By: Elliott Pollack, The Monday Morning Quarterback

Investor Impact on Housing Prices

Fortune magazine had an interesting story this week on the impact of investors in the single family home market. They attribute a good portion of the run up in housing prices to the boom of investor buyers. In the first quarter of 2022, investors made up a record 28% of single-family home sales across the U.S., according to a report published last week by the Harvard Joint Center for Housing Studies. That’s up from 19% in the first quarter of 2021. It’s also far above the 16% of investor home sales between 2017and 2019.

Investors focused much of their attention on the fast-growing markets in the South and West of the U.S. Redfin found that in the first quarter of 2022, investors made up a 33.1% of home sales in Atlanta followed by Jacksonville (32.3%), Charlotte (32.3%), Phoenix (29.0%), and Miami (28.2%). Those same markets are also among the nation’s most “overvalued” housing markets that are at-risk of seeing a home price decline, according to Moody’s Analytics.

The majority of investor home purchases in America are made by small or midsized investors who may be purchasing an Airbnb rental or amassing a small portfolio of rentals. According to the Harvard study, 74% of investor purchases in September were made by investors with portfolios of less than 100 properties. The remaining 26% of investor purchases were made by groups with property portfolios of at least 100 units. But those large investors nearly doubled their share of purchases from 14% in September 2020 to 26% in September 2021. Blackstone and Invitation Homes were two of the largest investors in the market.

While you can’t pin soaring home prices on any one group, investors have clearly contributed in some degree in the price runup. In most cases they come in with cash offers and waive appraisals and inspections. Investors have reduced the already limited supply available to potential owner-occupants, particularly first-time and moderate-income buyers.

shortage of housing, however, in the U.S. and in Greater Phoenix is due to several factors that all coincided at the same time. Low mortgage rates resulting from the COVID-19 recession attracted all types of buyers and allowed people who could work remotely to relocate to less dense, less expensive markets. The second home market also exploded due to COVID restrictions. Millennials born during the generation’s five largest birth years between 1989 and 1993 also hit their peak first-time homebuying age of 30. Add in investors who are able to rent to the local population and a housing inventory that was already trending downward before the pandemic and you have a recipe for a housing shortage.

Investor home purchases are now falling for the same reason overall home purchases are falling – rising interest rates and high housing prices have made it more expensive to buy a home. As demand softens, prices should adjust which changes the math for some investors who anticipated continued appreciation in the market and for-sale inventory should continue to rise from historic lows. More news on the Arizona housing market is below.

U.S. Snapshot:

• The Consumer Sentiment Index final June reading of 50 fell an additional 0.2% from a preliminary level earlier this month. June’s level is the lowest reading on record. 47% of respondents blame inflation for lowering living standards.
• Mortgage rates increased again this week. The 30-year mortgage rate reached 5.81% from 5.78%. Last week’s level was up more than 2% from the start of the year.
• New home sales surprisingly increased 10.7% in May from April, as potential buyers continue to face elevated prices and borrowing costs.
• Total existing sales dropped for the fourth consecutive month to a seasonally adjusted annual rate of 5.41 million. While this is down 8.6% from a year ago, the number of sales has returned to 2019 levels. On the other hand, the median sales price of all existing sales surpassed $400,000 for the first time and reached $407,600 in May. Single family sales dropped 7.7% to a SAAR of 4.8 million and the median sales price increased to 14.6% to $414,200.

Arizona Snapshot:

• RLBrownReports.com released their May data for Greater Phoenix and Greater Tucson. The data will be interesting when June’s data becomes available. The 30-year mortgage rate in the first week of January was 3.22% and averaged 5.23% in May. After the Fed’s effort to fight inflation, the 30-year mortgage reached 5.81% last week, sidelining even more potential buyers. While the supply of existing homes has started to improve, it remains below pre-pandemic levels. The lack of supply is especially noticeable for homes below $400,000.
• Greater Phoenix permits (-7.8%), resales (-5.5%) and new home (-2.6%) sales were down in May from a year ago. Median sales price of new homes was up 24.9% and resales price were up 23.7% for the same time period.
• In Greater Tucson, sales activity was up 3.4% in the resale market, with a 16% increase in new home closings. Permits were done 18.2% from a year earlier.

PHOENIX, ARIZ.– Encore Landscape Management was recently named as one of the 2022 Best Landscape and Lawn Care Companies to Work For. This inaugural awards program was created in 2022 and is a project of Lawn & Landscape magazine and Best Companies Group.

This survey and awards program was designed to identify, recognize, and honor the best places of employment, benefiting the industry’s economy, its workforce, and businesses. The 2022 Best Landscape and Lawn Care Companies to Work For list comprises 15 companies.

“Our culture is everything,” said Mike DiFabbio, Co-Owner of Encore Landscape Management. “When we started the company, we locked ourselves in a room for a couple days to hammer out our vision and values and determine what was important to us. The environment that we provide for our employees was a common theme we kept coming back to.

