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Status Of The Phoenix Housing Market Heading Into 2019

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The Phoenix housing market has seen stable growth over the last several years. This stability has been a welcome change from the turbulent times that are still fresh in everyone’s mind.   The housing market in the phoenix area started growing at unsustainable rates in 2005, this unsustainable growth eventually lead to a collapse in 2008 that caused the housing crisis and great recession.  The phoenix area was hit particularly hard during the recession. Since 2012, we have seen a very different picture, instead of huge rises and crashes the market has seen steady sustainable growth.

Recently however, Troy Reeves and “The Reeves Team” have started getting questions on whether or not we are starting to enter another bubble.  So, are we entering a bubble?   Or are we just suffering from a case of recency bias that is making homeowners, and potential buyers nervous that the past is doomed to repeat itself?

To answer these questions let’s start by taking a deep dive into some of the metrics that determine the health of the phoenix housing market.

We will start by looking at the Absorption rate of homes in the Phoenix metro area over the last 12 months.  Absorption rate is a very important statistic to measure the health of the overall housing market.  The absorption rate is calculated by looking at the current number of homes sold in a month versus the number of total homes on the market.  The result is the total amount of months it would take to sell out of the current inventory.  Three months is the ideal number for a healthy housing market.  We were around the 3-month mark in March of 2017 however we have been dipping under that number since that point.

So, what does it mean that our absorption rate has been steadily under 3 months?  The biggest takeaway is that there is not an ideal supply of homes on the market to meet the demand from the buyers looking to purchase a home.  This points to a rise in housing prices in the short to medium turn.  While the current absorption rate is not dramatically under the ideal mark if it continues lower look for even sharper price movement upwards.  If you are looking for additional insights into the absorption rate and what it means for your housing situation please reach out to “The Reeves Team” for an even further in-depth analysis.

Next let’s look at the most straight forward metric of them all, price.  While price may not give us as good of a gauge of what’s going to happen in the future as absorption rate, it gives us a great idea of what has happened in the past.  While the past in real estate doesn’t necessarily repeat itself, it does often rhyme.

So what does the price analysis over the last 12 months tell us?  The biggest take away is that we have a great deal of stability in the market.  Unlike from 2005 to 2012 these lines are fairly smooth instead of having huge spikes upwards and huge drops downward we have slow sustainable growth.  As you can see towards the end of the chart there has been a recent uptick in the median listing price and in the median sales price, this is to be expected as we continue to see an absorption rate of under 3 months.

As a side note this pricing graph demonstrates something we at “The Reeves Team” always explain to our clients.  If you want your home to sell quickly and for the highest possible value, it is important to price your home correctly when you put it on the market.  Look at how close the <strong>new median list price</strong> and the <strong>sold median list price</strong> are. This tells us that the homes that are priced correctly are selling and the homes that are overpriced are sitting on the market.  In the Phoenix housing market buyers have options so it’s important to be competitive if you want your home to sell for top dollar.  If you are interested in putting your home on the market or just want to have an idea of how much your home is worth, contact “The Reeves Team“.

Next up let’s look at inventory.  Inventory is a measure of how many homes are on the market, versus how many are being sold.   As with price you can see that the number of new listings and sold listings are very similar.

What is striking about inventory going into 2019 is how stable is has been since the housing market started recovering around 2012.  Take a look at this article written by “The Reeves Team” in July of 2012.  This was one of our most viewed articles ever as you can see by the over 30 comments that were posted when it was written.  Troy Reeves correctly predicted that the housing market was returning to normal and that normalcy has continued on until today.

The last item we are going to look at before we zoom out to the big picture overview is the Sold Days On Market.  This metric takes a look at all the homes that were sold during a given month and averages how long it took those homes to sell.  There are a couple of takeaways from this data over the past year.  The first takeaway is that the metric has been under 90 days for the entire last year.  The Sold DOM under 90 days for a span of an entire year reinforces what the absorption rate told us above, that buyers are wanting homes faster than sellers are listing them.  While the margin is not to wide at this point, it is something that could lead to a run up in prices in the short term if it continues to fall.

The second take away from the Sold Days On Market is that buyers want to buy homes during the summer.  As you can see the days on market dips dramatically during the summer months when kids are out of school.  You can expect this pattern to repeat for the foreseeable future.

After reviewing the detailed short term metrics we can see that prices and inventory seem very stable, and point to continued sustainable growth.  Now that we have looked at the short term lets take a look at the bigger picture and zoom out and look at prices before and after the run up and crash of the housing market.

