Ted Simons: Good evening and welcome to "Arizona Horizon." I'm Ted Simons. The Maricopa County judge says Arizona's medical marijuana law is constitutional. Superiority court judge Michael Gordon ruled that Federal drug laws do not prohibit state officials from implementing Arizona's medical pot initiative. Today's ruling means that the state's first medical marijuana dispensary could open as early as this week in Glendale. The landholder’s organization is holding the fourth annual land and housing conference tomorrow at the downtown Phoenix Sheraton. It is titled fact or fiction, and we'll explore issues that affect Arizona's real estate industry, here to talk about those issues is Greg Vogel, the founder and CEO of the land advisor's organization. Valley real estate brokerage firm. And Mike Orr, the director for the center for real estate theory and practices ASU The future of the valley land and housing market, why that particular title?
Greg Vogel: Well, we originally established this conference for the idea of really looking at how the press is really viewing real estate, especially in 2008 and 2009. It was very frustrating to read headline after headline. The first conference we had was more of a positive outlook in the, of the future growth. As this recovery has taken really hold now, the question is, is it going to last, and we have seen really a, what we believe is a firm foundation for recovery for the balance of the decade. But, there is so many facts, many of which Mike Orr has studied heavily, things that we study heavily, that leave questions to be answered.
Ted Simons: As far as land is concerned, is the recovery back, and how long can it last.
Greg Vogel: As we look decade-by-decade, and we think about what recovery means, and what it means to whom, if you talk about Gilbert or Chandler or southeast valley related land and lots, it's beyond recovery. It's in a full run. If we look to other areas of the valley, further out areas, we're still seeing the recovery, and part of that is starting much of the way the southeast valley did.
Ted Simons: As far as real estate is concerned, would the median price be going up, and up again?
Mike Orr: They are going up again. We had a slight hesitation during the hot months of summer, which is quite normal, but this year has been fairly quiet, amazing for the increase in Phoenix home prices.
Ted Simons: I want to go back to the idea of fact and fiction. Has there been much fiction regarding housing in Phoenix?
Mike Orr: Well, I think it really goes back to 2008 and 2009. We had a terrible year in 2008 because the market was being flooded by bank-owned homes, but when prices stabilized in 2009, a lot of people refused to believe it. They thought, prices were just going to go way, way lower, and in fact, we had a bit of a bounce that year, although it did not really last very much in terms of an increase, it did not go down very much more, either. We, actually, have had a stable pricing from really April 2009 through to, to the middle of last year.
Ted Simons: But that stability, that stable pricing, that was pretty low compared to where we were.
Greg Vogel: It was quite fall from 180 or so a square foot on the retail side, new homes have fallen not as much. And that's a factor as it relates to just the cost of production. What's it worth to build home. So, the new housing didn't fall as much as the resale, but also the activity in terms of its share of the market fell to nil.
Ted Simons: As far as new home sales are concerned, though, those are up big-time.
Mike Orr: Yes. The October numbers were about 85% higher than the previous October last year, which is impressive, but it is from low numbers, last year was quiet.
Mike Orr: The new home Production is, is really accelerating now.
Ted Simons: Why do you think that's happening?
Mike Orr: Well, there is still a lot of demand for houses, even at the higher prices, we have got more buyers than have sellers, that's pushing people to look for new homes. It's competitive out there if you are trying to buy resale home, and if you go to look for new home, at least you know you can get it, if you can get the funding.
Ted Simons: Talk about new home prices, new home sales, and what that means to land, what that means to developers trying tore buy upland.
Greg Vogel: Well, sure. And I think one of the things that relates to this demand for new homes and why, keep in mind, in 2008 and 2009, there was direct competition with that 2006 speck home that was all, all done up with all the upgrades. And now, we are six years later, that home has been rented or sold twice, and we're really dealing with a different environment. So, the new homes have lots of new features, and they have much more economy to them as it relates to the, the green side of things, the net zero homes, the technology, the floor plans, and bright and shiny, but the other factor is how easy is it to buy home today, and if you go to new home subdivision, there is lots of help there in terms of getting financing. You are not competing with investors. There is a lot of stability in that new neighborhood, versus buying within a neighborhood that lab full of resales and rentals.
