Tag Archives: W. P. Carey School of Business at Arizona State University

Arizona Commercial Real Estate Development

Survey: Phoenix Commercial Real Estate in Recovery

It’s shaky, but improving. Experts say the Phoenix-area commercial real estate market is now officially in a slow recovery mode. A full 100 percent of the real estate brokers participating in a quarterly survey by the W. P. Carey School of Business at Arizona State University indicate they feel “optimistic,” and 84 percent believe the market is on an upswing.

The participants recently came together for a forum and the survey about progress on apartments, retail, industrial, offices and more. They say land prices are still going up and that some areas of the Valley are already doing better than others. However, don’t expect any drastic changes over the next year.

“We expect 2015 to be much like 2014, so we’re likely looking at one more year of slow recovery,” explains one of the forum’s organizers, Mark Stapp, director of the Master of Real Estate Development program at the W. P. Carey School of Business. “Over the long run, we’ll grow, but in ways we haven’t in the past — like more mature, established markets that focus on infill and developing in context with what’s already there. Some reasons for our current slowdown include tight lending standards, sluggish job and wage growth, and the need to absorb around 150,000 new homes built between 2000 and 2007. I also think it will be at least 2016 before any significant new retail space comes onto the market.”

Those participating in The Commercial Real Estate Broker Forum come from a variety of sectors, specializations and brokerage houses across the Valley. The event is moderated and co-organized by Pete Bolton, executive vice president and managing director of Newmark Grubb Knight Frank’s Phoenix office. Quarterly reports from the forums are available for download at the W. P. Carey School’s website, http://research.wpcarey.asu.edu/real-estate/commercial-reports under “Commercial Brokers Survey.”

Here are some of the Quarter 3, 2014 results:

• Where are we in the cycle?
92 percent – Recovery, 8 percent – Expansion, 0 percent – Correction, 0 percent – Maturity, 0 percent – Recession
NOTE: 100 percent said the area was in recovery in Quarter 1, 2014.

• In what direction is the metro Phoenix market moving?
84 percent – Up, 8 percent – Stationary, 8 percent – Down

• What is the overall feeling about the metro Phoenix commercial real estate market?
100 percent – Optimistic, 0 percent – Pessimistic

• Is uncertainty in the federal government affecting the commercial real estate market and hindering our local growth potential?
100 percent – Yes, 0 percent – No

• Have land prices reached their peak?
82 percent – No, 18 percent – Yes

• Have homebuilders stopped buying land?
91 percent – No, 9 percent – Yes

• Is the tight inventory of homes on the market affecting the commercial side at all?
50 percent – Yes, 50 percent – No effect, 0 percent – Not yet, but it will

• Where are apartment rents headed in the next six months?
55 percent – Stationary, 45 percent – Up, 0 percent – Down

• Where are office vacancy rates headed in the next six months?
73 percent – Down, 9 percent – Stationary, 18 percent – Up

• Where are retail vacancy rates headed in the next six months?
64 percent – Down, 36 percent – Stationary, 0 percent – Up

• Is this a landlord or tenant industrial market?
83 percent – Tenant, 17 percent – Landlord

• Where are interest rates for commercial loans headed in the next six months?
75 percent – Stationary, 25 percent – Up, 0 percent – Down

• Where are investor returns headed in the next six months?
92 percent – Stationary, 8 percent – Down, 0 percent – Up

Phoenix-Area Housing Market

Phoenix Housing Report: 2012 Numbers and Look Ahead at 2013

Though home prices continue rising, things are still far from perfect in the Phoenix-area housing market. A new year-end report from the W. P. Carey School of Business at Arizona State University provides a 2012 summary of the numbers for Maricopa and Pinal counties, as well as some insight on what’s ahead:

* The median single-family-home sales price shot up almost 34 percent — $122,500 to $164,000 — from December 2011 to December 2012.
* The supply of homes for sale fell 6 percent from January 2012 to January 2013, with discounted, “distressed” supply down a whopping 42 percent.
* Foreclosures finally plummeted 51 percent from December 2011 to December 2012, signaling we are near the end of a terrible chapter in the Phoenix-area housing market.

Mike Orr, the report’s author, says things have dramatically changed in the Phoenix-area market over the past year or so. Prices have risen significantly since they reached a low point in September 2011.