 

Looking at this chart that began in 2000 and runs to today we can get a great perspective on just what happened and where we are today.  First you can see that we had sustainable growth from 2000 until 2005 when the housing boom, fueled by the rise in subprime mortgages, took off.  As you can see by the parabolic rise in prices from 2005 and peaking in 2007 these prices were not sustainable.  In 2008 the housing prices absolutely fell off a cliff and bounced around at the bottom until around 2012.  Its clear to see looking back that during the 2010 to 2012 time period we were clearly in oversold territory and a rebound back to normal prices was needed.  This rebound was accurately predicted by Troy Reeves” in November of 2012.  To give you some perspective “The Reeves Team” drew a red line that continued out from the original sustainable growth between the years of 2000 to 2005 up until today.  What is remarkable is, even with the parabolic run up and huge crash and recession that followed, the market has stabilized back to where it would have been if the slow sustainable growth had continued from the beginning.

Reasons to be optimistic.

There are many reasons to be optimistic about the housing market moving forward.   The biggest reason to be optimistic, is that it does not appear that we are in a bubble.  While housing prices have had growth at a slightly faster than average pace over the last few years, it is mainly fueled by the fact that prices previously were to low and we have been catching up to where we need to be all along. With that being said, it is always a good idea to keep an eye on prices in the future, and if you see another parabolic jump in prices be cautious.  However, looking at the data we have reviewed, including the absorption rate, prices, sold days on market and inventory a bubble does not appear to be an immediate threat.

Reasons to be concerned.

Wouldn’t it be great if there were no downside and everything was looking positive?  Unfortunately we are not that lucky.  Interest rates have been on the rise in recent years and the Fed Chairman Jerome Powell has indicated he plans on continuing to raise them, possibly even increasing the rate at which we see rates rise.  So what does this mean for the Phoenix Housing Market?  The biggest takeaway is that if rates go up, the amount of money home buyers will be able to finance will go down, as more of their monthly payments will be eaten up by interest.

Final Thoughts.

The effects on the rising interest rates may take time to play out, but for now “The Reeves Team” remains cautiously optimistic that we will continue seeing long term sustainable growth in the Phoenix Housing Market.  The market appears to have completed its return to normalcy and the deep dive that we did on the short term numbers appears to say the same thing.   If you want any additional analysis on the market or your home in particular please reach out to “The Reeves Team“.

Let us know what you think of the analysis below!

How Rising Oil Prices Can Affect The Value Of Gilbert Housing

As Americans we have enjoyed historically cheap oil for the last 5 years.  While many Americans may not keep it at the forefront of our mind, oil does have a big impact on our actions.  It was only little more than a decade ago when everyone was worried about the price of oil spiking to crippling prices due to “Peak Oil”.  Peak oil was was the concept in the early 2000’s that we had reached the peak level of oil production due to earths oil reserves being depleted.  While it is true that oil is a finite resource and once its gone we wont be getting more, this theory forgot to take into consideration one important factor, Human Ingenuity!  As prices rose and technology progressed we found newer and safer ways to get to oil deposits that had previously seemed impossible.

The United States has been a leader in the new oil revolution.  We used to be dependent on foreign oil suppliers where now we actually produce more oil than we import.

Another huge benefit for Americans is our strategic oil reserves. America has the largest oil reserves of any country in the world. While these reserves were steadily depleting for over 35 years, from the early 70’s until the mid 2000’s we have recently been adding to the reserves and are nearing an all time high.

Americas rise in production and increase in the reserves is great news and allows us much more independence from Middle Eastern oil producing countries. However, just because things have been going our way does not mean we are immune price fluctuations from those countries. After a recent drone attack on Saudi Arabia’s largest oil production facility oil prices have been driven up 15%. The attack which took out as much as 5% of the worlds oil production could prompt even higher prices in the days to come.

Here at The Reeves Team we want to let you know how these increases can affect your housing prices, as well as other potential scenarios that can come from this surge in oil price. We will detail some of the most important ways that housing can be affected by oil prices below.

