Flagstaff Blog - Real Estate and All Things Flagstaff: April 2007

What a busy weekend in Flagstaff! Drama fans have two great choices this weekend: John Steinbeck's classic novel adapted for the stage in Grapes of Wrath, is playing at the Clifford White Theatre at NAU. The Laramie Project based upon the murder of Matthew Shepard is playing at the Doris Harper-White Community Playhouse.  One of the actors in The Laramie Project wrote to me: "I've killed myself onstage and been a nurse to a woman dying of cancer. Nothing compares to this."

Here are other, more light-hearted, events of the weekend:

April 27 Palette to Palate, Coconino Community College Lone Tree Campus, 2800 S. Lone Tree, 5:00-8:00 p.m., $25 general, $15 students. Auction of regional and student art to benefit CCC's Fine Arts Dept.

April 27 Percussion Ensemble Concert, NAU Ardrey Auditorium, 7:30 p.m., free, 928-523-3739, http://www.nau.edu/.

April 27 Youthfest - a celebration of Northern Arizona's Children. Heritage Square, Downtown Flagstaff, 6 p.m. - 9:30 p.m. Musicians, dancers, poets, media presentations and fire spinners.

April 27 Woodwind Chamber Ensembles Concert, NAU Ardrey Auditorium, 7:30 p.m., free, 928-523-3739, http://www.nau.edu/

April 28 Arbor Day Celebration, The Arboretum, 4001 S. Woody Mountain Rd., 9:00 a.m.-5:00 p.m., free. Guided tours at 11:00 a.m. and 1:00 p.m., live "Birds of Prey" programs at noon and 2:00 p.m., and tree-planting instructions from an expert.

April 28 Elden Pueblo Public Day, Elden Pueblo Ruins, 1 mi. north of Flagstaff Mall on Hwy. 89 at Townsend-Winona Rd., 10:00 a.m.-4:00 p.m., tours at 10:00 a.m., noon and 2:00 p.m., free. Learn about archaeology in Flagstaff with a site tour, actual excavation, artifact analysis, atlatl (spear) and rabbit stick throw!

April 28 Soar into Spring, Kite and Activity Festival, Foxglenn Park, 4200 E. Butler Ave., 11;00 a.m.-4:00 p.m., free entry, fees for some activities, 928-779-7690, http://www.flagstaff.az.gov/. Kite demos, crafts, entertainment, carnival games and kite fly.

April 28 The 30-Year Photographic Journey of a Grand Canyon River Guide by David Edwards, Museum of Northern Arizona, 3101 N. Fort Valley Rd., 3:30-4:30 p.m., $5 adults, $4 seniors 65+, $3 students, $2 ages 7-17, 928-774-5213, http://www.musnaz.org/. Freelance photographer Edwards, who has led Grand Canyon river trips for three decades, teaches and lectures on photography, Mongolia and the Grand Canyon.

April 30 Jazz Ensemble and Jazz Combo Concert, NAU Ardrey Auditorium, 7:30 p.m., free, 928-523-3739, http://www.nau.edu/.

When asking "why" about the state of the real estate market, a large and sometimes over-looked factor is the general state of the economy. Indeed, I overlooked it in yesterday's post. This morning's news brings a report of overall slowdown in the economy: Gross domestic product rose at a seasonally adjusted 1.3% annual rate January through March, the Commerce Department said Friday in the first estimate of first-quarter GDP. The surprisingly anemic pace lagged the fourth quarter's rate of 2.5% and reflected the slowest growth in GDP since 1.2% during the first quarter of 2003. Wall Street Journal, April 27

Although unemployment remains low and the stock market is zinging (at least it was earlier this week), capital spending is weak. The latter factor signals that industry decision-makers think the economy will not support additional production capacity in the near future. Inflation is creeping up. When the economy is bad, real estate sales, like everything else are not good.

