For the most part, planning a city’s future is hardly a gripping experience.
But in Scottsdale, such a plan will play a huge role in determining how the suburban city evolves until it can grow no more.
Should Scottsdale maintain its small-town feel? Or is it destined to boast a bigger-city vibe?
Those and other questions reigned in recent discussions about the city’s General Plan, which will lay the groundwork for advancement as the city nears build-out, when there is no land left to develop.
Last week, a report laid the framework for what will become the plan’s visioning statement and community values — the meat and potatoes of how Scottsdale sees itself.
About 100 people met in town-hall panels recently to discuss the city’s future, resulting in the five-page report that drew remarks at an open house last week.
Comments ranged from protection of neighborhoods to the McDowell Sonoran Preserve, future urbanization and change in general.
While this is only the beginning of a lengthy process to craft a General Plan, residents have aired differing views on how to get there.
“Change for the sake of change is not necessarily good,” said John Washington, a town-hall panelist who ran for Scottsdale mayor in 2012. “Change without thoughts and historical perspective is absolutely bad, almost without exception.”
But Ace Bailey, also a participant in the sessions, said there is no “if” in change.
“Change is going to be inevitable,” she said. “How we’re going to change I think is what is really important.”
Bailey said Scottsdale will “stagnate and die” if it does not embrace change, acknowledging that it must be “well-done and smart.”
The report, as it reads now, says Scottsdale is “a sophisticated city with a small-town feel,” while its vision emphasizes its “rich Southwestern history, where the past is celebrated.” Later it says Scottsdale will be an “active, globally interconnected and multigenerational city.”
To panelist Howard Myers, the questions on the minds of many residents is, where is Scottsdale going?
“Are we going to be a big metropolis like Chicago?” he asked. “Or are we going to be what everyone who comes visits here and likes, which is the small-town feel that Scottsdale has?”
Currently the vision says Scottsdale “will preserve, protect and enhance neighborhoods.”
But Jim Haxby, a resident, said that “can mean just anything.”
Former City Council candidate Chris Schaffner said residents should decide whether they want to protect or revitalize their neighborhoods. He asked for language in the vision “to allow the public to have direct impact on the decisions that will affect them.”
Louise Lamb said her subdivision, Peaceful Valley in south Scottsdale, is close to the city’s Downtown Infill-Incentive District and plan, which allows property owners downtown to request amended development standards, such as increased height and density.
Lamb said the current plan allows for some gradual decrease in height from commercial buildings, to residential areas.
“I’d like to make sure there is a gradual decrease from infill incentive down to neighboring subdivisions,” she said.
Report not ‘perfect’
The preserve, cited several times in the report, is poised to grow to 34,400 acres someday.
Michael Mayer, a preserve advocate, said the vision should reflect that voters, not the city, created the preserve and have the responsibility to make changes affecting it, rather than the City Council.
Several people said the report should be less repetitive.
“Is this report perfect? Of course not,” said Azim Hameed, a town-hall participant. “But my perspective is it’s a tool to get to the end result, which will be something we can vote on and hopefully pass.”
Mark Stuart, a community activist, said “so much of the language is not relevant to what a city does and what a community does,” such as remarks about education.
While it may not be as concise as some would like, “the beauty of it is, it is going to continue to evolve,” said panelist Suzanne Paetzer.
The General Plan could go before voters in November 2014.
Archive for the 'Commercial Real Estate' Category
For the most part, planning a city’s future is hardly a gripping experience.
The developer who invented the concept of upscale living around world-class golf courses in Scottsdale three decades ago is now building on one of the last residential parcels in the northeast Valley city.
Lyle Anderson plans to build 250 custom homes and a resort on 223 acres next to the Golf Club Scottsdale. Plans for the community, called Sierra Reserve, began to take shape at the height of the housing boom and have evolved in the years since. The community at Dynamite Road and 118th Street is Anderson’s smallest development so far, and his first since 2008.
In November of that year, his longtime lender, the Bank of Scotland, ran into financial problems and took control of four of Anderson’s largest developments, including Superstition Mountain in Apache Junction. It’s taken some time for Anderson to weather the storm, but he is back on familiar ground.
Sierra Reserve is located between his first desert-style golf course community, the 860-acre Desert Highlands, and the 8,000-acre Desert Mountain, with its six Jack Nicklaus-designed golf courses.
Sierra Reserve backs up to the McDowell Sonoran Preserve on land that has recovered from damage in the 23,000-acre Rio fire in 1996. He describes the project as a culmination of everything he has learned in his 30-plus-year career of building custom homes and upscale planned communities in resort destinations from Hawaii to Scotland.
Anderson, who is 70, also said Sierra Reserve is not his last project.