Disposable Income

As oil prices rise so does the cost of gas an pretty much all consumer goods.  This hits Americans pocketbooks as quickly as anything can.  If you want proof just look at Americans driving habits. In the early 2000’s Americans were driving massive vehicles with almost no regard for gas mileage. However, as oil prices rose and the recession hit practicality took over and those big vehicles were traded in for smaller more fuel efficient vehicles.  Now after 5 years of low prices you are hard pressed to find an American made vehicle that is not a SUV or truck.  Will we see that trend reverse itself again if oil prices rise?  Because oil prices take a huge chunk out of a families budget it means they have less to spend on housing.  When thinking about how much mortgage a potential home buyer can afford it could be hundreds of dollars less if gas and other consumer goods rise in price.  This equates to lower purchase prices and puts downward pressure on the housing market.

Location, Location, Location

As gas prices sore people may also be hesitant to purchase homes farther away from where they work.  When oil prices are low distance to work is less a factor of cost than it is time, however if the prices of gas doubles or more as it has in the past, people will start considering how much extra per month it is to live further away from work than to buy in closer to there company.  This phenomenon will affect houses on the outskirts more so than homes that are in the more urban areas.

Recession

Yes that big scary word.  Oil prices can be a cause of recession.  As Americans we live in a consumer driven economy, as our pocket books struggle and we stop spending it can lead to a vicious cycle that ends in recession.  As we have seen in the past if we do enter a recession you can expect to see a modest pullback in home prices.  Because housing would not be what leads us into recession you should not expect to see any drops as significant as we saw in the great recession.

So what do you think?  Are we set to see oil prices spike even higher or is this a temporary blip that will come back down to normal soon? Let us know in the comment section below.

What happens to mortgages if interest rates go below zero?

We have been living in interesting financial times.  Over the last decade plus we have been in a financial experiment and nobody knows how the results are going to turn out.  Since the great recession we have have very unique monetary policy from the federal government.   In the wake of the financial crisis driven by the housing market the federal reserve reduced the effective interest rate to 0 and also pumped trillions of dollars into the economy in the form of quantitative easing.  The main reason the federal reserve started the Quantitative Easing experiment is because they felt that interest rates could not be lowered below 0.   Experts have always said that 0 is the lower bound for interest rates and cannot be crossed.

That was then, this is now.  We now have federal reserve members actively talking about interest rates below zero.  The International Monetary Fund also suggested that central banks including the United States government should consider allowing interest rates to drop below zero.  With the current economic concerns weakening both in the United States and in the world abroad this would normally be the time that central banks would begin to ease interest rates to lessen the impact of a recession.  There is just one problem,  central banks were not able to raise interest rates during the boom times of the last decade.  While there were a few interest rate increases the current federal funds rate sits at 2.5%.  This does not give us very far to fall before we go to zero.  The federal reserve already started cutting rates in June of this year by .25% and some expect a cut by as much as .5% in the September meeting.  If we do slip into a recession as many experts predict in the next 18 months the federal reserve will not have many proverbial bullets in the gun to lower rates before the hit the zero mark.  Here at The Reeves Team we want our clients to be prepared for any scenario.

A negative interest rate would be something many Americans never thought they would see.  It would also behave in a way that many would not expect.  For instance, people that put their money into a saving account expect a return on their account.  Even in elementary school you are taught that banks make money by taking money from depositors, paying them an interest rate and then loaning that interest rate out to others at a higher rate.  That whole model would be turned on its head.  Now imagine if you take your money to a bank and instead of the bank telling you how much per month they will pay you, they tell you how much you will be paying them for the benefit of leaving your money in the bank.  Strange times indeed.

So what does the mean for mortgages?  If we have to pay the bank to keep our money with them, they should have to pay us if we borrow it right?  Well it might not end up working out like that for consumers.  In some news that can be glass half full, or glass half empty depending on how you look at it, we do have some examples of countries that have negative interest rates that we can learn from.  Europe has been flirting with negative interest rates since 2015 and Danish banks have actually been providing loans with -.5 basis points.  This may be hard to wrap your head around but the bank is actually going to get back less money than they loaned out to the homeowner.   It will be interesting to see how this plays out, especially due to the fact that currently banks front load the interest you pay on a home so that most of the payment goes to interest in the beginning and as the life of the loan continues more money goes towards principal.

Even if the federal funds rate dips below zero it is unlikely that mortgages will follow suit as fast.  Many home buyers would jump for joy at rates around 1% or lower, and it would be hard to convince the majority of banks to lend money to consumers basically for free.

Do you think we will see mortgage rates in the United States fall below zero?  Or is this all just hypothetical and things will continue on as they have?  Let us know in the comments below.