“2012 was all about low inventory, which has been driving up home prices,” explains Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “Foreclosures and short sales have gone down, eliminating the sources of many cheap homes, so the more expensive types of transactions, like normal resales and new-home sales, went up. As a result, new-home construction, which was at rock bottom in 2011, also really came roaring back in 2012.”

The median single-family-home price in the Valley went up about 33.9 percent from December 2011 to December 2012, rising from $122,500 to $164,000. Realtors will note the average price per square foot went up 27.2 percent. The median townhouse/condominium price went up 42.7 percent, from $70,000 to $99,900.

“However, we expect to see that prices held steady or even fell slightly between December 2012 and January 2013,” says Orr. “Between Christmas and the Super Bowl is always a quiet time for home sales in Greater Phoenix, with ordinary home buyers much less active than average and investors continuing to concentrate on the lower price range.”

On the overall supply of homes for sale last year – Orr says inventory went down 6 percent from the beginning of January 2012 to the start of January 2013. Still, the supply began to bounce back toward the end of the year, increasing 13 percent in the fourth quarter. The supply of cheap, “distressed supply” plunged 42 percent over the year, as foreclosures and short sales fell. Overall sales activity also fell 12 percent for single-family homes and 13 percent for townhomes/condos from December to December.

“With prices moving substantially higher, it’s not surprising that buyer interest eased a little,” says Orr. “We still see multiple bids for many resale listings, but demand isn’t as strong as it was in spring 2012.”

Investor interest has dropped somewhat in recent months, after peaking in late summer. This means ordinary home buyers face less competition from investors’ all-cash offers. Still, all-cash purchases accounted for more than a third (35.5 percent) of the deals in Maricopa County in December. Some investment groups have started buying homes wholesale in bulk from other investors, since the market has become more competitive. Nevertheless, Orr asserts most investors are using their own money and not debt, so he doesn’t expect another housing bubble from this activity.

“Developers are also becoming more active, as bargains become tougher for the average buyer to find and those buyers turn to new-home construction,” says Orr. “Developers are stocking up on vacant lots – having purchased almost 2,300 of them, plus several tracts of undeveloped land, in December alone. However, the number of permits to build on the lots hasn’t shot up, so it looks like developers are trying to remain flexible, deciding whether to build or hold the land for the future.”

Foreclosure starts – homeowners receiving notice their lenders may foreclose in 90 days – are down 40 percent from December 2011 to December 2012. Completed foreclosures are down 51 percent.

Almost all areas of the Valley rebounded significantly in 2012. In fact, Wickenburg is the only city where the average price per square foot went down from December 2011 to December 2012.

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full-Report-201301.pdf. A podcast with more analysis from Orr is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

My Electronic Pillbox can help with complex medicine regimes

Cheap medicine more vital, study reveals

People may think it’s more vital to take their medicine, if that medicine is cheap. A new study from the W. P. Carey School of Business at Arizona State University shows consumers believe prices for lifesaving products are based on need and not profit. Therefore, they often assume their risk of getting a serious illness is higher when the medicine is less expensive, and they’re also more likely to plan to get the treatment, including flu shots.

“We find that people have a fundamental belief that everyone should have access to lifesaving care, such as vaccines, doctor’s visits, screening tests like mammograms, and cancer treatments,” says Assistant Professor Adriana Samper of the W. P. Carey School of Business. “Nobody wants anyone to die because they didn’t have the resources to cover the treatment. Therefore, they believe communal pricing (based on need), rather than the normal market pricing for other goods, applies in these situations. They expect medicine for a serious illness to be inexpensive.”

Samper’s new marketing study, co-authored with Assistant Professor Janet Schwartz of Tulane University, will appear in the April edition of the Journal of Consumer Research. In a series of experiments, the researchers demonstrated several interesting points about medication pricing, and those points held true, even if insurance — not the consumer — was going to pay for the treatments.

In the first experiment, participants in an online study were asked to evaluate 10 products and services based on whether they were priced for “communal” purposes or market value. Vaccines, doctor’s visits and drugs used to prevent serious illnesses all ranked as being driven by communal pricing, while items like tax-preparation services, restaurant menu items and home electronics all ranked as market-driven.

In the next experiment, online participants were asked about a fictitious cream described as either preventing skin cancer or preventing age spots. The cream was also offered at a low price of $25 or a high price of $250. Price had no effect on attitudes toward the cosmetic cream, but when the skin-cancer treatment was only $25, respondents believed they needed it more — that they were at higher risk for the disease.