A different approach
The custom-home process will be much different at Sierra Reserve, with more guidance and direction for buyers, Anderson said.
“Sierra Reserve will be the culmination of decades of learning what high-end homebuyers want,” said Anderson, who has owned the parcel since 2006. “We have been waiting for the right time to launch this project and have spent a lot of time doing our homework.”
Unlike at most other high-end residential developments, buyers won’t start with a blank slate. They’ll choose from 19 custom designs for single-family houses ranging from 3,000 to 6,100 square feet and costing $1.5 million to $2.5 million. Lots will range from 1/3 acre to 1/2 acre.
“We can promise buyers they can move in within seven to nine months, and they don’t have to worry about managing the process from thousands of miles away, cost overruns or the tile they picked not being in stock,” Anderson said. “I wouldn’t build my own custom home without the people I have around me now. It would make me crazy.”
A quiet period
Anderson is relishing the challenge of the new project as the housing market rebounds.
“During the downturn, everyone had to take a pause,” he said. “I never went into a financial abyss. I weathered the storm like others. I just wasn’t public about it.”
Anderson said he settled with the Bank of Scotland and sold his stakes in Superstition Mountain as well as in Hokuli’a on the island of Hawaii, Loch Lomond in Scotland and Las Campanas in Santa Fe.
“All the projects went forward and were completed, except Hokuli’a, which I am still involved in,” he said.
Anderson has always has a prominent group of investors. In the past, he partnered on projects with Texas’ Bass Brothers, Mobil Corp., Japan Airlines and Scottsdale-based DMB.
“Lyle Anderson is a pioneer in the development of golf communities set in extraordinary locations,” said Charley Freericks, president of DMB, which is developing Silverleaf and DC Ranch in north Scottsdale.
“To have Lyle returning to north Scottsdale, to his roots, and exploring a new format of desert community, is great news for Scottsdale and for the industry.”
Desert Highlands opened in the early 1980s and attracted many golfers and homeowners. It was considered one of the first high-end desert communities, meaning the development used the natural terrain and added little grass.
Anderson wanted to repeat his success in the desert but on a grander scale and bought the land for Desert Mountain for $45 million in 1985. He also brought the the PGA Seniors golf tournament, The Tradition, to the community.
In 1993, golfer and course designer Tom Weiskopf approached him about Loch Lomond. The golf club is built near Glasgow on 650 acres in the Scottish highlands that had been owned by an ancient Scottish clan for more than 800 years.
The first developer of Loch Lomond lost it to the Bank of Scotland. At Weiskopf’s urging, Anderson and investors that included DMB stepped in.
Anderson bought land near Apache Junction in the late 1980s and held onto it because of its views of the Superstition Mountains. In the mid-1990s, he launched Superstition Mountain on the site.
In the late 1990s, he began building Las Campanas in Santa Fe with two Jack Nicklaus-designed golf courses. The 1,550-acre Hokuli’a was tied up in litigation from 2000 to 2006, and Anderson couldn’t go forward with its development. He won the zoning lawsuit shortly before his lender ran into financial problems.
No golf course planned
Unlike Anderson’s past developments, Sierra Reserve won’t include a golf course. But it is next to the Golf Club Scottsdale. Homebuyers will be able to purchase a membership there for $25,000 to $50,000.
In Sierra Reserve, Anderson is making a 15,000-square-foot villa the central attraction , with amenities that include a spa, tennis courts, a lap pool, a cantina and a resident dining room with catering staff.
“People buy custom homes on 3-acre lots and think they want the solitude,” said Anderson. “But after a few years, many realize they want to be around people and be able to walk to places where they can socialize and exercise.”
One of Anderson’s investors in Sierra Reserve, Chuck Dubroff, bought a home in Desert Mountain 20 years ago.
“People want to move to Scottsdale, but they don’t have a lot of choice where they can buy a new home,” he said. “Lyle has always set the bar with his developments. I think its the right time for Sierra Reserve and buyers will come.”
He said to build a golf course at Sierra Reserve would cost an additional $60 million.
Construction on the community’s sales center and other early amenities is scheduled to start within a month.
The partners are also planning a eco-resort with up to 100 rooms. It will be on the north end of the site, backing the golf course. Anderson said the resort’s development is still in the planning stages, and so far the group isn’t looking for a hotel brand for it.
“Sierra Reserve is smaller, but it’s not easier to develop,” Anderson said. “We are trying to build a community with homes that will draw high-end buyers from other parts of the Valley, the country and the world.”
Sixty years ago, George “Doc” Cavalliere purchased more than 40 acres of raw desert east of Pinnacle Peak, in an area that is now part of north Scottsdale.