How Will The 2020 Elections Affect Gilbert Real Estate

With growing uncertainty in the economy many are Americans are beginning to look toward the 2020 presidential elections to determine how the economy is going to look for the foreseeable future.   As President Trump tries his best to continue the momentum we have had in the American economy over the last 10 years, there are many headwinds he is fighting against.  The Reeves Team is constantly monitoring the market and is here to keep you informed on how it might affect your pocketbook.

The trade war has started to slow growth in the American economy and the stock market is lower now than it was a year ago at this time.  The federal reserve has just recently started cutting rates again and we had the dreaded yield curve inversion.  So what does this mean for the general public and their bottom line?  When many people think about the economy they think about their largest investment.  For the vast majority of Americans their biggest investment is the home they live in.  So how will the Gilbert housing market be affected if Trump wins reelection or if a Democratic candidate wins in November of 2020.  With the elections nearly a year away lets dive into some of the consequences that could be felt. Here are a few scenarios.

Rental Tax Credits

Most elections candidates are weary to talk about the housing market.  People feel very passionate about their homes, for good reason, and don’t want to feel like the government is meddling in their largest investment.  This election seems to be different.  Many candidates have been discussing tax credits for both renters and buyers.  If trump wins reelection in 2020 I would not expect much change, however some democratic candidates may mix up the status quo.  Some candidates are trying to tackle the problem of ever increasing rent prices in the hottest markets in America.  Gilbert rent prices have nearly doubled in the last decade, so Gilbert would certainly see some effect from these tax credits.  Some of the proposals include giving a tax credit for families that are spending over 30% of their monthly income in rent.  While this could be helpful in the short term proposals like this will probably only increase overall rent prices, as well as increase home values as well.

Home Buyer Tax Credits

Its no secret that millennials have shied away from purchasing homes, however as they settle down and start their families many of them are beginning to look at purchasing their first home.  Unfortunately for millennials they home prices are higher, and they are straddled with more debt from college than previous generations.  One area that is being looked at is renewing the first time home buyer credit.  This was a credit that was put in place during the 2008 financial crisis and has recently expired.  This type of home buying credit and other credits for home buyers and home owners could also help out the housing industry.

General Outlook

Given the historic crash in home values in 2008 it is remarkable that home valuations are within 6% of their all time highs even when adjusting for inflation.  Given these lofty valuations if we do see a recession it is likely the market could dip.  It is important to keep in mind that last time the recession was driven by sub prime lending and crazy housing valuations, that will not be the reason we go into recession this time.  So if you are worried about a collapse in housing prices as big as last time you need not worry.

So what do you think about the possibilities of these tax credits? Are you for helping out those that are burndened by high home and rent prices?  Or do you see 12 Santa Clauses on stage when you watch the debate, and think we should stop spending more government money on tax credits? Leave your thoughts in the comments section below.

How Badly Would A Recession Hurt Gilbert Housing?

The federal reserve just lowered interest rates for the first time since the housing collapse in 2008.   At The Reeves Team we have been getting questions from our clients about what a rate cut means for the local housing market in Gilbert.  Since the 1990’s every time the Federal reserve has cut rates it has been because a recession was about to occur or because a recession has already started.  This has many people worried that another recession is likely.  Because of all the feedback we have decided to answer the three most common questions in a blog post.

Will this recession hurt real estate prices as much as the 2008 recession?

The 2008 recession was called the great recession for a reason.  The last recession was much larger than most.  Housing in Gilbert Arizona dropped by over 40% within the span of months.  Wealth that people had worked their whole lives to build up vanished almost overnight.  We have a recency bias when we think about recessions that make many of us assume that the next recession will see the same kind of stark decline in house values.  If we are entering into a recession it is unlikely that we will see the same kind of widespread losses in the housing market.  The biggest reason housing wont be hit as hard is due to the fact that the recession will not be caused by the housing market itself.  In 2008 the subprime mortgage fiasco was the reason prices were so inflated, it is also the reason the bubble burst so hard.  Lending standards have been much stricter, and while they have been loosening up as of late, we are nowhere near as bad as we were in 2008.  We don’t know what will cause the next recession but its unlikely to be housing that starts it.

Will we definitely have a recession?

