Where there is no vision, there is no hope.
George Washington Carver
What’s in store for the Phoenix real estate sector in 2014? Experts say the housing market should see less dramatic price gains, higher interest rates and dissipating interest from Wall Street investors. Meanwhile in the commercial sector, a we’re likely a few years away from a healthy recovery. Here’s a closer look at what to expect in 2014:
Prediction No. 1: The housing market keeps recovering, but at a slower rate.
The metro Phoenix housing market has been in recovery mode for two years, and it’s been a roller coaster every step of the way. Local real estate experts are confident the rebound will continue in 2014, but at a much slower, and even more “normal,” pace than we’ve been experiencing lately.
Experts say the 25 to 30 percent year-over-year price spikes Phoenix saw consistently throughout 2013 will look more like 6 or 8 percent in 2014. We’re already seeing signs of this too; according toArizona State University last week, October’s median price — $200,000 — was 27 percent higher than a year earlier, but up by only one-half percent, or $1,000, from September. Last year, the median price climbed 4.6 percent between September and October.
The other thing to watch for next year will be in the mortgage sector. Experts agree that the days of 3.5 percent interest rates are long gone, but it’s unclear how much higher they’ll climb in 2014. The Federal Reserve said last week it will begin to wean the economy off of its $85 billion monthly bond buying program next year in an attempt to lure private capital back to the mortgage sector, but it’s unclear how investors and the financial markets will react.
The potential upside to higher interest rates, some experts say, is looser underwriting standards for potential borrowers, which we’ve already been seeing in the jumbo-loan market.
Local housing experts are also expecting continued improvement in the home-building sector, although the degree of optimism varies. Growth in the new-home market this year was far below everyone’s expectations as land prices skyrocketed to what many describe as unreasonable heights. Analysts had predicted roughly 17,000 new-home permits for the Phoenix area in 2013, but it looks like we’ll end the year with less than 13,000. Next year’s predictions are as buoyant as 20,000 permits and as conservative as 14,700 — which, either way, still is a fraction of the 60,000 or so issued during the housing boom — while some expect land prices to come down.
Prediction No. 2: Wall Street’s home-buying binge passes
It’s been about two years since Wall Street got into the home-buying and renting business, and metro Phoenix — once plush with foreclosures and bargain deals — was among its top targets. (Note: Institutional investors generally are defined as larger firms, many of which are publicly-traded hedge funds or real estate investment trusts, that own more than 200 single-family homes in the Valley.)
The institutional investor buying spree in the Valley peaked in July 2012 with the acquisition of 831 single-family homes. Today, the nine firms that fit into the “institutional investor” category own roughly 13,400 rental homes across Maricopa County — which may sound like a lot, but it’s really only 5 percent of all single-family rental inventory and less than one-half percent of the Valley’s total housing stock. Additionally, Wall Street’s buying activities in Phoenix have slowed to a trickle this fall, netting a record-low 63 home purchases in October.
With foreclosures and short sales now extremely hard to come by and Valley home prices up dramatically this past year, Wall Street investors are setting their sights on other markets, and local real estate experts predict this will continue through 2014.
With the buying spree winding down, there are fears these groups will soon see dollar signs in the recent price increases and thus dump their portfolios all at once. Many local experts say that’s highly unlikely, but if it were to happen, the impact would be minimal given their small market share and 2014 won’t be the year.
However, it should be noted that the bulk of these groups’ portfolios are concentrated in select neighborhoods rather than spread out evenly throughout the Valley. Also, some of the early entrants into the rental home business have already begun purging their assets elsewhere in the country. And because this is an untested businesses model, skeptics say only time will tell whether the strategy is successful and what the long-term impact will be for the housing market.
Prediction No. 3: Multifamily construction stays red-hot.
The multifamily market has been on fire this year, and demand has been driven by the recent housing bust that turned many homeowners into renters. Experts tell me they expect that sector won’t lose any of its momentum until after 2015, and without any threat of overbuilding.
Industrial construction has been doing well in recent years, but the demand has been driven solely by a handful of big users, so experts say that the sector still is two years away from recovery when we start to see the smaller mom-and-pops making a comeback.