He and his wife ran the famous Reata Pass Steakhouse on the property until 1975, when they leased it to another operator.
At that time, Cavalliere decided to convert a nearby bunkhouse into a hideaway for friends.
Fast-forward 40 years, and Greasewood Flat is considered one of the last bastions of the Old West in Scottsdale.
Rusty equipment and farm wagons cover the sprawling grounds that draw a lively mix of bargoers and bikers to the bunkhouse turned saloon.
Cavalliere died in 2009 at age 92, passing on the businesses to his grandsons: Jacob, Justin and Joshua Johnson.
The property, southeast of Alma School Parkway and Pinnacle Vista Drive, has been on the market in large part because the family faces a hefty estate tax from the inheritance.
With the property up for sale, the Sonoran Desert next to Greasewood has become a prime target for housing, posing a threat to the acres that have been in the family for decades, said Hoyt Johnson III, whose three sons own the businesses.
At least one option has surfaced that may save the land.
Scottsdale City Councilman Guy Phillips has suggested the city purchase the 42 acres, including Greasewood and Reata Pass, and convert a portion of the nearby land into tourist attractions, including a desert discovery center.
Supporters say Phillips’ vision could keep Greasewood open while protecting much of the desert from suburban sprawl.
Many options for desert land
On a recent Sunday, Hoyt Johnson toured the flat, cactus-studded grounds ripe with saguaros and greasewoods. Nearby, the sounds of folk music emanated from the outdoor saloon.
“We plan to be here for a long long time, if there’s a way for us to do that,” Johnson said later, noting that Greasewood isn’t likely to close soon.
Right now, there is a good chance that a developer could build homes on the desert property, Johnson said, noting he is “very, very open” to discussing a land sale with Scottsdale.
Phillips, a Scottsdale councilman since January, said he was seeking signs of support.
Scottsdale has already planned a desert discovery center at the city’s Gateway trailhead into the McDowell Sonoran Preserve, near Bell Road and Thompson Peak Parkway.
As proposed, the $74 million project would be a museum and educational hub for visitors to experience the Sonoran Desert without having to set foot in the wilderness.
There is one problem: The site falls within the boundaries of the city’s preserve, drawing complaints from activists who fear its negative impact on the natural desert.
Phillips proposed the Greasewood/Reata Pass site as an alternative, noting that there are “many options” to build a discovery center and an amphitheater, or refurbish the old Reata Pass steakhouse, which has closed.
Dan Worth, Scottsdale’s interim city manager, called the proposal a “fascinating idea” but declined to comment further unless he received direction from the city’s elected officials.
Scottsdale officials did contact the seller to find out the property’s asking price — $21 million — and looked at comparable sales, he said.
Money remains a key hurdle
The biggest problem is money. Scottsdale, in the wake of the recession, lacks funding to cover even basic projects. Later this month, City Council members will decide whether to put a bond election on the November ballot, which would ask voters to raise their property taxes to bankroll new projects.
Phillips said Scottsdale could include the 42-acre land purchase in the bond package. In the meantime, “the city would have to come up with $1million to have them hold the property,” he said.
Scottsdale City Councilman Bob Littlefield was aware of Phillips’ proposal but expressed doubt that voters would support a tax increase. He suggested that Scottsdale use revenue from its bed tax, adding that the project could generate crucial tourism dollars for the city.
“If Guy or the city can come up with a way to buy that land with bed-tax money at a reasonable price and would turn into some tourism or revenue-generating thing, that’s exactly what we need, instead of more apartment development,” Littlefield said.
James Heitel, chairman of the city’s McDowell Sonoran Preserve Commission, said one of the ongoing issues is the discovery center’s location in the preserve.
Scottsdale has an ordinance that bans certain “uses” of the land, including the sale of food and beverages, which doesn’t mesh with plans for a restaurant and other elements proposed for a discovery center.
Howard Myers, a former commission chairman, said Phillips’ suggestion “solves a couple of problems,” including the preservation of Greasewood and Reata Pass.
Myers still voiced concerns about the proposed discovery center on the land near houses, which is not easily accessible and will bring a lot more traffic to an area that is mostly residential. A smaller-scale center might work, he said.
Most metro Phoenix homeowners will see the first increase in their property’s assessed value since 2007 when they receive their annual statement from the Maricopa County Assessor’s Office.
The median value of a house in metro Phoenix climbed almost 16 percent during 2012 after falling 7.6 percent in 2011.
The increase won’t surprise anyone who has watched the region’s housing market recover over the past 18 months. However, the overall increase in values for Maricopa County might be confusing because the overall median price of the area’s home sales climbed 34 percent in 2012.
