The plan had been to build 126 high rise condos, to be named Portales Place, on the site but that failed with the real estate bust.

Although I would have loved to have seen more condominiums in the area the market just won’t support them at this time.  Given that, I’m all for increased density even if apartments.  Couple Portales Apartments with approximately 700 apartments planned forBlue Sky Project, the vacant lot immediately west of Safari Drive, and we’re looking at approximately 1300 new residents to the area.  I love it!

Total sales in October 2011 were 14.7% higher than for the same period last year.  While sales were lower in October than they were in June that is to be expected as that is typical for the Phoenix market.  The important thing to watch is whether or not sales are higher than the previous year and if sales are higher in 2012 for the same time period as they were in 2011.

The inventory of “new listings” (real estate properties newly added to the MLS as “for sale”) continues the downward trend that began in March 2011.  IF new inventory continues to trend down, and there’s no guarantee that it will, then one would expect prices to begin rising, IF the number of sales continue to rise.

Many people consider the period from January 2002 through May 2004 to have been the last “normal” market in Phoenix.  During that time the average number of properties on the market for sale was 26, 727.  In October 2011 the total inventory was 27,266 and had been approximately that same amount since July.  So, people are listing properties for sale at about the same rate as people are buying properties.  This is a good thing.  It means that we MIGHT be reaching an equilibrium and IF so then MAYBE we’ll see more stability in prices.

In my previous post I wrote that short sales, although still difficult, are getting easier to close.  I believe that the chart below reinforces my opinion.  It is my opinion that part of the reason that the solid red line representing “lender owned” sales is trending downward is because more and more banks are electing to do short sales rather than foreclose on owners.  Please note that the yellow line representing “short sale sold units” is trending upward which would also support that opinion.  Yes, I recognize that there are other possible explanations for the trends but I believe that my opinion is worth sharing.  IF I am right and banks are cooperating with owners and negotiating more short sales and foreclosing on fewer properties then this is a good thing as foreclosure prices tend to be lower than short sale prices and in turn put more downward pressure on prices than short sales.

None of the data I shared with you above is really earth shattering.  Things are still moving slowly but it is somewhat comforting to see trends moving in a direction that will ultimately lead to a recovery.  I have no idea what 2012 will bring but for the time being I am guardedly and modestly optimistic.  If the market continues to move in a positive direction then one could easily argue that with interest rates being at such low levels that it might now be a good time to buy.

If you want to discuss your buying, selling or renting options, give us a call at 480-510-8755.  We look forward to talking to you.

Buildings such as One Lexington (formerly Century Plaza) just celebrated their 1-year anniversary since they started selling again and are currently 75% sold out.  ST Residential, new owners of 44 Monroe were initially going to restart sales in late 2010, but switched to luxury rentals in January, and has been filling up quickly ever since.  ST’s other recently acquired properties include 3rd Avenue Palms in midtown Phoenix and Safari Drive in downtown Scottsdale, both of which are selling at a good steady pace.  Optima Camelview is merely months from completion of it’s final phase (Phase 3) which will bring the total development to 700+ units.  Another iconic Scottsdale project, The Mark is selling very well with only 30% units remaining.

A lot of urban fans are excited to see West 6th (formerly Centerpoint) in downtown Tempe finish construction and potentially change the face of Mill Avenue…for better or worse?  Originally planned as luxury condos, selling at the peak for $700+/SF, West 6th has finally found a new owner who has decided to lease the building for now.

Not all fractured condo buildings have been blessed with new ownership.  Summit at Copper Square is “controlled” by Stearns Bank, the buyer of the original construction loan and owner of approximately 70 of the original 165 units.  I put the word controlled in parenthesis because in my opinion Stearns is kind of stuck.  It’s stuck because we believe most prospective buyers of the 70 unit package would want to rent those units out while waiting for the condos sales market to improve.  Unfortunately, we believe that renting of the units may be prohibited by the CC&R’s and the law.  Oh, and to make matters worse lenders will not make loans in the building.

Several other buildings around town are facing similar problems, which is hardly a great thing, but opens up one-of-a-kind opportunities for cash buyers to scoop up great condos at historically low prices.  First time homebuyers, investors and second home seekers have a solid array of choices, matched with interest rates that are still very low.  More and more people are buying which leads us to wonder, have we hit the bottom?