Experts also say 2014 won’t be the big rebound year for office and retail construction either. Those two sectors have been hard-hit by advances in technology, whereby employers are shrinking their office footprints with the proliferation of mobile connectivity. Retailers are staying competitive by growing their e-commerce platforms.
Local experts say office construction won’t make a comeback until sometime around 2017, when jobs return and absorb the glut of vacant space still remaining. Retail, which usually follows the other real estate segments, will come thereafter.
The other concern is the shortage of skilled construction workers. The industry has struggled with a shrinking workforce for the past three decades, but the issue was exacerbated by the recession and, in Arizona, immigration reform. The home-building sector has already been feeling the labor crunch as demand has picked up in recent years. Experts say that will continue to be problematic through 2014 and as commercial construction makes a gradual comeback.
Kristena Hansen covers residential and commercial real estate.
a little about me and my expertise – video
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Investment Properties in Phoenix.
View my listings and my profile at:
Please go to my web-site and get all the newsflashes and updates in Commercial Investment Real Estate in Phoenix and Commercial Investment Properties in Phoenix daily
Follow me on Facebook:
Follow me on Twitter:
Follow Me on Linkedin:
Follow Me on Google+
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial Investment Real Estate Broker in Arizona now for 20 years and I worked with banks and their commercial REO properties for 3 years. I am also a commercial landspecialist in Phoenix and a Landspecialist in Arizona.
WHETHER YOU LEASE OR OWN
NOW IS THE TIME FOR YOU TO EXPAND, UPGRADE OR INVEST.
we are at on the a rise of the cycle in Commercial Real Estate. so there is only one way and it’s called we are going up and now is the time for you to expand, upgrade or invest in Commercial Properties in Phoenix. The prices on deals I may get you will not be around forever.
WAITING TO SELL YOUR LAND ? TIMES CHANGE / IT’S TIME
We barely could give land away the last few years, but times are changing. Even in those meager years, I sold more land across the state than most other brokers. Before the real estate crash I was a land specialist in Arizona with millions of dollars of transactions, but then I had to change and also sell other commercial investment properties, which was fun, but I am a Commercial Landspecialist in Arizonal, a Commercial Land Specialist in Phoenix and love to sell land, one acre to thousands of acres.
If you have any questions about Commercial Investment Properties in Phoenix or Commercial Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion in Commercial Properties in Phoenix or Commercial Properties in Arizona with you.Obviously I am also in this to make money, but it could be a win-win situation for all of us.
Please reply by e-mail email@example.com or call me on my cell 520-975-5207 or Office:480-948-5554
PLEASE NOTE, I CHANGED BROKERAGES BUT CELL PHONE AND E-MAIL STAY THE SAME.
Walter Unger CCIM
Associate Broker, West USA Commercial Real Estate Advisers
7077 E. Marilyn Road, Bldg 4, Suite 130
Scottsdale, AZ 85254
Office : 480-948-5554
View my listings and my profile at:
a little about me and my expertise – video
Delivering the New Standard of Excellence in Commercial Real Estate
- Commercial Real Estate Scottsdale
- Commercial Real Estate Phoenix
- Commercial Real Estate Arizona
- Commercial Investment Properties Phoenix
- Commercial Investment Properties Scottsdale
- Commercial Investment Properties Arizona
- Land Specialist Arizona
- Arizona Land Specialist
- Land Specialist Phoenix
- Phoenix Land Specialist
- Land For Sale Phoenix
- Land for sale Arizona
- Commercial Properties For Sale Phoenix
- Commercial Real Estate Sales Phoenix
- Commercial Properties Phoenix
- Commercial Properties Arizona
- Commercial Land Specialist Phoenix
- Commercial Land Phoenix
- Multifamily land Phoenix
- Retail Land Phoenix
- Industrial Land Phoenix
- Land Commercial Phoenix
- Land Retail Phoenix
- Land Industrial Phoenix
- Land Multifamily Phoenix
- Industrial Land for sale Phoenix
- Land Industrial
- Investment Real Estate
Disclaimer of Liability
The information in this blog-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.