Question: Our real estate market has gone through several cycles of highs and lows in the last few decades. The most recent high proved to be a bubble from whose bursting we are still recovering. What steps can we take to avoid building another bubble in the real estate market?
Walt Danley Realty
Sector: Real Estate
As the real estate recovery continues, it is expected that we have learned from the mistakes of previous years and are trying to avoid another bubble — only so that we don’t have to suffer when the bubble pops! Although my firm specializes primarily in Arizona’s luxury market, the health of the entire market is vital for the success of luxury and we keep a watchful eye on market-wide trends.
While the luxury market has seen only moderate gains, the lower-priced home segment has seen incredible growth over the past year. This bubble, if there is one, is being driven by investors paying cash who feel prices for income properties can’t get any lower. Also note that tougher loan requirements mean relatively fewer people are borrowing than in our last bubble. Cash buyers and tougher loan rules forced a lot more equity into housing, so the value in real estate is real — not just on paper. Continuing to make “good” loans and keeping equity in housing will prevent another bubble from popping.
Walt Danley has been one of the most productive and respected Realtors in the Valley of the Sun’s dynamic luxury home market for more than 35 years. Danley consistently ranks in the Wall Street Journal’s lists of top agents, and he has been selected as “Broker/Agent of the Year” by his peers on multiple occasions. He is a dedicated supporter of the Humane Society and American Heart Association, among others.
Mary Lou Paulk
President and County Manager
Fidelity National Title Agency of Arizona
Sector: Title Insurance
Prevention of another housing bubble is directly reliant upon those factors which caused the event: over-appreciation, appraisals and requirements for mortgage applications to fund home purchases.
Since the downturn in our market, the appraisal process and lending requirements have undergone strict scrutiny and those requirements necessary to obtain financing and establish property values have been re-evaluated and re-set. Although we have seen a steady increase in home prices, they are not rising aggressively, primarily due to the old-fashioned concept of supply and demand. In 2012, more than 30 percent of our inventory was purchased by investors with “buy and hold” strategies of 15+ years. The Arizona market has experienced one of the quickest recoveries in the nation, largely attributable to the joint efforts of the real estate community, lenders and the support network of title companies, appraisal services, home warranty companies and others.
The necessary steps required to prevent a bubble are established and will be the cornerstones of the future success and continued growth of a healthy and vibrant real estate market in Arizona.
Mary Lou Paulk is president and county manager of Fidelity National Title Agency of Arizona. A native of Phoenix, she has been in the title industry since 1976. Fidelity National Title is a member of the Fidelity National Financial, Inc. family of title companies, which collectively represent the largest title insurance and escrow services company in the world.
While the homebuilding industry has the opportunity to once again participate in an expanding and thriving economy, we must first recognize we’re no longer the primary driver of the local economy. It is incumbent upon homebuilders to support a diverse economy that weathers all market cycles and to responsibly embrace Arizona’s economic recovery.
As we move forward, homebuilding can play a new role in Arizona’s economic success. To promote and sustain a healthy economy, homebuilding today can strike a responsible tone — one that places an emphasis on smart design, energy efficiency and supporting local subcontractors and vendors. For example, building 100 average single-family homes creates 305 jobs and generates more than $23 million in wage and business income, as well as $8.9 million in taxes and revenue for state, local and federal governments.
As one of the state’s leading homebuilders over the past 20 years, Maracay Homes is responding to market conditions by demonstrating confidence in the Arizona marketplace. It’s why we plan to open 13 new communities throughout Phoenix and Tucson in 2013.
Andy Warren has served as president of Maracay Homes, the Arizona subsidiary of the Weyerhaeuser Real Estate Company, since the spring of 2009. He currently serves on the boards of directors with the Homebuilder’s Association of Central Arizona and Greater Phoenix Leadership and as an executive committee board member with the Greater Phoenix Economic Council.