Coming sooner that later developments:

While a chunk of the once planned luxury fleet of high-rises in the urban valley have vanished, a few are hovering on the horizon and surprisingly a few new developments are picking up steam and filling up city council schedules.  Safari Drive was originally planned to encompass nearly the entire Northeast corner of Scottsdale and Camelback roads, minus the Triyar development along Scottsdale with Chipotle and Sprinkles.  Now, that vacant lot has a “next generation” vision according to Gray Development, the potential developers, with plans for a 750 unit, 3 building complex over 4.3 acres. The project is currently battling opposition from the local community and is in and out of council hearings with an undetermined completion date.  Ownership is another hurdle for the developer, as ST Residential (Owner of Safari Drive) and Triyar Properties (owner of that retail along Scottsdale Rd) jointly own that parcel and the project is contingent on the sale of the land, among other obstacles.

It is great to see a little life in the development industry, as it was hibernating for nearly 2 years.  Unfortunately, many grand visions during the latter half of the boom will never come to fruition, but in time, cranes will return to the urban cores.

Other notable development updates:

• The W Residences, comprised of 18 new penthouses on the top two levels of the hotel have re-opened sales, with starting prices of $800+/SF, yes I said 800.
• The unique 5-story, 21 unit Chateaux on Central found a new owner and relaunched sales at the beginning of the year.  With units ranging from 5000-8000+ SF and prices STARTING at $1.3M, they are still waiting for their sale as of May 1st.
• Portland 38, Evergreen 9 and Roosevelt 11, (Jag Development) all have builder units still available although Portland 38 had very strong sales in 2010 and is almost sold out.
• Sage Scottsdale, a 50 unit townhome/condo community on the canal off Chaparral is steadily selling after a opening earlier this year.
• Corriente, on the outskirts of downtown Scottsdale, just off Indian Bend is actually building their last phase, with construction on the first building set to open later this year.
• Cityscape in downtown Phoenix opened its office and retail sections, with an eclectic array of shops, restaurants, grocery and drug store, bowling alley and full service gym.
• Scottsdale Quarter, a mixed-use complex just east of Kierland Commons opened last year and is continuing to expand with a great variety of shops and restaurants and appears to be quite popular.  iPIC is definitely worth checking out.

Ten Wine Lofts, the urban condo community at roughly Osborn and Scottsdale Road has been converted to apartment rentals and is expected to be on the market in early 2011.  An investor purchased the community after the original developer and original construction lender went under and has elected to go rental vs. selling the condos.  We don’t have prices yet but hope to have those and other details soon.  If you’re interested in learning more or if you’d like to reserve one of the condo rentals then contact us now at 480 510-8755 ext 2 and leave a message.

Now Starwood et al and the FDIC are partnering to sell off those condo communities under the name “ST”.

One of the communities is 44 Monroe a 34 story high rise condo building in downtown Phoenix. We expect prices at 44 Monroe to start at $200 per square foot. This price point seems to make sense since it is approximately 10% lower than prices at One Lexington (formerly Century Plaza) which has been selling relatively well since March 2010 with starting prices at about $225 per square foot. Reportedly One Lexington has sold 55 condos in that time. Not bad at all for a “down” market. Such sales at One Lexington lead us to think that $200 per square foot at 44 Monroe should be well received.

Although “price” is extremely important we recognize that floor plans, amenities, location, and more play a very important role in every buyers decision.  This is where you need an independent agent like We Know Urban Realty on your side, to help you assess pluses and minuses of the building as compared to its competition.

Pluses:

44 Monroe is in a great location in downtown Phoenix within easy walking distance of Chase Baseball Field, US Airways Basketball Arena, Orpheum, Herberger and Dodge Theaters, the new convention center, light rail, Cityscape and much much more.

Views at 44 Monroe are pretty good with either expansive vistas of the city from afar or close views of surrounding buildings.

I like that starting sales prices are about 30% less than what it would cost to build the building today.  Buying at less than replacement value is great.

We like the general look of 44 Monroe with it’s bluish gray glass and contemporary styling.

Minuses:

There are definitely things to be aware of in this building BEFORE you visit it. To learn more, give me a call at 602 989-6788.

From January 1 to December 31, 2008, the total number of “distressed” sales of high-rise condos and lofts was 94.  These 94 properties took an average of 143 days to sell and the average price per square foot for these sales was $222.72.

For the same period in 2009, the total number of high-rise condominiums and lofts which were advertised as being a short sale or foreclosure was 262 units (a 280% increase)!  These 262 properties took an average of 75 days to sell (almost half the time as 2008) and sold for an average of $176.54 per square foot (21% less than in 2008).