As we pointed out above, the track record is not pretty.  For nearly the last 3 decades when the federal reserve cuts rates we are either in a recession or about to be in one.  However if you look back a little further you can find some reason for optimism.  In the early 90’s we had just had a long run of growth similar to the one we have just had.  As the economy started to soften the federal reserve stepped in and cut rates early.  When the fed cut rates back then it ended up lengthening the cycle for a few more years and averted crisis.  It is hard to tell if this rate cut will provide a similar situation or if we are already on the path to a recession.

How will Gilbert be affected compared to other areas?

Even if we are about to enter a recession if you own a home in Gilbert you will be in better shape than most.  Why?  Because people want to live in Gilbert.  Gilbert is a fast growing area with great schools and a great social environment.  Gilbert is also not as overpriced as some areas of the country such as California and the Hamptons.  If you own luxury real estate on the coasts a recession could have a major impact on your property value, also if you have an investment property in an area with declining population a recession could hit these areas hard as well.  Gilbert does not have those problems and should hold up extremely well if we do enter a recession.

So what do you think?  Are we headed for a recession or do we have a few more years?  Let us know in the comments below.

How Millennials Are Changing The Gilbert Housing Market

So it seems like millennial might be buying homes after all.  The younger generation dubbed as millennials have been a punching bag for older generations on many topics over the years, and home ownership is no exception. Millennials are known to stay home longer, rent instead of own and move around frequently.  However recent survey data is showing that our young troublemakers may be starting to grow up.

A study from the Urban institute shows that 7.1 million people aged 25 to 34 now own their own homes.  This is 37% of the millennial population.  Not only that but nearly 60% of millenialls now aspire to own a home.  This is a very big change from recent surveys.  So what do these new statistics mean for the Gilbert housing market as a whole?

Favorable Outlook

Home ownership was once frowned upon by millennials.  While older generations looked down on them for it, it made sense for a couple of different reasons.  The biggest reason is that they couldn’t afford it.  While the federal reserve states that inflation is at 2% annually they must not be including housing when they release that figure.  Housing has become increasingly expensive over the last few decades and to young adults entering the workforce saving up 20% for a down payment can seem like an impossible goal.  In fact, According to a 2019 home affordability report it will take new entrants into the workforce an average of 14 years to save up 20% for a down payment.  That is a staggering number and it is easy to see how millennials could get deterred and just assume home ownership is not for them.  Secondly, owning a home means putting down roots.  When you buy a home you typically need to stay in the home for 2 to five years to make the investment worth it over just renting.  For a young single person or even a young couple that isn’t sure where they want to end up, a 1 year lease may seem like a more favorable option than a long term housing commitment.  millennials also came of age through the great recession of 2008 that was caused by massive losses in the housing market, this could also have a negative effect on their willingness to take a risk on a huge asset such as a house.

Still Some Skepticism

While we have seen a drastic rise in home ownership in millennials it may not all be roses quite yet.  The same study also showed that of the 37% of homeowners from the age of 25 to 34, that 63% of those homeowners regretted purchasing the home and had wished they had rented instead.  Some of the reasons that the respondents cited were unaccounted for expenses.  When you rent a home you know what your monthly budget is going to be for housing.  When you own a home you can have unexpected expenses that many first time buyers were not adequately prepared for.  At The Reeves Team, we make sure to prep first time home buyers on some of the expenses they can expect.  It is important to know what shape a homes roof is in when purchasing as well as having the rest of the house inspected for common concerns such as Air Conditioner or pool maintenance that may be in the future.  Another reasons home buyers regretted the purchase was due to the fact they had to sell sooner than they had anticipated.   Many jobs require frequent relocation, and we live in a world that is becoming more and more transient with multiple reasons we may need to leave the place we planned on being for the foreseeable future.  Because there are large overhead costs with purchasing and selling a home this can be a real negative when homeowners decide to sell sooner than they anticipated.

So what do you think?  Is it a good thing that millennials are starting to get excited about home ownership?  Or are you still skeptical based on how many of them resent their home purchase?  Let us know in the comment section below!

Should I Rent My Home Or Put It On Airbnb

Back in the good old days it was simpler.  If you were buying a new home you had limited options.  You could sell your existing home or keep it as a rental property.  If you kept it as a rental property you would either need to find a property management company and pay a third party a significant amount of your rent, or you would need to set aside a large amount of your time and dedicate it to being a landlord for your property.  Then everything changed.  In 2008 in the face of the financial crisis,  Airbnb was launched and the real estate world would never be the same.  Now second home owners and investors have another viable option.  Airbnb allows owners to open up their units to short term tenants, in much the same way a hotel would work.  Many home owners come to The Reeves Team with questions regarding the benefits of renting vs listing on Airbnb so we are going to break down the options to help you decide which is best for you.

