Sherrie’s September Real Estate News

September 2018 Newsletter
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September 2018

New home buyers will pay for Arizona’s construction worker shortage

Cash offers for skilled workers

Valley home builders have been talking about the shortage of skilled labor needed to keep up with the rising demand from buyers for a couple of years.

Contractors will often offer painters, framers and drywallers working in new Mesa, Gilbert, San Tan Valley, Surprise and Buckeye subdivisions cash bonuses to leave their competition and come work for them the next day.

About 50 percent of Valley contractors reported in the survey that they are losing workers to other builders.

And about 68 percent of Arizona builders think the shortage of construction workers will get worse this year.

Building boom

Metro Phoenix’s apartment building boom is drawing more of the construction industry’s skilled workers. And that new development spree isn’t expected to slow during the next year.

About 23,500 new Valley houses are expected to go up this year, according to Belfiore Real Estate Consulting. That’s the most since 2008.

In 2019, Jim Belfiore is forecasting 25,400 new metro Phoenix houses will be built, and then 26,000 in both 2020 and 2021.

That’s still half the pace of metro Phoenix home building during 2005 and 2006. But many of the 250,000-plus construction workers who lost their jobs during the crash have left Arizona or the industry.

Higher wages, prices

With the Valley’s low unemployment rate of 4.1 percent, it’s not hard to see why a former or potentially new construction worker might opt for an inside job instead of spending the day outside in the summer heat.

Arizona housing analyst RL Brown said labor costs are up and will continue to rise because of the shortage of workers.

Higher labor costs mean higher new home prices.

Belfiore is forecasting new home prices in the Phoenix area will climb five to seven percent this year and four to six percent next year.

Catherine Reagor, Arizona Republic

There is so much to know when considering new home construction. Be sure to watch this video and pair up with an agent who can educate you through the process.
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Forget HGTV: These Are the Surprising New Hottest Markets for Home Flipping

As prices spike in white-hot housing markets such as California and New York, many home flippers are abandoning the ridiculously expensive coasts and heading for more profitable pastures—down South.

These intrepid real estate investors are seeing the biggest returns on their investments in Louisiana, according to a recent report from real estate data firm ATTOM Data Solutions. The company analyzed sales deed data in the second quarter of the year to come up with its quarterly ranking. Only properties that were sold twice within a 12-month period were included.

“The Southeast in general is a hot spot for flipping, as well as some parts of the Rust Belt,” says Daren Blomquist, senior vice president at ATTOM. “There are still deals to be had in those markets.”

That’s appealing to flippers who are seeing their profits squeezed by high home prices, which are continuing to soar. Returns are down to their lowest point in nearly four years, falling from a high of 50% in the second quarter of last year to 44.3% in the second quarter of this year. (Returns are the difference between the purchase and sale price of a home. They don’t take into account the cost of labor and construction materials for the rehab.)

Flippers made an average $65,520 in the second quarter of this year—a 5.7% drop from the previous quarter, according to ATTOM.

“The market is so hot that even homes that need a lot of work are selling close to market value, which leaves home flippers with less ability to make a profit,” Blomquist says.

Where home flippers are making the most dough

So why is flipping in Louisiana so lucrative, with returns of about 102.5%?

“The floods in the Baton Rouge [and Lafayette areas] in 2016 damaged a lot of homes” in Louisiana, Blomquist says. “It’s a little morbid, but it’s an opportunity for home flippers to come in and buy those damaged homes, fix them up and resell them.”

Many flippers down there are scooping up single-family homes on the cheap, rehabbing them and selling them to other investors who are renting them out.

Louisiana was followed by Pennsylvania, at 100.3%; Ohio, at 81.4%; Maryland, at 76.1%; and Tennessee, at 74.9%.

Meanwhile, flippers made the biggest bucks in ZIP code 35211 in Birmingham, AL, where the returns on investment were 352.4%; 63118 in St. Louis, MO, at 351.6%; 37344 in Fayetteville, TN, at 323.7%; 19144 in Philadelphia, at 294.1%; and 07017 in East Orange, NJ, at 273.1%. ATTOM looked at 1,451 ZIP codes with at least 10 flips in the second quarter of the year.

“Investors got priced out of Atlanta and said, ‘Where is there a good market fairly close by that we can invest in?'” Blomquist says. “And Birmingham became the beneficiary of that.”

Where homes are being flipped the most

Flippers may be making the some of the highest returns below the Mason-Dixon Line, but that doesn’t mean all of the flippers have moved south. The highest flipping rates (that is, the areas where the highest percentage of total home sales are flips) were in Washington, DC, at 8.3%. The nation’s capital was followed by Nevada, at 7.4%; Tennessee, at 7.2;Arizona, at 6.7% and Maryland, at 6.5%.

On a ZIP code level, the highest home-flipping rates were in 11950 in the Long Island, NY, city of Mastic, at 35.3%; 78537 in Donna, TX (near McAllen, TX), at 32.3%; 11717 in the Long Island city of Brentwood, NY, at 28.2%; 35214 in Birmingham, AL, at 27.4%; and 38109 in Memphis, TN, at 27.2%.

Clare Trapasso |

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