“We see the same thing for a flu shot,” says Samper. “People are more concerned about getting the disease and addressing prevention if the vaccine is cheaper. That’s an important note for health officials during our especially tough flu season right now.”

A third experiment showed participants an ad for the same cream, with the same image, but slightly different versions of text, again reflecting whether the cream was for skin-cancer prevention or cosmetic purposes. The two different price points were offered in each case. Consumers were much more likely to keep reading the ad and planned to pursue the treatment in the case where the cream was for skin cancer and the price was lower. This happened even when insurance was going to pay for the cream at either price.

“This implies a possible problem with the recent push for price transparency,” adds Samper. “In some cases, high prices may signal lower self-risk, and people may not think it’s important to get needed treatments just because the cost is high.”

In the last experiment, the researchers tested the effects of different types of messages meant to encourage people to get flu shots. They used the two prices again and also varied whether the flu’s consequences were described as self-focused — such as missing work or paying medical bills if you got the flu — or societally-focused — such as getting other people sick or hurting economic productivity with the flu’s spread. Very clearly, individuals again increased their assumption of risk and intentions to get the vaccine in response to lower price, but only when the message focused on personal consequences of the flu.

“Therefore, public health officials should take note: Ads emphasizing the protection of other people do not appear to convince people to get vaccinated,” say Samper. “People respond best to messages that emphasize how illness will personally affect them.”

The full study can be found at http://www.jstor.org/stable/info/10.1086/668639.

LAWLOGIX GROUP LLC

Spirit of Enterprise winner: LawLogix Group

LawLogix Group earned the Gary L. Trujillo Minority Enterprise Award sponsored by Blue Cross Blue Shield of Arizona this year at the W. P. Carey School of Business at Arizona State University’s prestigious Spirit of Enterprise Awards.

In 2000, LawLogix co-founder Brian Taylor was sitting at a Burger King near the consulate in Nogales, Mexico, waiting for a new U.S. visa to be approved. His own immigration experience was time consuming and frustrating, and he knew there had to be a better way for immigrants to share their case information with attorneys.

So LawLogix – a software company focused on creating the easiest-to-use and most secure immigration case management and I-9 compliance software available – was born. Brian and his co-founder Dan Siciliano, a law professor at Stanford, set out to develop a service that would automate what is otherwise a time-, labor-, and paper-intensive hiring and visa application process.

Today, LawLogix software and services are used by more than 155,000 organizations and 4.2 million foreign nationals worldwide. The company’s success  is based on five core principles:

  1. Empower the client. When developing their first product, LawLogix bucked the trend of client-hosted software, giving clients more freedom with a Software as a Service (SaaS) business model.
  2. Innovate by listening. LawLogix listens to customers to better understand their needs, and then develops software to solve their pain points.
  3. Listen to the marketplace. When the new I-9 and E-Verify laws were introduced, LawLogix developed an entirely new SaaS product to make I-9 compliance easy for companies.
  4. Invest in employees’ career growth. LawLogix provides specialized ongoing education and training for its employees and promotes from within.
  5. Lead the way. Through webinars and speaking engagements, LawLogix offers its lessons learned and expertise to the immigration services community.

Name of business: LawLogix Group, LLC

Nature of business: I-9, E-Verify, and immigration case management software

Address: 3111 N. Central Ave. Phoenix, Arizona 85012

Web: LawLogix.com

Founded: 2000

Number of employees: 52

DAPHENE'S HEAD COVERS

Spirit of Enterprise winner: Daphne’s Headcovers

Daphne’s Headcovers earned the The Spirit of Enterprise Overcoming Adversity Award this year at the W. P. Carey School of Business at Arizona State University’s prestigious Spirit of Enterprise Awards.

When Jane Spicer was 10 years old she told her mother that she wanted a sailboat. Her mother told her she had to earn the money for it. Jane did: she sewed a bagful of stuffed toys to sell to friends and neighbors. At the Park & Swap she made $200, and has been hooked on entrepreneurship ever since.

“When I was 16, a customer suggested that I make animal golf club covers. It was really hard to break into that market, but my mom, Daphne, told me: Be tenacious.” Jane taught herself how to get past the attendants and assistants at golf resorts to get to the buyers. It worked: sales grew 400 percent in one quarter, her animal headcovers becoming the best selling item in golf after Tiger Woods started using one.

