Real Estate

Housing market shifting away from sellers? Not quite

BY PAUL MARYNIAK

Executive Editor

Home prices aren’t coming down, but sellers’ negotiating power apparently is as the market may be cooling faster than expected, according to the Valley’s leading analyst of the housing market.

“Your negotiation power is dissipating at a rapid rate,” the Cromford Report warned sellers in a post last week. “It will take several months of this trend continuing to reach a balanced market, but this no longer looks like such a farfetched idea.”

And if you want to understand one of the factors infl uencing prices, the Cromford Report off ers a suggestion: “Demand from investors for rentals now represents nearly 21% of all home sales.”

“The reported intent of buyers has changed signifi cantly over the past year,” it explains. “In Maricopa County, purchases for owner occupation as a primary residence have declined 19.4% between April 2021 and April 2022. Purchases as a second home have declined by 8.1%. In contrast, purchases to turn into a rental have increased by 8.5%.”

And it suggests the actual percentage is likely higher, asserting that it’s likely some buyers are not being truthful in stating the reason for the home purchase on the affi davit of value that the state Revenue Department requires on every home transaction. “This is sure to be an undercount,” it states.

That affi davit asks the buyer to list whether the purchase is being made for a primary residence, to rent to someone other than a qualifying family member or as a second home.

“Just a cursory inspection shows us that many unscrupulous investors are marking their Affi davits of Value as purchases of a primary residence, no doubt to attract lower taxes,” the Cromford Report states. “It is perjury to enter incorrect information on an Affi davit of Value and each of these documents are notarized. However, we are yet to hear of any government agency taking action to enforce the state laws surrounding Affi davits of Value.”

The infl uence of investors on the rental market has been signifi cant over the last year as real estate investment companies have been paying two, three and even greater times the price of an apartment complex than the seller paid within the last two to fi ve years.

Likewise, large and smaller investors also have been buying single-family homes, keeping inventory low as prices climb.

But one sign of a sea shift in the market – and the reason for the Cromford Report’s pessimistic message to sellers – is its market index.

That index bases short-term forecasts of how balanced the market is in 17 Valley municipalities by analyzing the trends in pending, active and sold listings compared with historical data over the previous four years. Values below 100 indicate a buyer’s market, while values above 100 indicate a seller’s market. A value of 100 indicates a balanced market.

“All 17 cities are cooling quickly and their CMI is dropping 10% or more over the past month. 9 cities have fallen by 20% or more over the last month and one – Queen Creek – by as much as 30%,” the Cromford Report said.

Still, those markets remain well within what the Cromford Report considers heavily tilted toward sellers in most of those 17 cities. The lowest two are Buckeye, at 188, and Maricopa, at 219, while the two highest are Fountain Hills at 473 and Avondale at 442.

Phoenix is at 369 while East Valley submarkets’ rankings are: Mesa, 366; Gilbert, 363; Chandler, 354; and Tempe, 292.

Stating that its index as early as May

This 3,469-square-foot house on S. Camellia Place in Chandler recently sold for $1.6 million. Built in 1998, the house has four bedrooms and 3 ½ bathrooms and boasts a family room with a fi replace, lake views, a covered patio and negative edge pool, among

other amenities. (Special to SanTan Sun News)

See MARKET on page 24

Some advice on investing in Arizona real estate

BY CHRIS MORRISON

Guest Writer

Arizona has become one of the hottest real estate markets on record. Property values in metro Phoenix have grown 31.1% from last year. Many out of state investors are taking stake in Phoenix properties due to growth forecasts, predicting the city will be in the top 10 best real estate markets this year. Phoenix area home prices are expected to grow at a steady pace this year, making it an ideal market for investors. The limited housing supply also adds to the value, making this an incredibly competitive market.

Real estate investing is one of the fastest methods towards generational wealth. While real estate investments pose great opportunities, it is important to be aware of a few industry basics. If you plan on getting involved in real estate, here are a few suggestions that expert investors follow.

Know the neighborhood and risks. Consider the area in which you are purchasing a property. Areas that provide upcoming commercial and retail developments, such as shopping centers and restaurants, increase the odds of a profi table investment return.

A growing area in population and future developments is a great sign for a successful investment location. Research the worth of the area and recent comps to predict potential profi t.

Be sure to calculate renovation expenses and other costs to calculate an anticipated profi t margin. Set yourself up to make money and not lose money.