“Our analysis is based on both home sales and the valuations of the even greater number of houses that didn’t sell last year,” County Assessor Keith Russell said. “If a house doesn’t sell, we don’t know if it has new carpet or plumbing, but we must still do the research to assess its value.”
The overall median value of single-family houses in the county climbed to $127,000 in 2012 from $109,600 in 2011.
Statements will be mailed to Maricopa County residents over the next two weeks, with the first group expected to receive their statements as early as today. About 1.5 million properties were valued by the county assessor during 2012.
In 2010, Maricopa County home values fell 11 percent. In 2009, property values dropped 15 percent. In 2008, they plummeted 23 percent, the biggest drop of the prolonged retreat in home values. In 2007, values declined 13 percent.
The property-valuation assessments being mailed out now will be reflected in 2014 tax bills. This year’s tax bills will reflect 2011 valuations.
Despite the drop in home values in 2011, homeowners shouldn’t count on a significant drop in taxes this fall. Many Valley municipalities and school districts still face budget gaps and could raise property-tax rates again this year.
Russell said the county’s residential assessments are conservative, so homeowners can expect to sell their houses for as much as 10 percent more.
Some Phoenix-area cities fared better than others. Home values climbed the highest — 34 percent — in El Mirage and Youngtown. Tolleson homeowners saw a median increase of 33 percent. Those communities experienced some of the biggest drops in home values during the crash because of higher foreclosure rates.
Property owners can appeal valuations with the Assessor’s Office until April 23.
Joy Li, a fashion designer originally from New York, opened her boutique five years ago at downtown Scottsdale’s SouthBridge, just as the economy slipped into recession.
“It was very, very tough because you had to have faith in knowing that this was going to get built up,” she said. “It was a learning experience to build a business by yourself when everyone else around you is disappearing.”
The four-building restaurant and retail complex along the south side of the Arizona Canal was hard hit by the recession, as numerous merchants were forced out of business.
Studio Joy Li; Amy inc., a fashion boutique; and the Garage Boutique for Kids were the first and only remaining original tenants of the Mix Shops at SouthBridge, along Stetson Drive.
“No one else is from the beginning,” said Fred Unger, SouthBridge developer. “All the restaurants failed.”
Today, the SouthBridge district, the commercial triangle bordered by Stetson, Sixth Avenue and Scottsdale Road, is a very different picture. The neighborhood is bustling with thriving independent merchants.
The district includes about 40 tenants. It includes such restaurants as Mercellino Ristorante, Barrio Queen, Herb Box and Tapas Papa Frita.
“SouthBridge is now 99 percent leased and we have strong interest in the two small vacant spaces,” Unger said. “In the entire district, we have only three small vacant spaces. It’s never been that good.”
Li said the new merchants and activity are an encouraging sign.
“It’s nice to see new merchants that take pride and passion in the product they’re offering or the service, vs. the big guys who are just funded by a lot of money, but not caring about product and people,” she said. “It’s very interesting to watch it grow and who comes in.”
Classic Cakes and Confectionsis preparing to open in the Mix Shops. The company has been in business about seven years and its commercial kitchen is at 32nd Street and Shea Boulevard.
“This will be our retail location,” said Lisa Levinson, a co-owner. “We love the area, we love the people around here.”
The business provides special-order cakes, pies and pastries, and is now open to walk-in service in its retail location.
“We do a lot of big wedding cakes and things for the resorts, like the Phoenician Resort, the Arizona Biltmore, the Montelucia Resort and Spa and Sanctuary Camelback Mountain Resort and Spa,” said Neil Levinson, co-owner. “We feel Old Scottsdale needs a good bakery.”
Also at SouthBridge, Twist has just opened its first high-end salon in Arizona. It has two other salons, in Beverly Hills and Los Angeles.
“We came to Scottsdale because they told us the most beautiful women were living in Scottsdale, so we came in to enhance their beauty,” said Oliver Ifergan, the owner. “I think SouthBridge was a great asset to us because you already have so many cool stores and we wanted to be part of that, part of the experience of coming here.”
Ifergan plans to open five Twist salons in Phoenix-Scottsdale, and the SouthBridge location already is successful, he said.
Also on the second floor, Pearl MedSpa opened in late October offering plastic surgery and advanced aesthetic treatments in a spa environment. This is its first location outside Portland, Ore.
“We saw the opportunity to enter into the market with the increasing population in the area, and we want to provide the finest experience and the highest-quality service,” said Carol Robbins, Pearl MedSpa’s CEO. “We plan to make a major impact at SouthBridge and Scottsdale.”