Not that it was always easy: When the recession hit in early 2008, Jane said that she was paralyzed with fear. “I stopped taking a salary. I sold everything at home that wasn’t nailed down. But I never missed payroll and I didn’t lay off a single key employee. By 2011 we were profitable again.”

Jane and her company do a lot to give back to the community that, as Jane put it, built Daphne’s Headcovers. The company sells a special Weimaraner headcover and donates a portion of the proceeds to Gabriel’s Angels, which provides pet therapy to abused and at-risk kids. They also partner with charities globally to help make a difference and now Jane allows budding entrepreneurs to use her facility and equipment.

Through all of the ups and downs, Jane has lived out the directive her mother gave her, to be tenacious, and Daphne’s core value as well: to do good while doing well.

Name of business: Daphne’s Headcovers

Nature of business: Manufacturer of animal/novelty golf club covers

Address: 337 W. Melinda Lane Phoenix, Arizona 85027

Web: DaphnesHeadcovers.com

Founded: 1978

Number of employees: 19

GLOBALMED

Spirit of Enterprise winner: GlobalMed

GlobalMed earned the U.S. Bank Emerging Entrepreneur Award this year at the W. P. Carey School of Business at Arizona State University’s prestigious Spirit of Enterprise Awards.

In 2002, when Joel Barthelemy started the business that would become GlobalMed, he made imaging equipment for quality assurance in the semiconductor industry. “We did about $1 million a year in sales,” Joel recounted. “Just enough to keep the doors open.”

The company’s very fortuitous move into telemedicine came at the suggestion of a Tulane University pathologist. Joel took his advice and in April, 2005, GlobalMed delivered its first system: cameras and software for the first remote pathology consult, at Tulane.

Today, GlobalMed continues to develop the software and manufacture the equipment that makes telemedicine possible. “To date, we have installed well over 2,000 telemedicine systems in 55 countries,” Joel explained. “We provide patients with access to healthcare wherever there’s an internet connection.” He added, “We’re changing the healthcare system in the U.S. and globally.”

A story illustrates that fact quite poignantly: a woman in Minnesota was fishing with her kids and grandkids when she had a stroke. They rushed her to the community hospital, but it didn’t have the resources to meet her needs. So she was taken via air ambulance to the nearest stroke specialist, but by then she already had permanent paralysis and dementia.

In contrast, when the mayor of rural Copper Queen, Arizona had a stroke and was similarly rushed to the community hospital (which also didn’t have an in-house stroke specialist, but did have a GlobalMed system) he was seen within minutes by a specialist at the Mayo Clinic in Scottsdale. The mayor has fully recovered.

Name of business: GlobalMed

Nature of business: Develops and manufactures healthcare IT systems

Address: 15020 N. 74th Street Scottsdale, Arizona 85260

Web: GlobalMed.com

Founded: 2002

Number of employees: 107

TOTAL TRANSIT

Spirit of Enterprise winner: Total Transit

Total Transit earned the The Spirit of Enterprise Innovation in Entrepreneurship Award this year at the W. P. Carey School of Business at Arizona State University’s prestigious Spirit of Enterprise Awards.

When Total Transit CEO Craig Hughes bought a small airport cab company in 1984, he had only ridden in a cab twice, never in Phoenix. Needless to say, he had to learn on his feet, and learn quickly.

He did, and today Total Transit is a cab company unlike any other. For starters, the company manages both public and private transportation services, including Discount Cab, express route and paratransit service for Valley Metro, and service for many of the largest Medicaid and Medicare providers in the region. It’s a model Total Transit hopes to see spread. “We are truly committed to integrating and managing public and private transportation services in a new way. Our goal is to create the most efficient, cost-effective, and environmentally responsible transportation network possible.”

One of Total Transit’s competitive differentiators is its transportation management system. “We have seven IT developers writing the software that keeps us competitive.” In the public arena, where governments are trying to do more with less, “efficient design, effective integration, and responsible management” are critical to maximizing taxpayers’ investments.

In an environment in which many transportation services companies are struggling, Total Transit has flourished, growing 25-35 percent annually over the last few years and set to grow more than 40 percent this year. That growth comes in part from the company’s commitment to its strategic plans, and in part from its stand-out customer service. “Phoenix is a unique market because customers choose who to call. People call us specifically because they know our high standards.”