Currently there are 104 distressed urban condos on the MLS for sale.  Of these, the average advertised price per square foot is $189.92 and have been on the market for an average of 150 days.  In my opinion, this higher number of ”days on market” is irrelevant since the last three months of the year are typically slow due to the holidays.  I expect to see quite a bit of “market activity”/sales beginning in mid to late January.

So what do all these numbers mean?

Well clearly more people purchased in 2009 than 2008 and the speed by which condos sold is very similar to what we saw BEFORE the boom; meaning that sales velocity is comparable to what we see in a NORMAL market.  Now granted, these sales were of foreclosures but so what?  This simply means that after the crazy appreciation and subsequent bust, that prices now make sense to buyers; to the point that buyers are snapping them up at rates comparable to before the boom.

Oh, and just to clarify something.  I am looking at sales velocity to determine market strength vs total sales numbers because prior to the boom, very few high-rise and loft condos existed.  Think about it, prior to 2004, there were only two modern high-rise buildings (Crystal Point and Esplanade Place), four older high-rise buildings (Executive Towers, Regency House, Embassy and Phoenix Towers Co-Op) and a smattering of lofts.  So, to determine whether sales numbers today are comparable to pre-boom levels is kinda tough.  If any mathematically brilliant people are reading this and have suggestions, I’m opening to hearing them. 

Century Plaza, Phoenix - M&I Bank, the original construction lender has finally taken the property back from the developer.  Work has commenced on 13th floor condos but we don’t know what.  Word is that the lobby is about to have a face lift.  Why?  Heck if I know as I think the lobby and common areas are very nice.  However, perhaps the bank believes a face lift is necessary to sell the remaining condos (or whatever the bank has planned to do with them).  Nonetheless, we are hoping to see condos back on the market in 2010 at a much reduced price.

44 Monroe, Phoenix - Corus Bank, the original construction lender, was taken over by the Feds this year.  The loan was lumped into a pool along with many other notes and ultimately purchased by Starwood.  We have not heard yet what Starwood is planning to do with the asset but again we hope to see the condos back on the market for sale at greatly reduced prices.

Centerpoint, Tempe – Mortgages Ltd, the original construction lender AND Avenue Communities, the developer, both filed for bankruptcy earlier this year.  At this point the entire project is moth-balled.  My guess is that the developer will eventually settle with the lender, regain the high rise project, and put the condos on the market for sale at a greatly reduced price.  It would not surprise me if only one of the buildings was offered for sale while the other one remained moth-balled until the market gets much better.

X Wine Lofts – Mortgages Ltd was the original construction lender for this project as well.  We don’t expect the developer to save this asset but this is pure speculation.  We will hopefully see some sort of resolution to this matter in 2010.

Biltmore Towers by Optima, Phoenix - In late 2009 we saw the developer close its on-site leasing office and stop doing business in the community.  We assume that this was because it did not make financial sense to continue.  All rentals in the building are now handled by individual real estate agents like us or by the landlord themselves.  The Biltmore Tower HOA instituted a rule disallowing real estate agent lockboxes on the property that will eventually hurt property values/owners there.   Rents have significantly dropped in the building.  The average cost per foot for rents in the first two quarters of 2008 was $1.73 while the average for the last quarter of 2009 was $1.38 or more than 20%.  Sales prices dropped as well but activity is up.  In the first two quarters of 2008 there were only two sales with an average cost per foot of $407.13.  In the last quarter of 2009 (historically the slowest period for Phoenix real estate sales) there were six condos sold at an average cost per foot of $245.65, a 39.5% drop.  Is there any good news? Absolutely.  the average cost per foot for the sixteen sales from April 1 to September 30, 2009 was much lower ($210.63 per square foot) so prices at Optima Biltmore Towers seem to be going up!  We at We Know Urban Realty believe that the worst is behind us at Biltmore Towers.  Now if only the HOA would find another solution to the ban on lock boxes…..

Camelview Village by Optima, Scottsdale - Interestingly enough we have seen broadly supported rent stability in Camelview Village although we are seeing downward pressure on prices.  Rents today (Q4 2009) are at an average of $1.97 per foot in 40 condos.  Rents in the first two quarters of 2008 were $1.95 per foot in 76 condos.  Whad’ya know, rent appreciation!  Sales prices have been another matter.  In the first two quarters of 2008 condos sold for an average of $472 per square foot while in the last quarter of 2009 they sold for $355 per square foot or almost 25% less.  With the number of short sales and foreclosures in that community we expect to see downward pressure on sales prices in 2010.  However, the developer apparently believes that the Scottsdale condo market will recover and is putting its money where it’s mouth is.  Optima has announced plans to built another 500 condos at the corner of 68th Street and Camelback with a projected commencement of construction date of mid 2011.