Where is your home located?

Like most things in real estate location is a huge consideration when determining what to do with your home.  If you have a home in a highly trafficked area you will likely see higher returns on your investment.  Another important thing to consider is will your home be in demand more at certain times of the year than others.  For instance, if you have a home very close to the cubs spring training facility you can expect great returns when travelers come into town to view the games, but the rest of the year your returns will be more on pace with the average in the valley.  Now for instance if you have a home near downtown Gilbert or downtown Scottsdale you can expect higher than average returns on your Airbnb listing throughout the year due to there not being a real off season.  You can also expect higher returns during the winter months than in the summer as more people flock to the valley during the winter than they do in the summer.

Do you need a stable return from your investment?

As we mentioned above you can expect some variation in income if you decide to list your home on Airbnb.  This is even more true if you have a home that will have high demand but only seasonally.  You will need to budget accordingly and plan ahead for the months that do not have as high of demand and make sure to stay current with your pricing so you do not under charge during the peak months and lose out on potential revenue.  You must also make sure you adjust your prices down during the off season to make sure your property continues to get utilized and is priced competitively with other homes on the market.  With renting you know what you are getting.  Renting is more of a set it and forget it situation. You know the price you will be receiving every month and can budget accordingly.  If you are someone who is ok with fluctuations and wants to maximize the potential of your home Airbnb may be the way to go.  However, if you like consistency renting may be a better option for you.

Do you want access to use your property during some periods throughout the year?

One of the biggest benefits to using Airbnb is that you can have access to your property when you need it.  You can block out dates and stay in your home as you wish.  This is great for home owners that do not live in the valley but that visit frequently.  If you already live in the valley and don’t need access to the property then this is not a consideration to take into account.  If you have a home up north in the white mountains you use as a vacation home, this would be a perfect opportunity to rent on Airbnb the weekends it is not in use.

How big is your home?

The size of your house will matter when determining the amount you can charge for your property on Airbnb. If you have a one bedroom condo in a business area you will be in good shape, but if its in a family travel destination it may not be as marketable.  Also if you have 5+ bedrooms in your home you can anticipate multiple families staying in the house and will be able to charge significantly more than a 3 bedroom house.

Let us know what you thought of this breakdown between renting and listing your second home on Airbnb.  Have you tried both? If so which do you prefer?  Let us know in the comments below.

How Will The Trump Trade War Affect The Gilbert Housing Market

There has been no lack of drama surrounding the trade war with China.  At first many Americans believed the trade war would be over quickly and China would give into the demands of President Trump.  The stock market and home prices were largely unaffected in the beginning. As the tariffs on Chinese imports continued to rise there was more market volatility but it always seemed as though a deal was around the corner.   Now that talks have broken down and the tariffs have been increased to 25% more people are starting to believe we are in for the long haul on the China trade war. At The Reeves Team we are frequently asked for our opinion. So if we are in for a long trade war how can we expect this to affect the housing market and the Gilbert housing market in particular?  This is a complex issue and we are in some very interesting financial times.  What we mean by that its possible bad news for the housing market could actually end up being good news, at least in the short term.  Confused?  We will explain.

Trade war direct affect on housing market

First, lets put this into perspective.  There are direct effects that the trade war will have on real estate, and there are indirect effects.  The direct effects caused by the tariffs are the cost of material goods needed to build new houses as well as the goods needed to remodel existing homes. Rob Dietz the chief economist at the National Association of Home Builders stated that the new 25% tariffs will cost home builders an additional 2.5 billion when funding the construction of new houses.  This cost will need to be passed on to the consumer in the form of higher home prices which could in turn lower the amount of home sales and slow the economy further.

Some of the indirect effects the trade war has on housing prices is the increase in uncertainty.  Across the country over 12 million people plan on selling their primary residence within the next year.  Among those 12 million homeowners 44% of them said the trade war has made them consider selling their home earlier than anticipated to keep from losing value if the trade war continues.  If many homeowners decide to sell and the market begins to get saturated with homes you will see the prices start to dip and houses staying on the market longer.

What happens if the federal reserve lowers rates?