Name of business: Total Transit, Inc.

Nature of business: Transportation services

Address: 4600 W. Camelback Rd. Glendale, AZ 85301

Web: TotalTransit.com

Founded: 1984

Number of employees: 300

 

180 DEGREES AUOTOMOTIVE

Spirit of Enterprise winner: 180 Degrees Automotive

180 Degrees Automotive earned the Hahnco Companies Special Achievement in Entrepreneurship Award this year at the W. P. Carey School of Business at Arizona State University’s prestigious Spirit of Enterprise Awards.

When Sarah “Bogi” Lateiner decided to open her own auto repair shop, she “had no business plan, no money.” What Bogi did have was a passion and a talent for fixing cars and taking care of people.

With a focus on women and minorities – customers who have traditionally been neglected or exploited by the auto repair industry and feel particularly intimidated by it – 180 Degrees Automotive grew rapidly, doubling each year after the first. “I was booked out two weeks in advance, but I knew that growth was not sustainable, that I was succeeding despite myself,” Bogi explained.

So she decided to learn how to be a business owner. “You name it, I did it – business books, training conferences, success coaches – but I didn’t like what I was learning. It was all about focusing on financials, structure, systems. I was scared that it would take away my passion and creativity.”

Despite her fears, Bogi stuck with it and has discovered that focusing on the numbers and the systems behind her business actually allows her more time to do the things she’s really passionate about. That includes moving 180 Degrees Automotive into a new building, which she owns, teaching car care classes, and co-hosting a national all-women car repair TV show.

The lasting success of 180 Degrees Automotive doesn’t come from the fact that the company focuses on serving women, or the fact that most of its mechanics and service advisors are women. “Being women in this industry may help to bring people in the door, but that’s not what keeps them here,” Bogi explained. “We still have to provide excellent service and go above and beyond to earn, and keep, the trust of our customers.”

Name of business: 180 Degrees Automotive, Inc.

Nature of business: Automotive repair

Address: 545 W. Mariposa St. Phoenix, AZ 85013

Web: 180auto.com

Founded: 2006

Number of employees: 6

education.business

Penley Appointed President of Thunderbird

The Board of Trustees announced that Larry E. Penley, Ph.D., has been elected president and chief academic officer of Thunderbird School of Global Management effective Thursday, November 1, 2012. The appointment  follows a search that attracted top-tier candidates from both business and academic organizations.

Dr. Penley’s record of results over a distinguished 35-year career makes him a great leader for Thunderbird. As president of Colorado State University, he reversed declining enrollment and oversaw the doubling of fundraising. As dean of the W. P. Carey School of Business at Arizona State University, Dr. Penley led the creation of a strategic plan that produced a top 25 ranking among public MBA programs.

Dr. Penley also applied his learnings for diplomacy and management skills as chairman of The Association to Advance Collegiate Schools of Business (AACSB), a world leader in accreditation services. INROADS Arizona and the Greater Phoenix Economic Council have honored Dr. Penley for his service.

As a leader, Dr. Penley’s extensive overseas experience gives him great passion for Thunderbird’s global mission. He has lectured on four continents, speaks Spanish, and has held faculty and administrative roles in Mexico and Venezuela. While at ASU, he also oversaw the launch of successful MBA programs in Chinaand Mexico.

“Thunderbird is very fortunate to have Dr. Penley at the helm,” said Ann Iverson, Chair of Thunderbird’s Board of Trustees. “He is a lifelong learner who embraces innovation, fosters collaboration, and welcomes diverse viewpoints.”

photo

Top Arizona Businesses Win Spirit of Enterprise Awards

As Americans talk about how to improve our economy, we keep hearing how small businesses and entrepreneurs have to lead the way in the recovery. Today, the W. P. Carey School of Business at Arizona State University honored five of the state’s best businesses for creating jobs, contributing to charities and introducing innovation. They’re this year’s winners of the prestigious Spirit of Enterprise Awards.

“What is striking about this year’s group of finalists and winners is that these entrepreneurs have chosen incredibly difficult industries and excelled where others have failed,” says Gary Naumann, director of the Spirit of Enterprise Center at the W. P. Carey School of Business. “They are recognized today because of their hard work, dedication to the community, and great entrepreneurial stories.”