Merchants in SouthBridge want to corner the bridal market by offering one-stop shopping for all wedding needs. The second floor of SouthBridge includes four stores in one — the Flower Studio, Destiny’s Bride, De Noce Ferrer/Amy Mancuso Events and Savvi by Mr. Formal.
Lisa Daversa, owner of Destiny’s Bride, moved her business about a year ago to SouthBridge from the Borgata of Scottsdale. That shopping center is set to be replaced with a condominium complex.
“This whole thing was empty,” she said. “Fred asked me to come here and put together a couture wedding experience, and I told him about bringing other vendors who were all related to that, so that a customer could come here for almost everything. This is where young women go to pick fine wedding gowns and it has that sort of level.”
De Noce Ferrer, which specializes in designer bridal evening shoes and handbags, opened in October and is owned by Amy Mancuso, who also runs her wedding/event planning business.
“I love the area, I love the Waterfront,” she said. “I love the vision that they’re trying to bring for the shops here now and into the future,” she said. “This is the golden area down here for Scottsdale.”
Surviving and thriving
Katie Wilson, owner of the Garage, was the original tenant in the Mix Shops and has survived while other children’s boutiques have closed in Scottsdale. She relocated her business from the Borgata.
Surviving the recession meant making small changes in her business to appeal to more customers.
“Being an existing business through those challenging times is really what carried me through that time, as well as being a hands-on retailer,” she said. “I’m here every day. People like the neighborhood community and being able to support local shops.”
Other tenants in the Mix Shops include Nestldown Linens and J. Gilbert footwear.
Salon Spectrum, a hair salon/boutique, has been in the SouthBridge district for 11 years, before SouthBridge was even built. Tracy King, the owner, said she knew the area was “up and coming.”
“It’s exciting for us because now that we have the merchants collaborating, it’s nice to all pull together and work together,” she said. “You can definitely feel a positive energy in the people who are coming in.”
The district also includes such merchants as Scottsdale Pen, a specialty and collector pen store, and Oh My Dog, a boutique and spa for dogs.
Jay Sadow, owner of Scottsdale Pen, said he’s one of the survivors of the economic downturn and he’s happy to support the “resurgence of the Mix Shops.”
The buildings that last housed the Days Inn and Coco’s Bakery Restaurant near Scottsdale Fashion Square are set to be demolished next month.
The 44-year-old hotel north of the mall closed in early December, while the restaurant, which opened in 1966, closed last summer. When Days Inn and Coco’s opened, Fashion Square was a three-story, open-air structure anchored by one department store and a supermarket.
Macerich, which owns the properties as well as Scottsdale Fashion Square, has submitted to the city Planning Department an interim site plan for the acreage. It includes demolishing the hotel and restaurant, and installing a driveway providing access to the mall from Highland Avenue.
Amy Malloy, Macerich’s senior development manager, said there are not yet any plans to develop the site.
“Any future development will be market driven,” she said. “We didn’t want to leave a vacant hotel and restaurant on the site.”
Fashion Square’s most recent expansion, completed in late 2009, included a new wing for Barneys New York, H&M and other retailers.
Macerich will need to obtain demolition permits from the city to tear down the 167-room hotel and restaurant, in addition to permits to construct the driveway, said Dan Symer, senior city planner.
Macerich also will have to obtain a permit from the Maricopa County Environmental Services Department to proceed with demolition, he said.
“They have to go in and find out if there is any asbestos, and if so, remove it, then they can get the permits,” Symer said.
Macerich hopes to begin demolition early next month, and the process should take 45 to 60 days, Malloy said.
Once demolition is complete, landscape gravel will be installed to create a “more aesthetically pleasing area,” she said.
Other construction projects are set for the area, including Gray Development Group’s Blue Sky apartment complex and Phoenix Motor Co.’s Mercedes-Benz dealership, both on the east side of Scottsdale Road across from the mall.
The Tempe City Council adopted a resolution Thursday to sell about 100 acres of high-profile land that city officials have said could net $11.9 million and help pay for replacing Town Lake’s western dam.
The agreement with Liberty Property Trust, a Pennsylvania-based real-estate company, allows development of parcels of high-profile land at Rio Salado Parkway and Priest Drive just west of Town Lake.
The sale terms include $15.1million for 76 acres, $2.1million for 5 more acres and the option to buy an additional 21 acres. The city will credit Liberty for about $5 million in remediation costs to prepare the land for development. Upon development, Liberty would make a one-time $50,000 payment to two Tempe school districts.
The 7-0 vote came without comment from the council. However, during the public-comment period, Tempe resident Haryaksha Gregor Knauer, who was a Green Party candidate for a District 26 state House seat, told the council that he takes issue with the deal, which he described as “corporate welfare.”
The development deal allows Liberty to complete its project in phases over a nine to 12-year period.
