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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 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.

Featured Homes


Featured Community: Adora Trails

Apple Is Opening Large Facility In The South East Valley

Apple StoreArizona is showing its strength again as a leader in the business world, as the worlds largest tech company Apple has just announced plans to build a massive engineering plant in the South East Valley.

“This is a large structure,” Mesa Mayor Scott Smith said, “It’s larger than a regional mall where we all go shopping. That’s a lot of square footage. It’s gotta be built out so that it can be a manufacturing facility.”

With the large facility Apple is to create 2,000 manufacturing, engineering and construction jobs at a the new plant. The technology titan is beginning to shift production back to the United States. While Apple is known for its secrecy, the speculation is that the renewable energy powered facility in Mesa, Arizona, will produce laboratory grown sapphire crystals of the kind used in the iPhone 5S fingerprint scanner.

Also Read: Gilbert Focuses On Job Growth

Good News For Arizona

“Apple will have an incredibly positive economic impact for Arizona,” said governor Janice Brewer. “Their investment in renewable energy will also be greening our power grid, and creating significant new solar and geothermal power sources for the state.”

Run with solar and geothermal energy, which uses heat from deep underground, the plant has been designed in collaboration with local utility Salt River Project.

The building will be owned by Apple, while the furnaces will be supplied by GT Advanced, with a $578 down payment from Apple which will be reimbursed over five years starting in 2015 and is understood to come with certain exclusivity rights.

Also Read: Huge Master-plan Community Eastmark Now Open In Mesa

Demand for industrially produced sapphire has rocketed since Apple began using the material to protect camera lenses in 2012, according to research firm IHS Suppli. The deal will help Apple secure control over a scarce resource.

“We are proud to expand our domestic manufacturing initiative with a new facility in Arizona, creating more than 2,000 jobs in engineering, manufacturing and construction,” Apple said in a statement. “This new plant will make components for Apple products and it will run on 100% renewable energy from day one.”

This is more great news for Arizona, and specifically the South East Valley. Just recently Intel announced plans to build a 5 Billion dollar facility in the South East Valley.

Effect On Housing

The continued investment from fortune 500 companies in Arizona shows great promise for continued growth in the housing market. As large tech companies complete these new facilities you can expect to see an influx of high paying jobs and employees looking for homes.

What do you think of Apples investment into the South East Bally? Let us know in the comment section below.

Homes Near The Gilbert Temple: When Should I Sell?

Local residents have been watching eagerly as Gilbert awaits the unavailing of its first LDS Temple. While there is no official date for the temple opening(on record the LDS Church states late 2013 or early 2014) Gilbert’s first Mormon temple has already been a huge success. How big of a success? The Mormon temple has no official opening date and is still months away from completion, yet over 40,000 people have stopped in the temples visitor center. If you have not noticed the visitor center when driving by, that is because the center is extremely easy to miss. The Gilbert LDS Temple visitor center was set up in a trailer in early 2012 and has been a hive of activity ever sense.

The increased attention has helped the area near the Gilbert Mormon Temple see large increases in housing value. This has lead many potential sellers to ask The Reeves Team when is the best time to sell a home located near The LDS Temple. The conventional wisdom says that once the Temple opens and excitement is at its peak that is the ideal time to put your house on the market. While the opening may be a great time to sell your home near The Gilbert Temple, it wont be the best. Here are a few reasons why.

Housing Inventory – Right now there is a shortage in houses in the South East Valley, that will not be the case in early 2014. Arizona has just dusted itself off from one of the largest housing recessions in decades. New build communities have been struggling to survive for the last 4 years, and they can finally see the light at the end of the tunnel. This is especially true in Gilbert near the Mormon Temple. Communities such as Adora Trails, Finisterra, and Freeman Farms are starting to spring up. The added inventory will slow the increases in housing value, and the competitive prices new build communities sell at will put downward pressure on area prices. While this is good for the overall health of the Real Estate market, it wont be good for existing home prices in the short term.

Interest Rates – Rates have been to low for a long time. Everyone loves it, but we also know it can’t stay that way for ever. Unfortunately interest rates are going to rise at least 2 times by years end. Consider the impact of an interest rate increase of 2 percent on a mortgage loan. If you borrow $175,000 for 30 years, your principal and interest payment will only be $835 per month (with a 4% fixed interest rate). Borrow $175,000 for 30 years at a 6% interest rate and your payment balloons to $1,049. That’s a 26 percent increase in your loan payment. So what does this mean to potential sellers? It means you will have less people that can afford to buy your house next year than can afford to buy it right now. This means less competition, which in turn means lower prices on your home. It doesn’t matter if your home is near The Gilbert Mormon Temple or not, an increase in interest rates has the potential to hurt the value of homes anywhere.