Hundreds of Valley business and community leaders attended today’s awards luncheon at the JW Marriott Desert Ridge Resort & Spa in Phoenix, where the winners were announced. The finalists’ impressive and often emotional stories were shown on video, as the firms were recognized for ethics, energy and excellence in entrepreneurship.

The 16th annual Spirit of Enterprise Award winners are:

180 Degrees Automotive – The Hahnco Companies Special Achievement in Entrepreneurship Award. This woman-owned, full-service auto repair center caters especially to women and minorities. The company has moved to bigger locations four times in six years, provides free car classes to women, hosts an art exhibit, gives free rides home, and leaves a gift in each car with each visit. It also makes a notable commitment to “green” business practices and community causes.

Daphne’s Headcovers – The Spirit of Enterprise Overcoming Adversity Award. This novelty golf-club cover business was started when the owner was just 16 years old, and it had to address major growth issues when business shot up 400 percent in just one quarter. Daphne’s now serves fine resorts and golf shops in 75 countries, despite the recession that’s hit the golf industry hard. The company has covers in the bags of more than 200 touring pro golfers and offers customers a lifetime guarantee to repair or replace its products for free.

GlobalMed – U.S. Bank Emerging Entrepreneur Award. This booming company offers telemedicine solutions like innovative cameras, medical devices and software, so health practitioners can provide care to remote patients via telecommunications or satellite. GlobalMed made Inc. Magazine’s 2012 list of the nation’s 500 fastest-growing private companies. It also made large donations to charity, including the Marine Corps Toys for Tots Program, the Strike Out Child Abuse Walk and the Migrant Clinicians Network.

LawLogix Group – Gary L. Trujillo Minority Enterprise Award sponsored by Blue Cross Blue Shield of Arizona. This fast-growing provider of immigration, I-9 and E-Verify software boasts a 96.9-percent client-retention rate, low 3-percent employee turnover, and more than 155,000 organizations as customers, including Fortune 500 companies. The minority-owned business also has a nonprofit practice that offers tools to hundreds of nonprofit and community-based organizations, so they can provide some of the same information as expensive immigration law firms.

Total Transit – The Spirit of Enterprise Innovation in Entrepreneurship Award. This comprehensive mobility management company runs the Discount Cab brand throughout Arizona. Total Transit has the largest fleet of environmentally friendly Prius cabs in North America and also provides innovative Dial-a-Ride services for Valley Metro and many large Medicaid and Medicare providers. It also introduced a Free Ride Back program to keep drunk drivers off our roads, by offering paying customers a free ride back to their car the next day. The company donates to the community through its charitable Total Transit Foundation.

The other Spirit of Enterprise Award finalists this year were CyberMark International, Hard Dollar, NJOY Electronic Cigarettes, Optimal Performance Training and Real Property Management East Valley.

These awards are just one focus of the Spirit of Enterprise Center, which helps hundreds of businesses each year. The center offers companies the chance to recruit and meet with top student talent, while also allowing students to get hands-on business experience. One key program, Student Teams for Entrepreneurship Projects (STEP), matches teams of W. P. Carey School of Business students with Valley companies to help tackle real-world challenges and opportunities. Companies can also use the center to access other ASU business resources.

The center is self-funded and utilizes community sponsorships and volunteers to sustain its activities. For more information, visit www.spiritofenterprise.org.

housing.prices

Phoenix-area Home Prices Stable

Phoenix-area home prices stabilized from August to September, but we’re now seeing some other types of movement in the market. A new report from the W. P. Carey School of Business at Arizona State University shows the following numbers for Maricopa and Pinal counties, as of September:

The median single-family home price stayed at $150,000 from August to September, but prices are expected to start rising again this fall.
The overall supply of houses for sale in the market is finally going up – already 24 percent over just the past three months.
Big investors are showing less interest in the market, as the bargains here become tougher to find and some other cities’ housing markets become more attractive.

Though the median single-family home price in the Phoenix area remained at $150,000 from August to September, it is still up more than 27 percent from last year. The median last September was at a low of just $118,000, but it has risen sharply since then. Realtors will note the average price per square foot went up 23.3 percent just from last September to this September, and the report’s author, Mike Orr, expects the upward price movement to continue this fall.

“Prices are firming here as we enter the season when snowbirds return to the Valley,” says Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “Now that cooler weather has returned and the normal summer lull is over, prices are resuming their advance with greater speed, though on weaker sales volumes.”