For the past five years, foreclosures have been one of the most important indicators to track metro Phoenix’s housing market. Not anymore.
Both foreclosures and foreclosure starts have fallen back to levels not seen in the region since 2007. In January, lenders took back 1,339 houses, according to the Information Market. During 2009-11, monthly foreclosures regularly topped 4,000 and often climbed above 5,000.
Foreclosure starts, or notice of trustee sales as they are known in Arizona, totaled 2,245 last month. In March 2009, lenders moved to begin foreclosure proceedings on a record 10,105 homeowners.
“Foreclosures are not the driving force in Phoenix’s housing market anymore,” said Tom Ruff, real estate analyst with the Information Market, which was purchased by the Arizona Regional Multiple Listing Service last August. “There’s not another big wave of foreclosures coming. There’s no shadow inventory. Foreclosures will decline to new lows in a few years.”
He said current foreclosures are against homeowners who bought during the housing boom. Anyone who bought after 2009 has equity and doesn’t have a subprime loan because of tougher lending standards.
The new leading indicator for metro Phoenix’s housing market: how many homeowners are no longer underwater and can sell for a profit now.
Steady improvement in metro Phoenix’s new-home market has developers and homebuilders scrambling to buy property for dozens of new subdivisions projected to spring up over the next few years.
Their land purchases offer a road map for population growth in the region for years to come. Where houses are planned, schools, retail and service businesses and other employers soon follow.
Mesa, Gilbert, Chandler and Queen Creek, along with north Peoria, are the hottest spots for new-home sales now, but Surprise, Buckeye and Goodyear are expected to move up quickly.
With new-home building up 71 percent in 2012 over 2011 and the number of available lots dwindling, homebuilders sealed nearly 100 land deals in December alone that will create thousands of homesites. Based on those deals, as well as hundreds of others between builders and landowners in 2012, it’s clear homebuilders are now buying more land in more moderately priced areas in the northwest and southwest Valley as prices continue to rise in the southeast Valley.
The land rush is further evidence that metro Phoenix’s homebuilding industry is recovering from its devastating six-year slump. The area is leading the U.S. for home-price increases, according to S&P Case Shiller. The number of empty lots ready for construction has shrunk to its lowest level in more than a decade, with only enough lots in hand to last builders a year. The shortage, particularly in the southeast Valley, has sent land prices soaring.
In Arizona, the housing recovery is especially important to the broader economy. For decades, the homebuilding industry has been one of the state’s biggest economic engines, with at least one out of every three dollars generated statewide tied to housing, according to Arizona Republic research.
“When I look at what’s going on in the Phoenix-area housing market, I am bullish. Employment and population growth are up. Buyers are purchasing new homes, and builders are making a mad dash to buy more lots to keep up with demand,” said Charley Freericks, president of Scottsdale-based developer DMB. “We have gone over the numbers carefully and see 17,000 new homes going up this year.”
In 2012, nearly 12,000 new houses were built in the region, a 71 percent increase over 2011.
The land purchases are mostly in communities started before the crash and in some ways echo growth in the boom years, except the developments farthest from Phoenix’s core aren’t yet attracting builder or buyer attention. Most of the land purchases are inside the outermost freeways.
A shortage of labor could become a factor. And home prices are projected to keep rising.
In other ways, this is a new era. Growth is projected to continue at a steady pace for the next few years, with the number of houses built to stay below 50 percent of the number that went up in the peak boom year of 2006.
Avoiding a repeat of the 60,000 houses built in the region during 2005-06 is good news. This time around, new-home construction is based on real demand from homeowners and not speculation by investors and builders. Metro Phoenix homebuilders began to see more people checking out their model homes and sales start to rise in spring 2012, six months after the resale market had begun to recover.
Most recent new-home buyers had been looking at foreclosure and short-sale homes but were frustrated after getting outbid by investors paying cash. The region’s resale prices plummeted more than 60 percent during the crash but climbed back almost 35 percent in 2012. Thousands of homebuyers suddenly realized they could buy a new home in the area or school district where they wanted to live, for not much more than the top bid on the last short-sale home on which they had made an offer.
The number of new homes built in the Phoenix area climbed 71 percent to 11,600 in 2012. New-home sales followed the trend, with buyers closing on 10,034 new houses last year, up 41 percent from 2011. These are the biggest jumps for the new-home market since 2006. The median price of a new house climbed almost 15 percent during 2012 to reach $240,000.
“The recovery in the home market is real. It’s not about wishing and building for buyers who aren’t there or can’t afford the house,” said Arizona real-estate analyst RL Brown, co-publisher of the Phoenix Housing Market Letter.
