you an investor looking to do a 1031 exchange? If so, are you aware of the time frames around how quickly you must identify a new property and complete the sale? Are you planning to renovate the home? If so, what does your timeline and budget look like for that? Will you move in before renovation or after? Are you looking into neighborhoods with HOA fees or membership fees of some sort? If so, how would those affect your budget? There are so many things that factor into planning a budget for your new home. We suggest you map out the answers to as many of these questions as possible prior to engaging in an in-person home search. A professional real estate agent (mentioned below, of course) can help walk you through various scenarios and nail down a game plan for your home search.
Be ready: Once you know your budget and whether or not you will be paying cash or getting a loan, be sure to obtain a pre-authorization form from your lender or proof of funds from your bank before touring homes in person. This way, if you find a home you love, you can make an offer right away. In order to submit an offer on a property, most sellers will require that you also submit a pre-authorization form and/or proof of funds with the offer. These are vital pieces of information to have on hand. Also, do your best to determine your list of “must haves” like location, size and amenities. These will be helpful in identifying which properties would be best to tour in person.
Get the Inside Scoop by Partnering with a Real Estate Guru: We suggest selecting a professional agent who is actively working in the market where you are looking to purchase (like the agents on our team here at azarchitecture/Jarson & Jarson Real Estate). Per the Arizona Department of Real Estate, as of January 1, 2022, there were 61,605 ACTIVE sales agents and brokers in the State of Arizona. This means that you probably know someone who has their real estate license. Be careful though. Unfortunately, just having an active real estate license does not mean that the agent knows how to navigate this market. We suggest looking for an agent who not only knows the area where you want to buy, but will also work with the sellers or listing agents to determine what is most important to the sellers in an offer. Having an agent with a great track record of getting to the closing table as well as stellar negotiating skills will greatly benefit you in succeeding in this difficult market. They may even be able to point you in the direction of Coming Soon listings or pocket listings that haven’t been syndicated to the public yet.
Don’t Forget the Terms: Sometimes, the best offers include more than just a high price for the sellers. While it is true that offering the highest dollar amount might often win the day, sometimes additional terms that favor the seller can make a lower offer look competitive with or even better than the higher offer. This is why it is vital to find out what is most important to the seller. The best way to do this is to have your agent reach out to the listing agent or seller if you are purchasing directly from the owner. Occasionally, sellers may desire things like a quick or even extended close of escrow, other times they may desire to stay in the home for a period of time after the sale closes (known as post-possession). And, while it can be hard to compete with a cash offer that doesn’t require an appraisal, it is possible to submit a financed offer that is competitive with the cash offer by either waiving the appraisal or agreeing to an appraisal shortfall. Your agent and lender can help guide you through some of these possible terms, as well as others, if they are of interest to you.
Give Yourself a Bit of Wiggle Room: While we typically recommend putting your best foot forward in this market, that doesn’t necessarily mean that you have to show all of your cards at once. Prior to making your offer, determine any wiggle room you have in the offer price by referring back to your budget. Next, determine any wiggle room you have in terms by establishing things like how quickly your lender can fund your mortgage and whether or not your lender might be able to get an appraisal waiver for you. One semi-scary idea that seems to be floating around in this market is the idea of waiving the inspection period. While we don’t ever recommend waiving the inspection period, you could opt to offer to purchase the home “as-is” meaning that you agree not to ask the seller for any repairs or credits in lieu of repairs. Be sure you are acutely aware of the difference between purchasing a home as-is and waiving inspection. These are two totally different things. Once you have established your “wiggle room”, make the best offer you can that is most comfortable for you. Depending on the information you receive from your agent about what the seller needs, you may choose to offer your “highest and best” right out of the gate. If not, you will have at least established how much you are willing to negotiate if the sellers counter or ask you to resubmit your actual highest and best offer.
We hope these tips will help you achieve your real estate goals in 2022! Feel free to reach out to us with any questions or comments you might have. We are here to help you!
2021 Seller Market: Our New Normal or Just Normal?
December 28th, 2021
“How’s the market these days?” is a question we are asked over and over in our industry. Some agents opt to take the easy road by answering that question with a blanket statement like, “It’s great!” or “It’s crazy!” In reality, as any good agent would know, there is no blanket answer for that question right now. The answer to that question very much depends on the position of the person asking. The answer can actually differ widely depending on whether the person posing the question is a potential buyer or seller.