Edgewater at Hayden Ferry, Tempe - This 40 condo unit high rise seems to be in trouble.  There are currently 15 condos for sale which constitutes 37% of the entire building!  Eight of the fifteen listings advertise that the property is “pre-foreclosure” or “bank owned.”  Additionally, the HOA does not meet the financial requirements necessary for lenders to make mortgages there.  So, it will be very difficult for anyone to buy any of the fifteen units for sale.  You can see how these two factors, the high number of distressed condos for sale and HOA financial problems, can domino.

Bridgeview at Hayden Ferry, Tempe - A company out of Colorado purchased the remaining unsold condos (60) from the developer of this 100 unit high rise and began selling them several months ago.  Sales are rumored to be strong and the HOA appears to be financially sound.  If this is all true then it will of course make it that much harder to sell condos at the neighboring building, Edgewater, as buyers will have a superior option at Bridgeview.  The one thing that is confusing me is that the main sales guy, Bob Normile, recently quit.  Bob is a very sharp guy and had been at the building since the beginning.  He stuck to it even when there were zero sales to be had.  I don’t understand why a guy would quit if the sales are in fact as good at Bridgeview as I am told.  What real estate agent in today’s market quits if he’s getting sales.  I don’t get it but I’m sure we’ll learn the truth before long.

4020 Lofts, Scottsdale – An investor bought the entire project and tried for a very short time to sell the lofts.  Ultimately, he/she listed every loft for rent and was very successful in quickly filling them.

Third Avenue Lofts, Scottsdale - This was one of the first, if not the first, urban loft community built during the boom.  It came to market early, condos resold during the boom at steeply higher prices, and then it crashed…hard.  But it also began its recovery sooner than other urban developments.  Rents are lower than early 2008, having dropped from $2.04 per square foot in Q’s 1 & 2 2008 to $1.74 in Q4 2009.  Sales prices dropped too from $381 per square foot in Q’s 1 & 2 2008 to $281 in Q4 2009.  However, Q4 prices are up over Q’s 2 & 3 2009 by almost ten percent.  So, we at We Know Urban Realty believe that we have seen the worst at Third Avenue Lofts and that it is now recovering.

Well, there it is, the good, the bad and the ugly of urban living in Phoenix, Tempe and Scottsdale; at least part of it.  As a whole we expect lending to be tight in 2010 but in many buildings we expect prices to slowly increase, a very welcome development for most.  Also, with upward pressure on interest rates we expect buyers to “get off the fence” and aggressively purchasing properties in early 2010.

If you’re considering buying or renting a hip cool high rise or loft condo give us a call.  There are some great deals out there and we know where they are.

“Not all cities are created equal:

2008 (12/17) 2009 (12/17)
All counties 56,434 88,478
Phoenix 12,285 24,346
Scottsdale 4,309 5,459
Paradise Valley 174 255

This is just MLS and does not include Trustee sales,
Auctions or FISBOS.

Phoenix MLS had 25,773 in 2004 and 26,615 in 2005.”

As I understand them, his numbers essentially show sales (actual closed real estate transactions) for the two periods of 1/1/08 to 12/17/08 amd 1/1/09 to 12/17/09 for the various areas.

I don’t know Joseph but I love that he took the time to share some statistics.  Now, we all know that stats can be manipulated however the gatherer wants.  And I’m sure some of our readers questioned the stats that I shared in the blog post.  And of course some of you will question Joseph’s numbers as well.  Nonetheless, I’m happy to see that at least one other person has numbers that are reasonably close to mine. You’ll note that his 2009 sales in Phoenix are really close to the sales numbers in 204 and 2005 just as my data suggested.

Whether my numbers are 100% spot on or not, I’m telling you that sales are happening here in Phoenix (yes, many many of them are foreclosures) and we believe that more are to come in 2010.  Now if only FHA, Fannie and Freddie would loosen up underwriting guidelines a bit we might see a real recovery.

It’s probably good advise but I’m going to ignore it.

Although it is true that we do not know for sure whether or not interest rates will go up or if we will experience inflation anytime soon I personally believe we are heading that way.