Housing analysts, including Brown and Housing Market Letter co-publisher Greg Burger, forecast that homebuilding will increase each year until at least 2016. In 2016, at least 30,000 new houses will be built in the Phoenix area, Brown and Burger project.
Real-estate analyst Mike Orr believes builders must construct more houses in the Phoenix area this year to keep up with buyer demand. Another reason: The number of houses offered for resale has hovered near a record low for the past year.
“It seems many people may have decided to hang onto their homes in an effort to let values keep going up. I also anticipate another possible drop in supply this spring,” said Orr, of Arizona State University’s W.P. Carey School of Business. “Unless homebuilders can start keeping up with rising demand, we may have a chronic supply problem.”
Flurry of deals
Builders had been able to keep new-home prices relatively low until late last year because they had inventories of inexpensive lots purchased during the recession. Now, most builders must buy more expensive land to replenish their supply, which housing analysts say led to 1,000 deals between builders and landowners in 2012, with more to come.
Fewer than 21,000 lots remain ready to be built on in metro Phoenix’s planned communities, compared with 75,000 in 2003, according to a new analysis from RL Brown Reports.
Land broker Nate Nathan, president of Scottsdale-based Nathan & Associates, said that based on new-home building projections, there are only enough lots in the pipeline to last builders a year.
Land generally changes hands several times before a house is built on it. First, it’s often part of a larger tract sold through a land broker to a developer or investor. Developers then plan a community and sell lots ready for construction to homebuilders such as Pulte, Meritage, Fulton and Shea. Homebuilders typically then create their own subdivisions, with model homes and sales centers, and begin selling houses to consumers.
The price for a standard 60-foot lot is increasing from housing-crash levels of 2009, rising more than 100 percent in many areas of the Valley in just three years. Nathan said the region’s home-lot prices are rising faster than in any other part of the country.
Because of builder demand, the prices for bulk land sales also are increasing, which means new houses likely will cost more, no matter where they are located in the region. In February 2012, Maracay Homes paid $50,000 a lot for land in Chandler. In late December, K Hovnanian Homes paid $88,000 a lot for land in Chandler, according to public real-estate records.
“It’s hard for many buyers to hear, but home prices are going up,” said Ken Peterson, vice president of Shea Homes’ Arizona office. “But it’s a good time to buy, because prices are going to keep rising for a while.”
What’s driving rising prices
Metro Phoenix’s homebuilding recovery began in the southeast Valley, and Mesa, Gilbert, Chandler and Queen Creek are expected to draw the most new-home buyers again this year. Nearly 50 percent of the region’s new homes were built and sold in the southeast Valley in 2012, and the area is expected to draw almost 40 percent of this year’s buyers. Maracay Homes plans to open 13 new communities in the Phoenix area this year, and eight of those will be in the southeast Valley.
“We moved early to buy land in 2009, when prices were low,” said Andy Warren, Maracay president. “Now, we have lots ready for new homes where buyers want to go and don’t have to get in bidding wars with other builders for land in the southeast Valley.”
The typical lot in the southeast Valley sold for $35,000 in 2009, according to Nathan & Associates. At the end of 2012, the average price for the same type of lot in the area sold for $75,000.
Kim Underwood, who now rents in Tempe, has been shopping for a new home in the southeast Valley for the past few months. Prices are higher than she expected, so she’s expanding her search.
“I know a couple who bought for under $300,000 in Gilbert last summer. I looked at houses in their neighborhood, and prices were $20,000 to $30,000 higher,” she said. “I wanted to be close to my job in Tempe and buy a new home, but now I am looking in the north Valley or even the southwest as long as the community is close to a freeway.”
Several homebuilders say land prices are climbing too high in Chandler to build houses that most current shoppers can afford.
Most of the less-expensive vacant lots left in the southeast Valley are in Gilbert, Mesa and Queen Creek. The Gilbert developments Elliot Groves at Morrison Ranch, near Elliot and Recker roads, and Layton Lakes, at Queen Creek and Lindsay roads, have several hundred lots available. Builders bought 700 lots in the new community Eastmark, near Phoenix-Mesa Gateway Airport, and plan to start selling homes there this year. Thousands more new-home lots in the development are planned. In Queen Creek, Nauvoo Station at Ocotillo and Crismon roads and Hastings Farms at Ellsworth and Cloud roads have hundreds of lots available as well.
The recovery of the homebuilding market will have little impact on Scottsdale, where there’s not much vacant, developable land.
There is available residential land in north Phoenix but, as in Chandler, lot prices there are higher.
The southeast Valley dominated homebuying as a region in 2012, but Vistancia in north Peoria was Arizona’s top-selling community. And homebuilders are purchasing more land in the northwest and southwest Valley, betting on those areas attracting more buyers.