So, what has the market in Maricopa County looked like over the past couple of months? Well, it’s not too incredibly different from how it has looked for the bulk of 2021. Supply is down, demand is up, and we are far from balanced. It’s a simple as that.
Per ARMLS, “During most years, active listings decline in November and December, and this year was no exception… sales volume was slightly lower this year, remembering last November’s sales were the highest in ARMLS history. With extremely low supply and above-average demand, prices continued to surge, with the median sales price up 28.1% year-over-year and 1.5% month-over-month.” You may be wondering what these metrics mean for the future of our market in the Valley of the Sun. Michael Orr of the Cromford Report sums it up by saying, “We remain convinced that prices will rise again over the next month and unless the situation changes significantly the same can be said for the next 6 months.”
At this point, you might be wondering if the seller market is our new normal? According to Tina Tamboer of the Cromford Report, the Phoenix metro area has been in a seller market more often than not over the past 21 years. She states, “Over the past 21 years, Greater Phoenix has been in a buyer market for a combined total of 43 months (3.6 years), a balanced market for 55 months (4.6 years) and a seller market for 155 months (12.9 years). This is important to discuss because the longer seller markets last, the more human beings change their definition of what “normal” looks and feels like. “Normal” for Greater Phoenix is not a balanced market, it’s a seller market. So, when national analysts suggest the housing market will cool off in 2022, many (if not most) local housing analysts believe it will remain a seller market, but a weaker one. Prices don’t decline in seller markets, but listings may stay active for a few more days before accepting a contract. A full price offer may be enough to win a home. Buyers may have less pressure to waive appraisal and repairs.”
One of the reasons demand has been so high is the presence of ultra-low mortgage rates. Will these stick around? The short answer is: probably not. In fact, we have already seen them rise from an average low of approximately 2.67% last year to around 3,12% recently. Per Sam Khater, Freddie Mac’s chief economist, “While house price growth is slowing, prices remain high due to solid housing demand and low supply. We expect rates to continue to increase into 2022, which may leave some potential homebuyers with less room in their budgets on the sideline.”
So, back to that age old question, “How’s the market these days?” If you are a seller that already owns another property or has a foolproof plan on where you are going or what you are doing after you sell, it’s incredible! In this market, you would be hard pressed not to get top dollar for your home. Depending on your price range, you may still get over asking price for your home if you are priced competitively.
If you are a buyer, or small time investor, this market can be a bear! With inventory at all time lows and demand above normal, properties can be hard to find and even harder to secure in this market. Unfortunately, large investment companies aren’t making things easier either as they often swoop in with cash offers that make for hard competition for a borrower. The Scottsdale Association of REALTORS® recently published an article stating that the largest buyer of homes in Maricopa County in 2021 was Progress Residential, an investment company that uses a computerized property-search algorithm and swift all-cash offers to gobble up “entry level” homes. It’s not all bad for buyers though. Interest rates are still considerably lower than the current rate of inflation which hit 6.8% in November, and buyers can still purchase homes and gain equity quickly.
One of the biggest benefits to buyers these days are knowledgable, professional real estate agents. Oftentimes, by the time a property appears on Zillow or Realtor.com, it is already under contract. By using the services of a good REALTOR®, buyers have the inside scoop on properties that have been listed as Coming Soon, which aren’t syndicated to 3rd party sites, as well as upcoming and “pocket” listings. In a society that has been accustomed to educating themselves via the internet, buyers that choose to work with an agent have an advantage over their competition.
Sellers, too, benefit from working with a professional REALTOR®. Real estate agents can help field questions about the home and help decipher which offers would be best to consider. It can get overwhelming for many sellers when they have to field multiple offers. Agents that are well-versed in the real estate contract, high level negotiations, and what is happening in the real estate market in your area are a valuable resource for getting the best deal to the closing table.
If you are looking to buy or sell a home in the coming year or if you are just interested in knowing more about the market or what your home could be worth, don’t hesitate to reach out to us. We have a team full of hard-working, honest real estate agents that are always ready and willing to help you. More information about our team can be found here: https://azarchitecture.psstudiosdev.com/agents-staff/
While 2021 was a bit “crazy” for some of us, we look forward to helping more people understand the market and achieve their real estate goals 2022! Cheers to a New Year!