Herd mentality – This one is simple, if you are doing what everyone else is doing, your probably doing it wrong. The conventional wisdom says your home will be worth the most when the temple opens, it also says the same thing to everyone one else in your neighborhood that is considering selling their home. If your home goes on the market with 3 similar models at the same time your going to have the wrong kind of bidding war on your hand. You want to have the only home in your area like it, talk to The Reeves Team about the proper strategy when listing your home.

Its also important to consider buying a home is not a spur of the moment decision. The majority of potential buyers for your home are not going to decide they want to live there the second that The LDS Temple opens up. In fact many of them probably already know, or they may be considering it if they find that perfect house. Give The Reeves Team a call today, it would be our pleasure to discuss the best time to sell your East Valley Home.

The Scary Truth? Or A Real AZ Housing Recovery?

phoenix housing market recovery

Housing economists across the nation are watching the Phoenix housing market very, very closely right now for one reason: the truth. A recent cover story by Bloomberg Business Week paints a pretty optimistic picture, and yet on the flip side (pun intended) over at the Washington Post a very different picture is being portrayed. So what’s the truth? Is the Phoenix housing market truly turning around, or is it another inflating bubble that is getting ready to burst, again?

 

 

Bloomberg Businessweek

Bloomberg got A LOT of flack for a recent cover story featuring minorities with loads of cash in a new home. In fact, they received so much criticism they issued a formal apology, saying “our cover illustration last week got strong reactions, which we regret. Our intention was not to incite or offend. If we had to do it over again, we’d do it differently.”

 

Why was the cover so offensive, especially to Phoenix residents? According to the NYPost, all of the characters depicted in a cartoon house awash in money were drawn to look like minorities – implying that they were the ones expected to trigger the next (housing) bubble.

 

In the controversial Bloomberg article, Phoenix is painted as on the road to recovery, with job growth at 3% over the last year, almost twice as much as the national rate, and home prices going up because inventory is low. Phoenix home prices have increased 88% in the last three months of 2012, according to the National Association of Realtors, which could mean a Phoenix housing recovery.

 

The Bloomberg article goes on to point out that Phoenix was the epicenter of the housing crash, and could be the epicenter of the housing boom. From realtors to flippers and ‘boomerang buyers,  everyone had something to gain back in 2005 and something to gain today.

 

Sidebar: With that in mind, how do you know who to trust when selecting an Arizona real estate agent? According to the Bloomberg article, everyone is out to make money and nothing else. Back when things were goo before the housing crash, people quite their jobs to get into real estate simply for the money. Typically, that’s a great sign of a realtor’s intentions. Ask them how long they’ve been in the business and why they got into the business. You’ll find that there are very few Phoenix realtors as genuine and hard working as those on the Reeves Team.

 

The Washington Post

A recent article from The Washington Post deeply criticizes Bloomberg BusinessWeek for their cover story, calling it a ‘regrettable turn.’ The Washington Posts questions “whether this is a sustainable recovery or whether profit-minded developers, flippers, brokers and so forth could be blowing up another bubble waiting to pop.

 

Because job growth is still low and many homes are still empty, many economists see this growth as less sustainable “making it a poor bet to expect home prices to keep rising.”

 

Another aspect left out of the Bloomberg article is “how mortgage fraud, predatory lending and other abusive practices also fueled the original housing bubble and subsequent crisis….Arizona was among the states with the highest number of subprime mortgages – and the weakest anti-predatory lending laws.”

 

So, are those structural problems still in existence as we work towards a Phoenix housing recovery? Troy Reeves and the Reeves Team knows this market inside and out, and will take care of you like no other agent in Arizona. With more years of experience than can be counted, and a wealth of knowledge on the Arizona housing market, the Reeves Team will keep you protected and keep your best interests at heart. Give us a call today to get the truth about the Arizona housing market, and when you should buy, or sell!  480.892.1969

 

“by Troy Reeves” at Google

Gilbert End Of Summer Festival Is Canceled

For 18 Years, Gilbert AZ has said so long to the hot weather with its End Of Summer Fest. But this year the community swan to hot weather was a casualty of budget reductions. The seven-member Citizens Budget Committee, Community Services recommended it be eliminated.