Although new-home lot prices in Peoria are similar to those in the southeast, current land costs in Surprise or in the southwest communities of Buckeye and Goodyear are at least $20,000 less per homesite. More lots are also available for purchase in these areas.
Whether new-home buyers flock to the West Valley like they have to the southeast isn’t a sure thing. And so far, neither builders nor home shoppers are doing any serious buying in most parts of Pinal County or west of the White Tank Mountains. New-housing developments in Pinal and the far southwest Valley were hurt the most by the crash.
Brown said a geographic shift in homebuying will depend on whether the communities are close to freeways, jobs and retailers, no matter how much more affordable the new houses are.
“The ‘drive until you qualify’ homebuilding trend worked before because the mortgage market didn’t really require borrowers to qualify for the loans they were taking out,” Brown said. “Lending guidelines are much tougher, and borrowers will really have to be able to afford the payments on a new house.”
Land purchases are continuing in early 2013, and early indicators show new-home sales and prices continue to rise. After the housing crash and the long climb out, metro Phoenix’s major developers and builders hope to cash in on the continued growth.
The region’s top-selling homebuilders — Pulte, Lennar, Richmond American and Maracay — have the most land. Tempe-based Fulton Homes reports selling 52 houses during January. Builders that shuttered
Phoenix operations during the crash also are buying land in the region, hiring employees and trying to compete with builders still here.
DMB owns some of the communities with the most available land ready for new houses: Eastmark in Mesa, Marley Park in Surprise and Verrado in Buckeye.
“We sold 87 homes in the Phoenix area during the terrible year of 2009,” DMB’s Freericks said. “Last year, 364 new homes were sold in our Valley communities. We are expecting 637 new-home sales this year.”
The developer of a proposed apartment complex along south Scottsdale’s McDowell Road corridor Tuesday avoided facing a super-majority vote for approval by the City Council.
Chason Development wants to build the complex, Las Aguas, on the 5-acre parcel that formerly housed Pitre Buick, on the northern side of McDowell west of 68th Street. The $25million complex would include 154 units.
At its Tuesday meeting, the council voted 4-2 to continue until its March 5 meeting consideration of a rezoning with amended development standards and a development plan for Las Aguas. The continuance was requested by John Berry, a zoning attorney representing Chason.
Councilmen Bob Littlefield and Guy Phillips voted against the continuance. No discussion took place prior to the vote.
A legal protest filed by adjacent property owners would have forced a super-majority 6-1 vote for approval of the project. Kim Chafin, senior city planner, confirmed that the legal protest is still valid and that the applicant sought more time to work with neighbors who continue to oppose the project.
Phillips said the council should first have a discussion about the need for more apartments before considering this and any other apartment proposals. The council already has approved “too many apartment units.”
“It’s just irresponsible to keep approving these without a discussion on do we need them, where are the people going to go, do we have room for the traffic, is there work for them, etc.,” he said. “It’s putting the cart before the horse.”
Littlefield said obtaining “endless continuances” is the developer’s way of wearing down the neighbors.” On the other hand, if the residents weren’t ready to present their arguments, the council wouldn’t grant them a continuance, he said.
“The developer’s attorney knew he didn’t have the votes, so he continued it,” he said. “Why should we let this guy just continue to vote shop … for when he thinks he has enough votes?
“It’s disrespecting the residents while fawning over developers.”
A small number of residents attended the council meeting, but weren’t allowed to speak because of the continuance. They wouldn’t comment after the vote.
The council previously granted a continuance at its Jan. 22 meeting. The first continuance is granted automatically, according to council procedure. The second continuance required a council vote.
“We continue to discuss issues the neighbors have raised with them and hope to be able to move forward successfully with the case with additional neighborhood involvement and input,” Berry said. “We’re just talking to folks.”
The proposal has been unpopular with nearby residents from the start. Chason has made numerous changes in the proposal to gain the support of nearby residents, such as no north-facing balconies, a higher buffer wall along the northern side, higher-pitched roofs on the one-story garages along the northern side and a construction sequence to buffer the neighborhood.
Berry has said those who remain opposed don’t want apartments built on the site.
“We’re looking at all the alternatives,” he said.
The council also is tentatively set to consider at its Feb. 26 meeting another apartment proposal that faces opposition from nearby homeowners.
Woods Partners, a developer of multi-family residences, wants to replace Rural/Metro Corp.’s Scottsdale billing and call center with a 223-unit apartment complex at the northeastern corner of of Indian School and Granite Reef roads.
Opponents plan to mobilize in the coming weeks and present a stronger opposition than when the proposal was considered and recommended for council approval by the Planning Commission.