Upgrade your vacation home rental. Arizona is popular to tourists for the incredible weather, golf courses, and college towns. If you are hosting a vacation home, upgrade to a smart lock. Smart locks not only provide easy access for guests, but a sense of security as keys can’t be duplicated or lost.

Always keep your rental property in operable shape by repairing issues immediately. Do not forget to have all permits in order and assure all laws are followed where your rental home is located. An organized and clean listing with great photos, will make your rental home stand out for travelers.

Grow your investment without purchasing properties. Yes, it is possible to invest in real estate without purchasing real estate property. Invest in a real estate-focused company such as commercial real estate developers, timeshare companies, hotels and similar real estate companies.

Before investing in a company, analyze its stock and history to ensure it is a good option for you and your investment portfolio. Other methods of investing include real estate mutual fi nds and real estate exchange-traded funds, commonly known as EFTs.

Finally, look for a seasoned professional to guide you through the purchase for any type of real estate to ensure a smooth and successful acquisition. A knowledgeable agent will provide expert insight on the evolving market and industry trends that would impact the price of your new property, resulting in the highest return for your investment.

Christ Morrison is a founding member of RETSY, a technology-based real estate brokerage with over 300 years of combined experience and more than US $3.5 billion in sales.

Address legal damages up front with an attorney

BY PATRICK MACQUEEN

Guest Writer

An often-overlooked aspect of evaluating one’s legal case by clients assessing legal damages. It is not always as straightforward as it seems.

Let’s suppose you live in a homeowner’s association and your neighbor begins construction in June of a second-story addition without your consent or approval while away in your summer cabin.

When you arrive home a few months later, you are very upset to learn of the new structure because you no longer have the mountainous views you previously had serving as a backdrop to your backyard. Instead, all you can see is your neighbor’s close-up second story structure.

You took great pride in your backyard views and guests routinely admired the views when over. You review the governing documents applicable to your HOA and learn that your neighbor and the HOA are in violation of the governing documents.

Without hesitation, you hire a lawyer and file a lawsuit.

Since the structure was completed or substantially completed over the summer months while you were away, it is unlikely that the court will force the neighbor to take down and demolish the structure. That leaves you with a case for legal damages.

Up to this point, you have not put much thought into legal damages and just assumed they exist and for a lot of money – after all, you’ve lost your mountain views in your backyard! Even your friends have commented on the loss of view.

As part of the litigation process, after consulting with appraisal experts, you learn that no appraiser is comfortable testifying to a diminution in value of your property because the “data” does not support damages. In other words, the appraisal experts inform you that while they personally and subjectively believe you have suffered damages, there is not sufficient data (in the form of comparable sales) to prove that the loss of your mountain view means your property is worth less. While you may be able to present diminution in value evidence through your own testimony, it could prove difficult to make out a case for legal damages. And, while there may be other legal damages you can assert in this case, the lack of an appraisal expert is a setback.

Of course, this is just a hypothetical example, and there are many cases where appraisal experts would testify to damages in the above example.

But the point is, it should not be assumed you have legal damages. Among other things, it is vitally important to address legal damages upfront with an attorney in a litigation case.

Ahwatukee attorney Patrick MacQueen and Chandler attorney Benjamin Gottlieb created a different kind of law firm using state of the art legal software and technology combined with award-winning legal minds to provide the best real estate representation available. Ben can be reached at ben@mandglawgroup.com or 602533-2840.

MARKET from page 23

9 “was the first indicator to sound the alarm about the current market direction,” the Cromford Report adds, “We can now see several other early indicators fall like a sequence of dominoes toppling over.”

“Supply is growing in almost all areas thanks to a plentiful and growing flow of new listings, while homes are going under contract at a slower rate than we have seen for a long time.”

“While all the numbers are low in absolute terms, the 2022 line is shooting skywards like a missile. This tells us that supply is increasing very quickly relative to demand.”

Still, it’s too early to say what will happen over the next six months, the Cromford Report warns.

“I am NOT saying this is going to happen in 2022 and 2023, but I am saying this trend needs to be watched very closely,” it states. “A balanced market will have about 120 to 135 days of inventory and if we get more than 150 days we will be in a buyer’s market, one where prices will tend to fall rather than rise.

“My advice is to keep watching days of inventory like a hawk and react appropriately.”

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