Last year’s So Long to Summer Festival drew about 6,000 people who paid a $4 admission to listen to a live band, play carnival games, ride a kiddies train and participate in other activities in a festive atmosphere.

This comes on the heals of the controversy surrounding the Gilbert days parade. The event was all but cancelled until a few big name private sponsors kicked in money to save the event.

But Community Services Director Jim Norman said his department must begin to “reinvent” how festivities are organized in the face of reduced funding and staff.

“We’ll try not to be too dramatic with some of the events we’ve been involved in for the first year,” he said, noting the change would occur gradually.

Town Council at a special meeting May 1 directed Norman and his staff to work toward a 100 percent cost recovery for festivities over the next three to four years.

Council also eliminated $38,500 for special events in the coming fiscal year.

Norman said funds for Gilbert Days and Fourth of July, both organized by the Gilbert Promotional Corp., came out of this allocation.

But he noted that for the last two years, the Town Council has approved additional funding for both events.

“I would imagine the Council will do that again in the future but funding will then have to come from contingency instead of the Community Services budget,” he said.

The special events unit had three staffers coordinating events until one member was transferred recently to coordinate the sports coalition groups.

Although the transferred staff member did “double duty” for a while, Norman said he was able to test whether a two-member team could offer the same support as before.

“The two people had to work hard, but still we were able to do it,” he said.

With So Long to Summer Fest eliminated, it would be one less activity to work on for two staff members next year.

Gail Disch, a member of the Citizens Budget Committee, said Constitution Week also took place in September during the same time frame as the summer fest. A private group funds and organizes Constitution Week.

Although the summer fest is not the most popular town-organized festival – the Halloween carnival drew 8,000 last year – “it was a very popular event,” Disch said.

“Perhaps it was an event that a private group or promoter is interested in taking over and doing,” she added.

Josh Coplan Explains New FHA Flipping Rules On The Front Page Of East Valley Tribune

Josh Coplan Front Page East Valley TribuneA recent policy change by the U.S. Department of Housing and Urban Development is encouraging flipping to foster more sales of foreclosure homes.   This is a major shift in policy, as the regulations until now required a home to be on the market for 90 days before a home could be flipped.

“Flipping” Coplan said, ” is when a house is bought and quickly resold for a profit.”  “Foreclosed homes, typically damaged like the one [pictured] here, are being bought, fixed up, and resold for substantial profits.”

Until now there have been seasoning requirements that do not allow a property to be resold for 90 days on some loan types.  The FHA which is a large part of mortgage activity taking place is valley has suspended the 90 day seasoning requirements for 1 year starting February 1st.

Last Month, foreclosure activity was up 4 percent from the previous month in the Valley, over one in every 100 houses received a foreclosure filing during January.  Phoenix had the second highest foreclosure rate among metropolitan areas  according to the latest report from Realtytrac.

The Valley was the only metro area among the top 10 to post a month-overmonth increase in foreclosure activity.  The anti-flipping waiver isn’t the solution to the foreclosure crisis, but it’s a step in the right direction, said Jay Butler, associate professor of real estate in the W.P. Carey School of Business at Arizona State University.  The waiver includes numerous safeguards to prevent inflated pricing, such as if the price of the home is 20 percent over the previous sale, the seller has to justify that increase, he said.

Josh Coplan has been in Real Estate for 6 years and is Certified in Short Sales & Foreclosures Resources(SFR).  We congratulate Josh for making it to the front page of the East Valley Tribune, and also congratulate the Tribune for their excellent selection.

Gilbert Is Named Safest Community In Arizona

gilbert02In a study that analyzes trends for total crime, Gilbert was named the safest municipality in Arizona.  Gilbert has a population of 220,000 and was ranked 24th in the entire united states.

The good news continues to pile up this year for Gilbert. In the annual heads of households survey 97 percent expressed satisfaction with the town of Gilbert.  Also, 2009 showed a great deal of community involvement.  The Gilbert days parade was revived by its citizens after being canceled due to a lack of funding, also there was an uptick in participation at community events such as block parties and watch programs.

If you would like to learn more about Gilbert AZ please visit GilbertAZ.com

For questions concerning relocating to Gilbert please contact the Reeves Team.