The amount of sales activity has been down, with many homeowners reluctant to sell at low prices. Specifically, single-family home sales were down more than 12 percent this September from last September. However, the situation may change as prices rise, attracting more sellers. Over the last three months, housing supply has already gone up 24 percent.

“Though supply was still down 15 percent from last September, it increased 9 percent just from this August to this September,” explains Orr. “We’re now in a strong growing trend. For example, the number of homes for sale under $150,000 with no existing contract is up to 35 days’ worth, from just 15 days’ worth in May.”

In spite of this, the lower price range remains very unbalanced, with more buyers than sellers. Ordinary home buyers who need financing face tough competition in the form of both multiple bids and investors’ all-cash offers, which are typically more attractive to sellers. At the lower end of the spectrum — homes priced under $150,000 – 50 percent of the transactions are still all-cash. However, the frenzy of investors in the market is beginning to slow, moving on a downward trend.

“The percentage of homes acquired by investors rose significantly between 2011 and 2012, but declined from August to September of this year,” says Orr. “Investor purchases are down from the peak in July and August and will probably decline further.”

Orr also has some news for those who worry about another bursting bubble in the market.

“This market is relatively well behaved,” he says. “Investors are risking their own money, rather than borrowed funds, so risk is being more carefully managed than in the previous boom. Also, ordinary homebuyers drawn into the market now are less likely to regret their actions than those who did so in 2005 and 2006.”

Meantime, foreclosures continue their downward trend in the Phoenix market. Foreclosure starts – homeowners receiving notice their lenders may foreclose in 90 days – went down 18 percent from August to September. Completed foreclosures dropped 31 percent at the same time. Short sales are also becoming less common.

“Lenders are aware of how much prices have increased for the post-foreclosure homes they have sold recently, so they have been requiring higher prices for short sales before they will agree to them,” says Orr.

The most expensive types of transactions — new-home sales and normal resales – are on the rise. In fact, the number of normal single-family home resales jumped 76 percent from last September to this September. At the same time, the number of investor flips, short sales, and sales of bank- and government-owned homes are all falling, and bargains become tougher to find. Orr says the gap between the pricing of “distressed” and “non-distressed” properties has been closing.

Most areas of the Valley are showing double-digit percentage increases in price year over year. However, those with mostly expensive homes or active adult communities are showing only relatively modest annual gains.

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/FullReport201210.pdf. More analysis is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

Phoenix-Area Housing Market

Short Supply, Rising Prices In The Phoenix Area Housing Market

Are we actually seeing the start of a housing shortage in the Phoenix area? A new report from the W. P. Carey School of Business at Arizona State University reveals some surprising information for Maricopa and Pinal counties, as of February:

  • Housing supply was down a huge 42 percent from the year before.
  • Foreclosures were down 52 percent from last February.
  • Single-family-home prices have been on the rise since September.

Perhaps most notably, the report’s author, Mike Orr, says some realtors are actually starting to call around to ask people whether they would consider selling homes in desirable neighborhoods.

“Supply is tight, in a pretty extreme way, and it looks likely to stay that way for months,” says Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “The inventory of single-family homes for sale under $250,000 (without a contract already) is less than 25 days of supply. This is highly unusual and signals a market heavily out of balance, with far more buyers than sellers. It’s now becoming a matter of how much of a price increase will get people to start putting their homes back on the market.”

The median price for a single-family home sold in the Phoenix area in February was up 8.3 percent from last year. This includes new-home sales, and it’s an increase from $115,000 to $124,500. Realtors will note the average price per-square-foot went up 4.1 percent.

February is the start of the selling season that normally runs through June. Orr expects to see lots of activity and even “frantic attempts” to buy over the next three months. This is likely to push prices even higher.

“One thing that could slow this down is appraisals,” explains Orr. “That’s because appraisers are still looking at prices from up to three months ago, and they may be reluctant to write appraisals that match the now-higher market value. This will continue to give all-cash buyers a big advantage over those who need to secure a loan.”

Orr adds that foreclosures and short sales continue to exert a strong influence on the market. They represent about 20 percent of total sales. New home sales make up only 6 percent of the total market.

Buyers from outside Arizona account for 26 percent of the transactions. Also, despite the positive momentum, Orr emphasizes there are still many Phoenix area homeowners with loans exceeding the market value of their houses.