So we have laid out the reasons why a trade war could hurt the United States economy, and in normal financial times this would be it.  Its fairly obvious that tariffs on foreign goods from China and negative sentiment from homeowners can only be a negative right?  Well not so fast, it turns out we don’t live in normal financial times.   With the federal reserve seemingly eager to cut rates the trade war and the resulting slowing economy may give the federal reserve the ammunition that they need to decrease rates.   I know what you may be thinking, didn’t the federal reserve just increase rates multiple times last year and promise three more cuts in 2019?  If that is what your thinking you would be right, however it seems like they are set to do a complete 180.  Many economists have estimated the fed may cut rates up to 3 times over the next year.  So how does this affect homeowners?  Great question! Well the primary way it will help homeowners is that buyers will be able to pay more for houses because interest rates will chew up a smaller amount of the payment they can afford.  The second way that it will help home prices is that lower interest rates tend to help spur economic growth and will help with consumer confidence.  So we may be in a rare situation where good news is good, and bad news is good.  If there is a trade agreement announced that should be good for the overall housing market, if the trade war drags on and the fed cuts rates that could also be good for the housing market.

So what do you think?  Are we in a win/win situation?  Let us know in the comments section below.

When will the huge water park being built in Gilbert open?

Gilbert Arizona has announced it will be opening one of the worlds biggest and best water parks in the nation.  As families look to find any way they can to get outdoors during the summer months, aquatic centers and splash pads have been popping up all over the valley.  We haven’t seen anything quite like this before however.  The town of Gilbert recently announced the park will called The Strand @ Gilbert.

What is it?

The Strand will be a massive new Gilbert Regional Park.  This park will be unique in that it will be operated by a private company once built.  The park will encompass more than 270 acres and the water park itself will be 25 acres in size.

Where is it?

The Strand @ Gilbert is being built at the intersection of Higley and Queen Creek roads.

What activities will be there?

This is where it gets really exciting.  Current plans include some incredible attractions.  A cable ski lake is being built that will allow skiers and wakeboarders to be pulled by an electrically driven cable.  This will be a huge advantage for all those that love water sports.  Currently Gilbert residents flock to the lakes that surround the phoenix metro area, but soon they wont have to leave the neighborhood, oh and don’t forget you wont need to buy a boat either! A surf lagoon is also being built.  This isn’t your standard wave pool as there will be rideable waves for those brave enough to give it a go. There is also going to be a massive inflatable water park for kids of all ages.   There will be multiple swimming areas of varying depths for kids and adults of all sizes to enjoy.  Another very unique feature to be included will be real sand beaches to give you the feel of the ocean without the 5 hour drive to the coast.  There will also be restaurants and clubhouse to relax at.

When will it be ready?

The Strand is expected to open in the summer of 2020.  Stay tuned to RelocateAZ for updates when an exact date is announced.

How can we expect this to affect Gilbert housing prices?

This should have a very positive affect on housing prices in the Gilbert area.  While we at The Reeves Team expect it to help all Gilbert housing, the impact will be felt most for houses directly surrounding the new park.  If you are interested in purchasing a house near the new park let us know and we will be happy to find your dream home.

So what do you think of the new park being built?  Are you as excited as we are or do you have reservations? Let us know in the comment section below.

Bitcoin, Blockchain and Cryptocurrencies Will Upend Real Estate Market

A few months ago we are The Reeves Team wrote about the potential that exists in the blockchain space.  At the time of writing many people were declaring bitcoin and cryptocurrencies dead.  Unfortunately we live in a media age where a majority of what you read online and hear from “news” outlets is either clickbait or at worse fake news.  Since the time of publication the price of Bitcoin has more than doubled and people are starting to come to the realization that cryptocurrencies are not going anywhere.

Like any revolutionary technology it seems like something that is nothing more than a curiosity to the casual observer.   If you need a reminder of how people viewed the internet in the 90’s here is a clip of Katie Couric asking “What is the internet, Anyway?

It is safe to say that 20 years later you can replace internet with blockchain and that will let you know where we are with the adoption of the new technology.  It is safe to say that the internet has changed our lives on a daily basis but will blockchain and cryptocurrency do the same thing?

In the previous article we discussed how blockchain will revolutionize the title company industry and also a different ownership model.  Now that Bitcoin is back in the mainstream news we would like to present a few more ways that blockchain technology will revolutionize real estate as we know it.