This is not always true for Flagstaff. One factor of the overall economic picture is more important to us than in some other places. Specifically, as long as the stock market is strong, potential second home owners feel wealthy enough to buy. Thus, when the market crashed in 1999-2000, the high-end second home market here crashed with it. Right now, the market seems on the incline, which should help our market. But stocks are always unpredictable and I certainly am not expert at analyzing them. (My investments in that realm sit in "random-walk" funds that I learned about 35 years ago - long before I had anything to put in them.)  I do know stock prices have something to do with corporate earnings, which are high right now and seem to make the market go day-to-day, but economic growth numbers are down, so those corporate earnings may be in danger in the near future unless their source is something other than U.S. economic production. It's hard to think that is generally true.

So, we may be in for a dip in the stock market and thus a continued stall in the second home market and thus the overall Flagstaff real estate market. (See yesterday's post.)

What is behind the slowdown in the Flagstaff housing market? Fundamentally, of course, there are fewer buyers than sellers right now. But why?

One factor is certainly the slowdown in the Phoenix market. 18 months ago, Phoenix was the number one market in the nation measured by rate of price increase. Like it or not, Flagstaff --  just 140 miles, but a huge 20 degree summer temperature difference -- is a huge second-home escape location for Phoenicians. When Phoenix area residents are feeling wealthy, one of their likely expenditures is for a Flagstaff home. (Most estimates make 25% of our housing stock second homes.) Phoenicians' primary homes are now feeling less like piggy-banks to them than they were two years ago. Also, rates on the home equity loans that they might have taken to buy a second home are at least 2.5% higher than they once were.

Another factor is the downturn in the general national real estate market. This affects us because people who are relocating, or want to relocate, to Flagstaff cannot sell their homes elsewhere in order to buy here.

Real estate investors have also pulled back in the last year precisely because prices had sky-rocketed so much in the prior two years. Before putting more money into real estate, investors want to see if the market can sustain the unprecedented prices reached.

Demographers see the national slowdown as a blip that is traceable to lower birthrates beginning in 1973. That dip in population growth continued to 1977. Those never-born thirty-something people would be just at the age where they would buy their first homes.  Without these first-time homebuyers, people wanting to sell and move-up or out have no one to sell to. Relying on this theory, the market should stay relatively slow for another 3 years and then pop back up.

Of course, interest rates are higher than they were and sub-prime loans have largely evaporated. While rates on more traditional mortgages are still historically low (dropping below 6% recently), each bit higher than they were in 2005 takes a slice out of the population that can afford monthly payments on a new home.

Let's get some perspective on the Flagstaff market, however. 2006 saw a 12% price increase on average; 2005 was over 30% and 2004 over 20%. So far, the average for 2007 has been stable or dropped very little. The fundamentals of Flagstaff real estate are protecting us from significant price drops seen in other parts of the country. (Fundamental #1: we have limited land for development; fundamental #2: Arizona is one of the fastest growing states in the country.) Likewise, while there are more homes on the market per buyer (about 7/1 at my latest estimate), that compares to 20/1 in some parts of the country. Just this week, I've seen two homes come on the market and be sold in a matter of days - the sellers were well-advised and motivated to price right. So don't take out the crying towel for Flagstaff real estate yet!

Wall Street Journal news flash this am:

EXISTING-HOME SALES TOOK the biggest tumble in 18 years during March as poor weather struck demand. The median home price dropped from year-earlier levels.

In Flagstaff in April, there certainly have been fewer sales, fewer showings compared even with February and, yes, March. So, will we finally begin to see prices drop -- for the first time in decades in Flagstaff? By next month we should know. Right now, prices are pretty much sticking where they were last year. Which is a pretty big shock to sellers who have been used to taking the last sale and tacking 5% to it in the last years.

 What's happening?  No one knows, but watch later in the week for a collection of "whys" I've heard from various market theorists in the last few weeks.

For those of you following this thread, the second hearing on the "Re-Do" of the historic district between Thorpe Park and Downtown is scheduled for hearing tomorrow night before the Flagstaff Historic Commission. This pertains to a new Historic Overlay District zoning overlay that roughly covers the National Register of Historic Places Townsite Historic District. Here is the scoop on tomorrow night:

Time: 5:00 PM - Tuesday, April 24, 2007

Place: Flagstaff City Hall, Council Conference Room, 211 W. Aspen Avenue

 Subsequent meetings scheduled as follows:

Planning & Zoning Commission meeting, May 22

City Council meeting (1st Reading) Work Session, June 4

City Council meeting (2nd Reading) July 19

We're in a buyers' market. Right now there is a seven month supply of homes on the market. This means if you put your home on the market today, and no one else listed a home for the next seven months, seven months from now, the buyers available would have nothing to buy. Contrast this with some periods at the peak of the hot market when, if you had put your home on the market and no one else listed thereafter, six weeks later the available buyers would have had nothing to buy. Right now there are 821 residential units of all types and sizes (condos to acreages, one bedroom to mansions) for sale. Since March 21, 109 units have sold. Here are the stats from the MLS for all properties with Flagstaff mailing addresses, March 21, 2007-April 21, 2007:

"MLS" data is based upon information from the Northern Arizona Association of Realtors® and is deemed reliable for sales reported to the association, but is not guaranteed and does not include all sales in the market area.

Ok, sun is out, at least part way. Today's event in Wheeler Park should be a big success. (It seems all Wheeler Park events are successful.) Wheeler Park is the grassy area between Aspen and Birch in front of the library and next to Humphrey's (for those of you from out of town -- the turn off Rt. 66 that takes you to the Snowbowl and Grand Canyon). It's in front of City Hall and across from the American Legion. On most weekends, you'll find some "event" -- some free, like today's, some for a fee. Many have good and tents for displays.

Here is the scoop on today's event:

We know it. Now readers of Kiplinger's Personal Finance know it.

Flagstaff is one of the five choices named in Kiplinger's May 2007 issue on best college towns. In Kiplinger's words: "Nothing matches the vibe of a college town.... There is something about living near a campus that stimulates the mind and spirit."  Flagstaff has all of this, and "a top-notch medical center and a low crime rate."

Ok, they know that the cost of living is "19% higher than the national average," but "compared to living in a big city, you'll save on everything from housing to recreation." 

The other four featured college towns are Athens, GA ("southern charm"), Eugene OR ("wins the location lottery"), Tallahassee, FL ("not your father's Florida"), and Fayetteville, Ark. ("down-home sophisticate"). 

 Flagstaff's ambiance is described as "cozy and cultural." The article points out the symphony (featured, by coincidence, in my blog earlier this week) and our museums and art galleries. "A staple of community activity in historic downtown Flagstaff is Friday-night movies in Heritage Square, running from May to September."  They don't mention the First Friday Art Walk - a feature every month all year round! But they do talk about our wonderfully restored downtown buildings.

Read the full article: Kiplinger's Personal Finance, Vol 61, Issue 5, May 1, 2007. Pages 35-39, 42, 44 (2599 words)

Sunday is the 37th anniversary of Earth Day, celebrated around the world. Here are two ways you can celebrate in your own little world:

Pay your bills on line -- save paper. Save fossil fuels used in delivering that paper.

Change the incandescent light bulbs in your home to ENERGY STAR®-qualified compact fluorescent light bulbs (CFLs). Yes, I know they contain dangerous chemicals of concern at disposal time, but they are nonetheless "net green." When they have to be replaced in 5 years, use care to take them to a hazardous waste disposal site. Meanwhile, you'll save energy and money while helping conserve natural resources. To make the switch even easier, APS (Arizona Public Service -- our electric company) has worked with lighting manufacturers and local retailers to offer special pricing on ENERGY STAR qualified lighting. Learn more about the benefits of energy-efficient lighting, and view the list of retailers offering special pricing on ENERGY STAR lighting products at http://portal.ecosconsulting.com/aps_public/locator.asp

To kickoff the event, attend the Special Performance Friday night (this is books like I never "heard" in the 1950s):

In an unprecedented special "unplugged" appearance, JERRY RIOPELLE brings his distinctive brand of hard-driving roots rock to an intimate Festival audience at Charly's on Festival Friday. Riopelle's music reflects a genuine lyrical honesty with heavy doses of rhythm and blues, rock and country flavored with a unique mix of jazz and reggae sounds. Riopelle is an artist whose work, both in the studio and on the stage, has always refused to be categorized. His natural ability to drawfrom different contemporary styles while utilizing wide ranging instrumental ideas and rhythmic variations
gives the Riopelle sound a very distinct character.

For a full run-down of guest authors and weekend events, visit: http://www.nazbookfestival.org