Ted Simons: As far as housing in general, talk about that. The ability to buy home now as compared to couple of years ago.
Mike Orr: Well, credit standards are pretty high. People are still in the process of repairing their credit, but we are starting to see people come back into the market, and that's actually a significant source of new buyers now.
Ted Simons: As far as foreclosure starts and completions, what are we seeing in there?
Mike Orr: They are down, and they are still headed downwards, no sort of real surprises there, drifting down to going back to normal levels, I think, by the time we get through next year.
Greg Vogel: And also finish answering your question as it relates to price, we had a low of 185,000 in 2009. It's now up to 260. So, the mix is also changing in terms of the areas which hems are being sold. Keep in mind, in 2009, 2008, we were selling, still, the remaining wreckage, the inventory of surplus new homes. We are out of any surplus of new homes. We're at a low in terms of that stock, and also the mix-up of where the homes are selling in terms 69 hot area being the southeast valley, the northwest valley. That mix is about to change.
Ted Simons: I think that people would be surprised because we kept hearing place like Maricopa and other areas where there was street after street of empty homes. And you are saying that does not exist anymore.
Greg Vogel: It does exist. The absorption of homes to date has been slow. The number of active builders in Maricopa dropped from almost every builder in town was down there, and that was by the dozen back in 2005 and 2006. It dropped less than half a dozen builders being active. Recently, though, there's been new purchases of lots in Maricopa, and it really has to do with supply, and supply of lots have dwindling dramatically in what these initial preferred quadrants was. And that's going to disperse growth. Much differently than occurred over the past three years.
Ted Simons: Are you saying that as far as where the dispersement of growth, are you seeing people moving to certain areas, buying resale homes in certain areas? We always hear that no one wants to live far away because of the gas prices, is that showing up on the numbers?
Mike Orr: It depends on how much cheaper they can get a home, you know. People will drive further if you can really get much nicer home for the same amount of money, so, they are constantly evaluating that.
Ted Simons: And as bottom line regarding supply of homes, up? Considerably?
Mike Orr: Well, we hit a low point at the beginning June. It generally rises most years, as we head to Thanksgiving and it falls off again, and this year we have had bit more significant increase.
Mike Orr: When the prices go up, sellers get more enthusiastic, and buyers lose bit of enthusiasm so that's been happening over the last few months.
Ted Simons: But we have seen enthusiasm from buyers, at least until the last few months?
Mike Orr: Well, they are still enthusiastic. One or two of the investors saying, ok, Phoenix is too expensive, let's go and find somewhere cheaper. But, there is still plenty of buyers, what I am now seeing is the sellers are coming out to meet them, and it's getting a bit more balanced.
Ted Simons: Real quickly regarding investors, still heavy, a big influence on the market. Is it a healthy influence on the market?
Mike Orr: It's been an influence that's stabilized the market. If there was none, there would nobody buyers but we have ordinary people buying. I kind of wish that the investors would quiet down a bit and let the owner copy --
Mike Orr: Pick up the slack.
Ted Simons: You mentioned new homes, people were looking for, developers building a different type of home, more ecologically, environmentally sensitive. Floor plans, what's changed? If you were looking for home five years ago and you are looking if new one now, how are they different?
Greg Vogel: A few things, one is the next jen home when you might have heard quite a bit about, and this idea of multiple generations residing in the same house, which hasn't been terribly common in America. It came common in the downturn. Especially with the sandwich generation of children and parents coming back home. That's big new idea. The other is a more open floor plan for sure. And clearly we are seeing more innovative housing, and you are about to see more things that relate to the smaller lots that became dysfunctional during the downturn. They are coming back with new and innovative design. So, that's relatively exciting of course especially for parts of the southeast valley. That's going to start, but that will spread surely to new and other areas.
Ted Simons: All right. Good stuff, interesting information. Good to have you here, thanks for joining us.
Both: Thank you.