“We’d all been a part of some good companies in the past, but we knew we could create something really special for our employees at Encore. So, to be recognized for that and to be voted as a top place to work in our industry is truly an honor,” DiFabbio said.

Encore Landscape Management will be recognized in the June edition of Lawn & Landscape where the rankings will be revealed for the first time along with profiles of each winning company.

“Encore is intentional about creating an environment in which our employees feel good and are absolutely valued. We work hard and play hard, and it’s an honor to be recognized for the workplace we’ve created,” said Co-Owner Juan Hernandez.

To be considered for participation, companies had to fulfill the following eligibility requirements:

• Have 50% or more of revenue coming from landscaping services, which includes maintenance, chemical lawn care, irrigation, design/build, hardscapes, tree care and interior landscaping, landscape lighting;
• Be a publicly or privately held business;
• Be a for-profit or not-for-profit business;
• Be based in the U.S. or Canada;
• Have a minimum of 15 full-time or part-time employees working in the U.S. or Canada;
• Must be in business a minimum of 1 year.

“These companies exemplify the professionalism and excellence that the industry can provide,” said Brian Horn, Editor of Lawn & Landscape magazine. “Lawn & Landscape is proud to acknowledge these businesses and tell some of their stories.”

Companies in the industry entered the two-part process to determine the Best Landscape and Lawn Care Companies to Work For. The first part consisted of evaluating each nominated company’s workplace policies, practices, and demographics. This part of the process was worth approximately 25% of the total evaluation.

The second part consisted of an employee survey to measure the employee experience. This part of the process was worth approximately 75% of the total evaluation. The combined scores determined the top companies and the final rankings. Best Companies Group managed the overall registration and survey process and also analyzed the data and used their expertise to determine the final rankings.

For more information about Encore Landscape Management visit encorelm.com

77-acre land buy paves way for new Class A, four-building $260 million industrial development

TUCSON, Arizona – LPC Desert West, the Southwest division of Dallas-based Lincoln Property Co., has announced it will develop a more than 1 million-square-foot, Class A industrial development in the Tucson, Arizona airport submarket, highlighting the rising relevance of Tucson as a strategic industrial location.

According to public records, the land was acquired for $6.5 million from an affiliate of Diamond Ventures of Tucson.

Plans for I-10 International include four warehouse/distribution buildings totaling 476,000 square feet, 214,882 square feet, 188,327 square feet and 158,908 square feet, located on 77 acres just minutes from both Interstate 10 and Tucson International Airport. All buildings will be state-of-the-art cold storage capable with other features including 32’- 36’ clear height, 14’ tall glass entrances, full concrete truck courts and an R-38 insulated roof deck system.

Like all new LPC Arizona industrial developments, I-10 International will follow a “creative industrial” vision, incorporating lifestyle amenities unique to the industrial sector and designed to increase employee health, comfort and efficiency. These include touchless technology, generous use of clerestory windows to let in abundant natural light and a best-in-class outdoor amenity space to include landscaped areas for outdoor seating and relaxing.

“This site has tremendous location advantages, being proximate to I-10, I-19 and Tucson International Airport, with direct connection to major ports and cities in the U.S. and Mexico,” said Lincoln Property Company Vice President Doug Klocke. “We have designed I-10 International to operate efficiently, to provide added comfort for employees, and to  take full advantage of this location, which includes the ability to distribute product to 46 million people within a 500-mile radius.”

“We are taking an incredible step today,” said Tucson Mayor Regina Romero. “I-10 International will help meet pent-up demand so Tucson can attract more Class A industrial park tenants. By adopting the Airpark 10 annexation ordinance we are acting swiftly to enable 1 million square feet of much-needed warehouse and distribution space.”

I-10 International is located at the southeast corner of Alvernon Way and Los Reales Road, two miles from a full-diamond interchange at I-10 and Valencia Road and directly northwest of Tucson International Airport. It sits within a Foreign Trade Zone and a world-class e-commerce market that is home to companies like Amazon, Home Goods, Pepsi, FedEx, DHL, Intuit and Raytheon.

LPC purchased the I-10 International land site from Tucson-based real estate development and investment company Diamond Ventures. Keri Lazarus Silvyn, Esq. served as entitlement counsel for LPC.

“It was a pleasure working with Lincoln Property Company and Tucson leadership to complete this transaction,” said Diamond Ventures CFO Bill Kelley. “I-10 International will bring great economic and employment advantages to Tucson, and marks what we hope will be the start of a long relationship with LPC and more deals in the future.”

Construction on I-10 International is scheduled to begin Q2 2022 and complete Q2 2023. The project will be built in two phases, with Phase I including the 192,600-square-foot, 176,000-square-foot and 142,000-square-foot buildings, and Phase II including the 476,000-square-foot, cross-dock building. Butler Design Group and Ware Malcomb are the project’s architects, along with Rick Engineering as the civil engineer. A general contractor has not yet been selected.

To discuss leasing, investment or property management opportunities with Lincoln Property Company in the Desert West region, please call David Krumwiede or John Orsak at (602) 912-8888.

To learn more, see RED Comp #9948.