Should this inhibit you from buying today?  No, just the opposite and here’s why.

Interest Rates - If you buy property today and lock in a loan with a 5% interest rate then you are taking advantage of some of the lowest interest rates in the history of modern lending.  Folks, these are great rates.  And IF interest rates go up, your rate won’t change.  So, IF rates go up to 8%, 9%, 10% or more you’ll be sitting pretty.

Also, let’s say you have “x” amount to spend each month on a mortgage payment.  If you buy today and take advantage of the low rates then less of your monthly payment goes towards interest and more of your monthly payment goes toward the condo itself.  In other words you’ll buy more condo for the same amount of money.

Inflation - If we experience double digit inflation (10% or higher) you would be wise to have taken advantage of today’s real estate prices rather than waiting.

With inflation, the value of a dollar goes down.  So if it costs $1 to buy a loaf of bread today, it will cost $1.10 to buy a loaf of bread during an inflationary period of 10% because the bread will be worth more relative to the less valuable dollar.  This may not seem like a big deal because the loaf of bread only went up ten cents.  But this is also true for real estate.  So in the same scenario a cool loft condo that costs $250,000 today would cost $275,000 a year from now!  It will cost this much more simply because the dollar will be worth 10% less than a year before.  So, during inflationary periods, while your dollars go down in value, real estate and many commodities (food, fuel, energy, precious metals, etc…) go up.  With real estate, the value of your money is “preserved” but with cash the value of your money is lost.

BONUS, The Power of Leverage - Now, let’s say you buy the $250,000 condo referenced above and get an 80% loan to do so.  In other words you come in with $50,000 cash for the down payment and borrow $200,000.  During a 10% inflationary period the property could be worth $275,000 a year after you bought it; $25,000 more than you paid.  And remember that you only spent $50,000 to enjoy that $25,000 gain!  So while folks who did not buy are losing 10% on their money every year, you’ll be enjoying 50% growth thanks to leverage!!

DOUBLE BONUS – Paying Back With “Cheaper” Dollars - Finally, if the value of the dollar is lower because of inflation AND you have a fixed rate mortgage, then you are paying the bank back with “cheaper” dollars.  As we saw above, it might cost $1 to buy a loaf of bread today but during 10% inflation that same loaf will cost $1.10 because the dollar is not as valuable as it was a year earlier.  So, when you make a mortgage payment during 10% inflation, those dollars are worth 10% less than they were a year before; you’ll make money on the bank’s money!

Like I said above, no one knows for sure whether or not interest rates will go up or if we will experience high levels of inflation.  However, with interest rates being soooo low, it only makes sense that they will go up.  Remember, interest rates in the early 1980′s were in the very high teens, yeah like 18%!!!  Folks, if you can borrow today at 5.25% or less then DO IT!  If we do get hit with inflation then you’ll be really glad you bought today rather than later.  The number of homes and condos selling in Phoenix and surrounding cities are up, prices appear to have leveled off, there are fantastic foreclosure deals out there, there are still significant tax credits for some buyers, there are still tax benefits to owning real estate and IF interest rates and/or inflation kick in, those who buy now will be glad they did.

I do not want to sound like one of those rosy and cheery Realtors who ooze “good” news and only good news.  I have written plenty of blog posts about the problems in real estate.  However, I do believe in the fundamentals of economics and when the market starts “making sense” I am not afraid to discuss that too.  Real estate is beginning to make sense again.  Call us at We Know Urban Realty to learn where we believe are the best deals and why.

No one can know the mind-set of all the various sellers or potential sellers in the Valley.  Additionally, the evidence does not support this person’s opinion.  “Closings”, the number of properties that sell each month, are way up.  In fact, in Phoenix as a whole, the number of closings each month is approximately 1,700 homes and condos.  That’s over four times as many as in January 2008, the period with the fewest closings in seven years.  The 1,700 is as many as what was selling in 2004 and 2005, the boom years in Phoenix.

Some people don’t want to see the new reality, that market activity is up, more and more people are buying, and as a result, inventory is going down.  Now, just like I said last week, these numbers are for real estate in the Valley as a whole and are not condominium or urban condo specific.  While some urban condo buildings have not yet “hit bottom” there are many others that are performing nicely and offer great buying opportunities.  At We Know Urban Realty, we study the urban market daily, we analyze the numbers, we talk to other experts, and we develop solid buying and selling strategies for our clients.  If you are considering buying a high rise condo or loft, give us a call.