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May 2006
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Hello everyone. I hope you are enjoying springtime. As we move into the hot months of summer in Arizona, with interest
rates slated to come down, we here at Reidynamics, are looking forward to a very active buyer’s market in the 4-plex sector. Growth in the Phoenix Market is very strong and there are plenty of
investment opportunities available to suit virtually anyone’s investment goals.
Because the market has experienced a slow down in the first quarter of this year, some sellers are quite anxious. Instead of the seller’s market we saw at the end of ’05, today the buyer has
much more control. This won’t last long, however, as all the appreciation factors are still in play. This is a great time to enter the Phoenix market. You can “buy right” and then enjoy the next
Phoenix boom expected to occur no later than the end of next year/early ‘08 when Glendale hosts Super Bowl XLII.
As I reported a month ago, Phoenix area vacancy rates are down and rents are increasing. This mitigates the increase in mortgage expense and supports continued positive cash flow.
The most important ingredient in making investment decisions is finding the right people to work with. Reidynamics is the result of my vision to assemble a team of real estate professionals,
dedicated to providing our clients with a complete, “one-stop”, simple investment process. Our business philosophy is built on a foundation of honesty, integrity, and education; focusing on
building relationships as well as portfolios.
On a personal note, on April 28th, after 150 hours of continuing education, 5 exams, and a 500 page resume, I received my CCIM designation. According to the CCIM Institute, “a Certified
Commercial Investment Member is a recognized expert in the disciplines of commercial and investment real estate. A CCIM is an invaluable resource to the commercial real estate owner, investor,
and user, and is among an elite core of 7500 professionals across North America”. Out of 80,000 licensed realtors in Arizona, only 115 are designated CCIMs. I use this advanced training every
day to help clients achieve greater than expected returns on their investments. Please go to our web site, www.reidynamics.com for testimonials from current clients.
I am especially pleased to announce that Buyer’s Agent, Eric Schneider is joining Reidynamics, this month. Eric has been with RE/MAX Commercial Investment for a year, functioning as an Agent and
Licensed Transaction Coordinator for the top producing Commercial team in the Southwest Region. Specializing in client satisfaction, Eric will make an excellent addition to the team.
Finally, I wanted to let you all know, in the next few weeks I will be attempting to contact you to evaluate your current portfolios and to begin to develop future investment strategies which
fit your goals. If you are currently in a time sensitive situation, specifically in need of a 1031 exchange property, please don’t hesitate to contact me as soon as possible. I can identify
qualifying properties and facilitate an expeditious escrow process in order to meet your deadlines.
I look forward to speaking to you, and working together very soon.
Sincerely,
Carol Reid, CCIM
Reidynamics
RE/MAX Commercial Investment
6424 E. Greenway Parkway
Scottsdale, AZ 85254
602-799-7339
carol@reidynamics.com |
Eric Schneider, Buyer’s Agent
Reidynamics
RE/MAX Commercial Investment
6424 E. Greenway Parkway
Scottsdale, AZ 85254
480-217-2238
eric@reidynamics.com |
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Phoenix Real Estate Market Quarterly Update A Quieter but Saner Market March 2006
2005 was a very active year across all real estate fronts in the greater Phoenix marketplace. Although there's been a lot of press about the possible market crash, there doesn't appear to be any
evidence that the bubble has burst. Instead, the market simply seems to have slowed to normal.
Whereas last year was marked by a dearth of inventory leading to a seller's market, the first quarter of 2006 seems to have brought a reversal. Inventory is increasing on a daily basis. One
could liken this to the stock market where we often see a pullback or consolidation after a good Bull run. Most of the local and national pundits believe that this is a very good thing. This
period of catching a breath could well portend a new upward cycle.
Continuing population growth, anchored by one of the strongest job markets in the country continues to give the Phoenix marketplace significant fuel to extend through the next several years.
Although 2005 represented a significant catch up from the unusually inexpensive nature of the Phoenix market, most believe that there is a lot of headroom left in terms of appreciation.
Here are some of the interesting quotes regarding the 2005 market and predictions for 2006.
According to Jay Butler, Director of the Arizona Real Estate Center, just a year ago, the third quarter median resale home price in Maricopa County was $177,500. 2005’s third quarter reflected a
median sale price of $259,700.
In terms of whether Phoenix is considered to be an overvalued market, National City Corp. conducted a study that showed in August that only 53 areas of 299 metropolitan areas were considered to
be overvalued. A market was considered overvalued if prices were more than 30% above where the Company determined it should be based on the historical price information, area income, mortgage
rates and population density. Of the 299 areas reviewed Phoenix ranked 108. Jay Butler goes on to say "clearly there's still room to grow in value. I think we are showing signs of moving back to
normalcy,” he said. "It's not going from a good market to a bad market. It's moving from a hyper market to a good, sustainable market."
Lee McPheters , regional economist and senior associate dean with the WP Carey School of Business said, "Phoenix is one of the fastest-growing metropolitan areas in the country. Nationally
population goes up about 1% a year. In Arizona, it goes up 3% a year, so that's three times faster than the nation as a whole. There's actually a supply and demand imbalance, which is feeding
appreciation in the Phoenix market."
There is so much more information on the residential real estate segment, but some folks focused on the multi-family market. "Phoenix is expected to be one of the better performing markets in
the nation in 2006," comments David A. Wetta, managing director of Marcus and Millichap. "Phoenix was one of the nation's leaders in the number of jobs created in 2005, which will translate into
another year of substantial net in-migration in 2006. This along with the rapid rise in home prices last year and sustained job growth, supports our expectations for lower vacancy and healthy
rent growth." The Marcus and Millichap report goes on to say
• asking rents are forecast to rise 3.2% to $735 per month.
• Vacancy in the Phoenix metro area will decline 70 basis points to 7.4% in 2006
• Phoenix employers will add over 71,000 positions in 2006, an increase of 4%
• Apartment completions will total 5300 units this year, a 13% decrease from 2005
• in addition to the opportunistic plays on the fringes of the Metro where vacancies are highest, some investors will focus on in city properties.”
As a Buyers agent, I appreciate the slowdown in the Phoenix market. The mean appreciation number that I have heard for 2005 multifamily investments is approximately 18%. That's terrific for my
clients who bought in early 2005, but there is no way to maintain that trajectory without a serious burn out. Returning to more normal seven to 10% appreciation creates the platform for sound,
predictable investments that can generate double-digit returns across three to five year holds.
The increase in interest rates, from 5% to 6 1/2 percent has created more pressure on investments than the heat of last year's market. Considering that debt service has risen to equal net
operating income, profits are now derived after-tax. Nonetheless, with vacancy rates decreasing and rents increasing, the Phoenix fourplex market offers a self-sustaining investment, with
$3-$5000 in annual tax savings. If you add the 7% appreciation each year to your $395,000 purchase price, you will realize $131,000 in sales profit. All in all, not bad for a totally passive
investment.
Carol Reid is a commercial real estate agent focusing exclusively on multifamily investments. She supports out of state buyers by providing one-stop shopping, including lender, inspector, CPA,
Attorney, and dependable property management. She can be reached at 888 - 887 - 7343.
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