Property Managment

Property management can be a pretty hectic process.   Often times there are multiple applicants that want to rent a particular property.  A management company will typically ask for an application fee upfront as well as extensive information from an applicant including personal information such as address and social security number.  More times than not this private information is sent to companies with varying levels of security and the applicant will not successfully sign a lease. Blockchain technology offers transparency that is not typically associated with the property management world.  What if you could see a persons rental history right on the blockchain?  What if the tenants could see if a lease was already signed directly on the blockchain instead of waiting weeks for the property management company to respond? What if you could share your credit history with someone without giving them your social security number? These are just a few of the efficiencies that will be provided when the blockchain revolution comes for the real estate market.

Real Estate Investment Trusts

We recently discussed REITs as a potential real estate investment vehicle. In this article we will dive into the implications that blockchain can provide for REITs.   To give a bit of a background a REIT is a company that owns, operates or finances income-producing real estate. These REITs allow anyone to invest in real estate in the same way they would invest in an ETF or a mutual fund.  The downside of REITs is there is typically high management fees.  With smart contracts blockchain technology could all but eliminate these hefty fees and will also allow for more transparency when investing.  There will also be more liquidity in the market as people will be able to buy and sell smaller increments of the property.

These are just a few ways in which the real estate industry will be disrupted by blockchain technology. Do you agree with us here at The Reeves Team or are you still a blockchain and cryptocurrency skeptic? Let us know in the comment section below.

How To Make Money Investing In Real Estate

It is well documented that fewer and fewer people are owning the homes they are living in.  It is a harder decision than ever before if you should own a home outright or rent.  Millennial’s notoriously are choosing the flexibility of renting over owning a house in historic numbers.  While many people people are choosing to rent there is another question you should be asking yourself.  Should I invest in real estate?  For many owning a home is the single biggest investment they will ever make, but is real estate investing a strategy that fits your goals?

Even if you chose to rent for the flexibility of being able to pick up and move whenever you want, it still may be a good decision to invest some of your capital into real estate.  Making an investment into real estate can seem like a huge undertaking but here at The Reeves Team we will show you that it doesn’t have to be the case.  Below are four different ways to invest in real estate ranging from the traditional to the unique.

Option #1 Owning a rental property

When people think of investing in real estate this is typically what they think of.  Owning a rental property can be a great investment.  Housing for the most part appreciates over time and you can also gain cash flow if you are able to collect more in rent than it costs to own the property.  There are some things to consider before deciding to purchase a rental property. You will either need to plan on spending a significant amount of time handing matters related to your rental unit, or you will need to hire a property management company which can eat into your profits.  Another great thing to remember when purchasing a rental property is the possible tax deductions.  Expenses are tax deductible and if there are any losses related to the property they can offset gains from other investments.

Option #2 Investment Groups

If you want exposure to the real estate rental market but don’t want to get your hands dirty by being a landlord you always have the option of an Investment Group.  Typically if you are investing in an investment group you will be investing in a company that purchases, or sometimes builds real estate.  Often the type of real estate you are investing in will be condos or apartments. Similar to owning your own rental property and hiring a property management company their is typically management overhead that will eat into your profits.  The benefit of an Investment group over a rental property is that you are more hands off in a way that you would typically see with a mutual fund or stock portfolio.  The negative side is there are more fees and you have less control than you would if you had your own rental property.  You will also need substantial capital to start investing in investment groups.

Option #3 Real Estate Investment Trusts

If Investment groups are similar to mutual funds or stocks then REITs are nearly identical.  REITs like many stocks will pay dividends and are basically the same as owning stocks.  This is good if you are familiar with owning stocks but you are not comfortable owning large amount of real estate.  REITs can be a great investment and can help you create a diversified balance sheet when you are investing.  You are however, less likely to hit a home run with REITs because unlike Investment Groups and rental properties they are not leveraged.  This means you don’t have the option of taking out a loan on a property so the gains and losses are not going to be as large as if you invest on a large property by taking out a loan.

Option #4 Flipping Homes

This one is not for the faint of heart.  We do not recommend flipping homes unless you know exactly what you are doing and have lots of experience in the real estate market.  If done right you can make a great deal of money flipping homes, but there is also a lot that can go wrong.  When flipping homes you typically have high interest short term loans on a property.  If you are not able to turn the home around and sell it quickly your profits could very quickly turn to losses. Also if the real estate market takes a turn you could be left holding a home you never wanted and paying extremely high interest rates on it.  However, if you are handy and know how to spot a good deal flipping homes can be a very lucrative business.

So what do you think about these 4 options for investing in real estate?  Do you use any of these strategies? Let us know in the comments section below.